The tax man

By Andrea Fox

Sunday 1st February 2004

The kitchen table at young Rob McLeod's house in the little East Coast settlement of Manutuke in the 1960s always felt like a crowded hall of fame, where the family digested large servings of its own achievements. When the subject of big sister Kitty's latest academic success at university or a fresh sports triumph waned, there was grandfather Pineamine Tamahori's inspirational friend Sir Apirana Ngata to muse over, if not Pineamine himself, the revered East Coast Anglican minister.

The man who is today the chairman of Ernst & Young New Zealand, one of the country's top tax experts, and chairman of the Business Roundtable, calls them his Ngati Porou "war stories". They were an integral part of the "learning laboratory" that his shopkeeper parents ran in their household of five children.

Not that it was all beer and skittles for this future captain of industry. While another sister was named dux of her high school, Rob McLeod's teachers were telling his parents he was "kind of okay, but nothing outstanding". His parents, he recalls, "gave me a hard time. When I look back now it was probably more of a positive than a negative."

It was the sort of environment, with its demanding elders, rich supply of role models, and emphasis on perseverance and discipline, that he believes is all too rare for Maori kids growing up today. "The reason I tell the story about the kitchen table in my house is I think it was unique in a Maori household. Not enough Maori households have that kind of experience. They're not watching and listening to their parents constantly going on about the value of achievement and discipline. There's the odd spot story like mine, but they are still too spotty."

You got it: McLeod, now at the pinnacle of his profession, has some stern and politically incorrect messages for his people. Yes, fix the historical grievances, but quit blaming others for your underachievement. Yes, embrace your heritage, but remember that a nurturing and stable home environment is what will set your children up for a life of achievement. He wants to help Maori lift their economic standards, he wants to root out empirical evidence for the "frustrating" indications that Maori have underperformed in the key socio-economic indicators, and he doesn't mind attracting a few slings and arrows in the interests of advancing his people.

So who is this emerging Maori role model bearing unpalatable truths? Two things impress on meeting McLeod, whose shock of white hair belies his 46 years. First, he seems a man of contradictions, proud of his cultural heritage, yet willing to challenge the very structures of Maori society; second, he seems possessed of supreme self-confidence - albeit firmly leashed and fed, by all accounts, by a formidable intellect.
He humbly opines that his rise to the top of his profession is "simply one of perseverance", but then he also notes that his early career performance had secured him a partnership at Peat Marwick at just 27. Former Fonterra chief executive Craig Norgate, who worked with him during the dairy industry mega-merger that created New Zealand's biggest company, calls McLeod's self-assurance "arrogance that's positive". Norgate, himself an accountant, describes McLeod as "outstanding". "He's a wonderful, well-centred businessman, probably regarded as the best tax man in the country. He's hugely intelligent, hugely experienced, and he's got a way with people."

Family ties
This personable tax man takes a keen interest in his whakapapa, which he nurtures with microscopic attention to recorded detail. He was named after the Ngati Porou chief Ropata Wahawaha (McLeod prefers the transliteration Rapata), a ruthless and skilful major who won the New Zealand Cross for action against Te Kooti at Ngatapa in 1869.

But one of the strongest influences in his life was the household help, Rawhakarite Riini, a woman from the Tuhoe tribe who spoke no English, and whom McLeod's parents were asked to take in after her husband died.

A full sister to one of the 12 wives of Rua the Prophet, she entered McLeod's life when he was less than one year old. The McLeod family had by then moved from his birthplace of Waipiro Bay, between Ruatoria and Te Puia Spings, and was living at Manutuke, 13km south of Gisborne because his parents wanted to maximise educational opportunities for their children. He stayed with Riini and her people at Waimana in the eastern Bay of Plenty every school holidays until he went to Otago University in 1976. At Waimana he experienced the "more Maori existence" of Tuhoe, who, unlike the more dispersed Ngati Porou, lived a marae-based life.

