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Tuesday, June 14, 2005

Corporate Welfare

To attract investment you can lower the tax rates for every-one (and every business) and set policies conducive for business to thrive.

Or you can provide huge chunks of tax payer funds to select companies as a grant, on the basis that they'll hire people who you can tax at high rates.

Navman made $132 million of revenue and after-tax profits of $4.8 million in 2003. It could choose to re-invest some of that profit to make new technology, and return greater rewards to its investors. Such is the nature of risk and return. Or it could simply get the dosh from the government, who raises the investment funds from the taxpayer. If Navman make 10 million profit next year, the taxpayer, as investors without shares, get nothing back. Chances are the profits are diverted to the Cayman Islands. Who knows, perhaps Transpower funded some of this investment as well?

There are many other worthy companies that would like some real tax relief that would create jobs in NZ. Alas, there is no room for tax cuts under Labour because their elitist corporate welfare policies are busy giving the money away to a select few.

Are you sure you are not being played?

Hattip: Rodney Hide and an article in Stuff

Posted by ZenTiger | 6/14/2005 09:06:00 am


Blogger Bernard Woolley said...

Its probably a payment to make them keep their jobs here in New Zealand. With repaid expansion occuring in the US and UK, they are surely well placed for packing their bags and heading to the northern hemisphere. I'm not supporting the govt's action, but that is how it may have occurred.

6/14/2005 10:51:00 am  
Blogger ZenTiger said...

If that is the case Bernard, it sets the precedent on how to keep major business in NZ. A million dollar grant will not be enough for most larger companies (but they'll take it), and after about the 1000th company, how are we better off?

Business tax rate and top marginal rate of 25% would turn a lot of heads, and encourage business. Matching Australia's 30% still doesn't compensate for exchange rate and market size issues. 5 points lower would make the proposition attractive.

The GST guarantees our tax take goes up as spending increases. Much safer than corporate welfare.

6/14/2005 11:01:00 am  
Blogger Lucyna said...

Yeah, but they don't want to do that - Labourites love targetted assistance.

6/14/2005 11:06:00 am  

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