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Big business demands to pillage state

Written By: - Date published: 5:49 pm, October 24th, 2009 - 18 comments
Categories: business, capitalism, national/act government - Tags:

Fran O’Sullivan runs up some more big business proposals today unsubtly reminding Key that big business, which put up the cash to get him into power, expects pay back by being allowed to pillage the State:

Behind the scenes the two task-forces investigating capital markets and tax reforms are taking a look at whether a major new industry could be created here to offer “back-office” services to the international finance sector.

The theory goes that by offering preferential tax breaks to major financial and insurance firms to re-situate their back-office services here, thousands of jobs would be created to keep young Kiwis in New Zealand.

Key himself promoted this “game-changing” policy when he was National’s finance spokesman under previous leader Don Brash. He had seen first-hand the positive job-creation effects after he diverted some of Merrill Lynch’s operations to Dublin to take advantage of the low corporate tax rate the Irish Government used as bait to get new industries into Ireland.

Yes, let’s be the Iceland or Ireland of the South Pacific. Remind me, how did turning their tiny economies into a base for financial institutions trading into new, risky instruments to a value many times the size of their countries’ GDP work out for them? Oh, right. Anyway, who’s going to pay for these tax cuts? John Key’s pixies?

Selling equity bonds in state-owned enterprises like the power generators – rather than privatising – would release much needed cash to get the debt under control. And it would be another sign that Key has not lost his mojo.

Selling the profit stream of SOEs, which is what a bond issue is, is privatisation. You can dress it up in any fancy form you like but we’re not fooled. All we have to do is follow the money, and whether it’s ‘allowing competition with ACC’ or ‘SOE bond issues’ the money goes straight from our wallets to the back pockets of big business.

Fran and big business may moan that Key hasn’t delivered enough for them yet but for ordinary Kiwis the worry is that Key is showing signs of going further and further to the right, bouyed by the polls. The question is whether his instinctual hunger for popularity and lazy attitude to governing will constrain him from pushing through more controversial rightwing policies.

18 comments on “Big business demands to pillage state”

  1. John Dalley 1

    A slight side issue but i see a one page add in the NZ Herald on at least two day for a faceless organization going under the banner of http://www.themarch.org.nz.
    Both faceless and nameless.

    • Captain Rehab 1.1

      http://www.themarch.org.nz

      registrant_contact_name: [deleted]
      registrant_contact_address1: [deleted]
      registrant_contact_address2:
      registrant_contact_city: [deleted]
      registrant_contact_country: NZ (NEW ZEALAND)
      registrant_contact_phone: [deleted]
      registrant_contact_email: [deleted]

      IrishBill: I don’t care what information is available at whois: we do not publish name and address details at the Standard. Do it again and you’re banned.

  2. Tom M 2

    “the money goes straight from our wallets to the back pockets of big business.”

    voluntarily, in exchange for electrical power, of course. That’s a very singular kind of theft, in that it is mutually beneficial and non-coercive.

    • Marty G 2.1

      Currently, we get the power and we own the power companies’ profits. Big business wants to own the profits stream, it amounts to privatisation

      Who used the word theft? It is a pillaging though – the wealth of the state, that we have collectively built up, being turned over to big business.

      • Swampy 2.1.1

        Problem is that the State gets into these things for political reasons and half them end up being a net liability for the taxpayer.

        Like Kiwirail, years of loss making bloated operations for the political purposes, huge sums of money wasted by governments operating it to buy votes, gets sold (good riddance) then bought back at a huge waste paying well above market value and it still can’t compete without a $100 million subsidy.

        I grew up in the Muldoon years when this was all the norm. Douglas in the Labour government and his successors in National did a great job of dismantrling all these bloated inefficient State monopolies and giving us choice in broadcasting, education, telecoms and the like.

  3. Mike Collins 3

    “Remind me, how did turning their tiny economies into a base for financial institutions trading into new, risky instruments to a value many times the size of their countries’ GDP work out for them? Oh, right. Anyway, who’s going to pay for these tax cuts? John Key’s pixies?”

    Well if the idea of having tax incentives is to attract the business in the first place, one could conclude that we are currently not taxing the business at any sort of tax rate. Don’t you think, say 15% of some revenue, is better than 30% of none? So your question should be turned around from “who is going to pay for these tax cuts” – to “who is going to pay the tax that we could otherwise be getting off these industries?”

    • RedLogix 3.1

      So by reducing business tax to 15% (down from 30%) the taxable business base in this country would have to double just to maintain the same revenue levels.

      Any sense of how plausible that is?

  4. illuminatedtiger 4

    I saw her walking down the street this afternoon looking very bitter indeed.

  5. TightyRighty 5

    kind of the same thing when labour makes sops to the unions, who donate well in excess of what big business does in new zealand. “by the workers, for the masters of the workers unions” should be labours mission statement.

    • Roger 5.1

      not really kind of the same thing. Under Labour, we saw the end of the Employment Contracts Act, a rise in the minimum wage by 75%, a rise in the average wage by atleast 1.5 time the rate of inflation, an extra week’s holiday leave just to name a few things that workers have gained. So clearly it is “by the workers, for the masters of the workers unions, ultimately for the workers and a better New Zealand”. If only what John Key was doing here even comes close to the excellent job that Labour and the unions had done.

  6. sk 6

    Marty G,

    Not sure I agree with your take on this. Sure the equity bonds in generators is complete nonsense. I do not get this obsession with selling things, be it equitiy or claims on cash flow (given we own so little of what is left).

    But on tax breaks for financial back offices that is another matter. We produce a lot of good accountants, lawyers etc who do not have the opportunity here, and leave.

    Why can’t we position ourselves to compete with Sydney and Singapore, and use short-lived tax breaks to get started? How is that policy anti-left?

  7. handle 7

    I must have missed the bit where they said “short lived”.

  8. Irascible 8

    I seem to recall a similar economic solution – that NZ open back office facilities to capitalise on the money speculation markets when Roger Nosferatu Douglas was finance minister in the 1984 Labour Govt. Roger had this vision of NZ being the power house temple for the money lenders and thus becoming the Southern Hemisphere London money trading centre.
    The scheme fell over as the Money Trading Houses weren’t too convinced… probably just as well as NZ could have been the first Iceland style collapse.
    Anyway yet another discredited economic policy being dragged from the NACT bag.

  9. Sam 9

    Is it really that common elsewhere in the world for a government to run out of ideas after 10 months?

    (Arguably earlier… in fact, did they ever have any ideas at all? The cynic in me…)

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