Ever the number-cruncher, he has calculated the percentage of Maori blood in his veins at 43.75%. "A lot of contemporary Maori are offended by this kind of calculation, but my view is that Maori are too easily offended these days."

Passionate though he is about Maori achievement, he's not a romantic about Maoridom or his part in it. Nor, it seems, is his father George, 90. Born a Tamahori, he started using the name of his Pakeha geologist paternal grandfather McLeod (George's father Pineamine Tamahori had changed his name from McLeod) after returning from war service and finding carpentry jobs hard to get. Someone suggested the name change might help. It did. But being George Tamahori by night and George McLeod by day made life complicated, so he changed his name by deed poll.

"Tamahori was a well-regarded name on the East Coast. It created a bit of a fracas in the family. But for Dad and those who know him on the coast, it wasn't a case of disowning, it was just a very pragmatic thing. I don't have any concerns about it. But Maori put a lot of stock by names. The reality is in Maoridom [names] do break bones."
(Hollywood filmmaker Lee Tamahori is a first cousin, though the two have yet to meet).

Moving and shaking
Rob McLeod, qualified in law as well as commerce, has been quietly making a name for himself in corporate New Zealand and public policy for some years now. He is a former member of the Treaty of Waitangi Fisheries Commission, and was a member of the 1994 Inland Revenue Department organisation review and the 1993 ministerial taskforce on tertiary education. But in 2001 his public profile rose sharply. As chairman of the Government Tax Review, he delivered, among other key recommendations in a 215-page discussion paper, the bombshell suggestion that owner-occupiers pay a tax based on how much their home's equity would earn if invested in risk-free securities such as government bonds.

New Zealanders had a collective apoplexy, and Finance Minister Michael Cullen wasted no time in rejecting the idea.

In his Auckland tower office with its harbour views, McLeod mildly observes that Kiwis "might be surprised to learn that tax economists around the world would support that reform in this country". But the public reaction stung. "It's one thing to say 'for some reason some chairman's been appointed that's absolutely insane so we have to move on', but even an observation of insanity can be made without emotion."

His opposite at rival firm PricewaterhouseCoopers, John Shewan, says that episode merely increased his respect for McLeod. "I recall well Rob saying the committee would have been derelict in its duty had it not examined that issue. I think that's right and it speaks volumes about Rob. He will not leave stones unturned just because they are in a political no-go zone."

The McLeod Review, which had been asked to recommend improvements to the tax system without reducing the amount of taxes collected, also recommended reducing the top personal tax rate and the company tax rate - proposals that were similarly swiftly rejected by government.

Shewan has worked with McLeod for 15 years on taxation-related projects, and describes him as "the consummate professional. He brings intellectual rigour to issues in a way that really denies people the ability to bounce across the issues he raises lightly. He will challenge people to consider the framework he has laid out, and to respond ... he brings discipline to debates on complex issues."

Shewan says McLeod is "a trifecta" with his legal and accounting training and "strong sense of economics". Air New Zealand chief executive Ralph Norris also builds the case against McLeod having simply "persevered" his way to the top. "He has a very keen intellect. He can get to the core of an issue very, very quickly. He also has a personal manner that draws people together, to have them co-operate. He has a nice people touch."

Waikato University Pro-Vice Chancellor of Maori development, Tamati Reedy, believes McLeod is the talented product of a "very competent, very intelligent" family. A Ngati Porou relative, Reedy recalls school prizegivings in Gisborne where the McLeod name featured with monotonous regularity. Lion Nathan chairman and Todd Corporation director, Geoff Ricketts, an Auckland lawyer, seals the prosecution case for McLeod's heavyweight intellect. "He's a man of high intelligence with an incisive mind, he has a sense of humour which is always helpful and an incredible work ethic. What he gets through is amazing." Ricketts, a Business Roundtable member, has known McLeod professionally for 15 years. McLeod, he says, is a visionary, and he finds that vision - for an inclusive society that values individual freedom and encourages endeavour - "pretty compelling".

