Spark’s CEO gets a basic economics fail

The Herald (I know, I got roped in) has an article from Spark’s CEO. Forgetting my broader opinions about the subject matter, this statement really got up my nose:

‘And not only that, cause New Zealanders to pay more tax to make up the difference required to fund our schools, hospitals and welfare.’

Sorry, but that is a basic fail. If you increase their tax, we’ll end up paying for it, one way or another. There is no free lunch. If they’re making a 30% margin at the moment, they’re hardly likely to just go, ‘Oh, heck, we’ll just take 21.6%’, let alone now charging GST on top of that. We are a microcosm and they’ll just charge us more for the services, either through higher prices or +GST.

Our ‘Little New Zealand’ mentality, as an import from England, is a major fail and what’s being advocated here. We should be utilising our position to encourage more business here, including through improving our tax system, not trying to rope foreigners into complying with our tax laws for the sake of ‘fairness’.

And, in the end, if we wanted them to pay more tax, we’d simply change our tax laws. Enforcing it would be nigh on impossible, and would probably result in a withdrawal of services from our market (or loss of future services), but it’s doable. So stop complaining about how little tax foreigners pay and accept that the GST and income tax nets just don’t work so well online (and we should be looking at alternative tax methods to deal with base erosion).

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2 thoughts on “Spark’s CEO gets a basic economics fail

  1. Over at Liberty Scott or somewhere, I read amazing figures on the tax take from high end earners, within New Zealand. He too, asked how many different ways did the high end tax payer have to contribute.
    Its the Cunliffe , tax the rich pricks approach.
    I wanted to be shocked into dismay about the poor devils paying all the tax, and being abused as well.
    CEO Spark was asking for a contribution, from foreign Giants, in a feel good zombie sort of speech.
    It will gel with voters, and we can expect NZF will be on this as election gets close.
    Its beyond me. When I asked about it , over in the conservative blogs, I got stood, the way dumb rednecks get stood on.

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  2. The fundamental problem is, as I see it, that we’re an insular little nation. I say that with great care, as it’s often what protects us from the envy of less happier lands, but it remains that we model ourselves on much larger countries, rather than doing what smaller countries do best (I’m talking about population here, rather than physical size). Hence, if you look at NZ’s international tax position for companies, we really aren’t trying to be competitive at all. People go, ‘They should pay MORE tax’ and all I’m left thinking is, ‘Wait, but if we just didn’t bother taxing companies, they’d flock here to tax advantage of that, bringing with them vast amounts of capital and work’. Can you imagine what would happen if we had, say, a 5% business income tax rate? Or 0%? With our macroeconomic stability, neutral position, and enviable lifestyle, we’d get a good chunk of international business. Yet, instead, we keep finding ways to make it harder for foreigners to actually do business here. I don’t want to be overrun by vast immigrant hordes, but gosh would it be nice if we had an influx of capital (and all the benefits that would flow with it).

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