At the Business Roundtable, where McLeod was vice chairman before taking the reins in 2002, long-serving executive director Roger Kerr appreciates McLeod's strength in economics. "He is very well read in the field, very economically literate, and it is a real quality he has brought to tax advice. He gets frustrated with tax accountants that don't have that background. He also gets frustrated with business people who are good at business but have not applied themselves to understanding the economy, which is a very different thing."

McLeod is "passionate" about building a better New Zealand, improving economic and social performance, and seeing Maori do better, says Kerr. Along with Kerr, McLeod was the instigator of - and continues to be closely involved with - a major Business Roundtable research project on Maori social and economic performance, expected to be finished later this year. "There's nothing in Rob's makeup that's Maori versus the others, or the rest versus Maori," says Kerr. "He's a New Zealander first and foremost. He can be pretty straight with Maori audiences. He takes it to them pretty directly."

The invitations to speak to Maori groups and business networks are increasing - but McLeod says his message often doesn't make him popular. "I'm trying to get Maori to stop thinking about the issues of disparate performance on a blame platform. Even if certain people have been guilty, the fact is that guilt, and recognising that guilt, doesn't solve the problem." Many Maori, in an audience or in a counselling session with McLeod, take this to mean he is trying to absolve Pakeha of blame. "That's missing the point entirely. Apirana Ngata [Ngati Porou leader and MP from 1905-1943] was in that same space I'm talking about, which is to say there may have been some blameful activity, but we are better off as a race focusing on what we need to do to succeed."

It's a message he's peddled for more than ten years. On the foundation team for Te Puni Kokiri in the early 1990s, he argued that the Maori development ministry should not be established on the platform of the Treaty of Waitangi. "Not because I don't think the Treaty is important, but because if the central policy advisory agency was wrapped up with the Treaty it would get sucked into a blame and reparation paradigm."

He has no "basic difficulty" with the reparation side of Treaty negotiations, but believes breaches need to be managed and settled quickly - and it needs to be recognised that Treaty settlements alone won't deliver Maori economic success. "Ultimately those resolutions are not going to put Maori where they need to be. If Maori think that by just fixing up the past and resolving the past they're going to rocket up to an average wage [they are mistaken]."
It's a point he tried to hammer home while serving two years on the fisheries commission (he resigned in 2003 because Ernst &Young was auditor to the underlying commission company Sealord Moana Pacific). He argued that carving up the commission's assets of about $1 billion between the nation's 600,000 Maori worked out at about $2000 a person.

"I said if we were able to get Maori to the average wage, then we would have something like 15 additional fisheries commissions coming in on an annual basis. There's far more grunt economically in focusing on skilling up labour to earn an average, or better than average wage, than there is scrapping over carve-ups of capital."

Maori economic development starts in the home, he argues. Strong values and two-parent families are the keys to economic achievement for all New Zealanders. "If children are being born into environments that are not conducive to good outcomes, it can stuff them from birth." In his own case, he realised early on that wealth would deliver the quality of life he aspired to. "I'm not an apologist for that. The reality is that having money makes for a better life, it gives access to things, not just for yourself but for your children." Aspiration, he says, was "in my blood and pushed me into a more systematic approach to making money. As opportunities came my way, I leapt at them. I have an underlying competitiveness and I had a few lucky breaks early on."

And despite McLeod's personal pride in his own whakapapa, he has no particular attachment to traditional tribal structures. These, he says, evolved in pre-European times to meet particular needs - organising food production, defence, and so on - and those imperatives have changed. He knows he is buying a fight with some young Maori in saying this, but believes even older Maori have accepted that the things done today may not be done tomorrow. "Romanticist Maori, and Maori who are trying to define their tikanga (the correct way) by looking at the dictionaries of the past will get trapped in a time warp and will, as a result, perpetuate these old orders, as opposed to allowing them to evolve and be dynamic. As long as the democratic processes are rich and lively the quality of the leadership will be as good as can be expected. If [leaders] are not appointed by democratic process, and by that I mean the members of the tribal population are not embracing and participating in a lively, proactive fashion, my prediction is those institutions and their leaders are going to wither."

When he's being caned for his views by a member of a Maori audience he tries to remember that "the squeaky wheel gets the oil", and doesn't necessarily represent the thinking of the majority. "In seminars I've given, I've thought, heck, I've been given a real lambasting. I come away feeling I haven't made traction, but then I found through informal channels, even emails, that a lot of people agree."

And does he feel like a role model for young Maori who must confront a changing future? "I think I can be. I'm quite happy to say to Maori, 'Here is a story that starts out with an individual who is not necessarily talented in any unique way but who, with application, discipline, self-belief and perseverance, can make it'."

McLeod doesn't speak Maori. When he was young that was all he spoke to Rawhakarite Riini but it has slipped away, he says. Which presents yet another challenge: one of the tasks the indefatigable tax man has set himself in the next decade is to relearn what has been lost.

Rob's Mob
Rob McLeod is keen for the Business Roundtable to rise again, but with a wider and better marketed agenda than before

The cold front over the Business Roundtable is moving away and with the thaw chairman Rob McLeod wants a gear change. He wants the big business group to move beyond its reputation as a producer of quality research on economic and business issues and into social issues, while at the same time working much harder on marketing itself.

"The Roundtable's popularity is cyclical and seasonal and it's been a cold season for some time because key institutions don't support the ideology of the Roundtable. But I think that ideology, that force, is growing. The New Zealand public, as it gets tired of one set of ridiculous ideologies, will move to another set. And that typically will show us being on the high side of the curve in the medium term. The signs of that are emerging."

He wants the group to reach out to a broader constituency. "A lot of our resource is devoted to education. We have a full-time person working on it, but who would know?"

He is keen for the Roundtable's 55 chief executive and director members to get out and speak to wider business audiences about the group's work and aims, and that includes the workforce. Veteran executive director Roger Kerr, who sees the organisation as a research body, told Unlimited he was comfortable with McLeod's idea of a marketing initiative.

"I'm the sort of person who says, 'Call a spade a spade, even if you don't like what the spade looks like'," says McLeod. "If you're being wrongly condemned, then do some decent marketing." Even in the past few years, when the Roundtable has been perceived to have lost its influence, people still wanted to hear its message, he says.

He dismisses the suggestion that the group's wish to present a softer, cuddlier image contributed to a Maori being elected chairman. "But that of itself might get people thinking there is more to the Roundtable than we thought ... they might ask 'what the hell is a Maori doing in that organisation, bearing in mind that on a lot of Maori issues it is not thought of positively?'."

Part of the marketing approach is in jolting and jarring people's perceptions of the group, he believes. "When we came out in support of the property right foundation of the foreshore debate, a lot of Maori were perplexed and surprised by it. A lot of people think these are just fat rich cats in this game for their own wealth and welfare. So to have a Maori at the front of the Business Roundtable just gets people off guard and in a marketing sense that's more a positive than a negative."

"At the end of the day I am only an individual, but the reality is that I do derive some comfort in Maori reform issues that a number of people I know, like Shane Jones (Waitangi Fisheries Commission chairman) and Ralph Norris, who have Maori backgrounds of sorts, are in the same space as I am on what Maori need to do. There is enough of a constituency there, but that constituency can magnify its influence if they are talking about it."

CV
Robert McLeod
46
Married to Joanne Hodge, tax partner Bell Gully
Three sons
Education: BComLLB
Career: Barrister and solicitorTaxation

Now and then

2002 to present - Chairman Business Roundtable

2002 to present - Chairman of Ernst & Young New Zealand

2002 to present - Member NZ-US Council Advisory Board

2000 to present - Commissioner for the Treaty of WaitangiFisheries Commission

1997 to present - Councillor of the Institute of Chartered Accountants of New Zealand

1992 to 2002 - Managing partner of Andersen

1985 to 1987 - Partner-in-charge of tax at Peat Marwick

2001 - Chair McLeod Tax Review

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