Sunday, January 1, 2012

ZenTiger Corporate Welfare

There are a lot of areas to discuss when talking about building a more equitable system. And when I say equitable, I don't mean equal, I mean "just". So my opening assumption is that the system isn't just. There are weaknesses and discrepancies. There are things that the market doesn't necessarily "correct" itself for in a way that is good for the people of NZ as a whole, especially as we are but a small part of an increasingly globalised economy.

My first topic for 2012 is a musing about Corporate Welfare and Corporate Contribution to the NZ Economy. Whilst such figures as I'm about to discuss might be on the balance sheets somewhere, I'm interested in a quick way of understanding what the key figures are. I'm looking to understand:
  • How much net GST did they pass on to the Government?
  • How much corporate income tax did they pay in their last complete financial year?
  • What their total average income tax payments have been since inception in NZ?
  • How much PAYE did they hand over to the government on behalf of their employees
  • How much money did they donate or spend on the community?
  • What their total export revenue was, less their overseas expenditure?
  • Were they in receipt of any government money: %Government Sales; Grants; Funding; Huge Tax Write-offs
Now this information might be available nicely collated across companies, or perhaps industries - I have no idea. So any help pointing me in the right direction would be appreciated. If it isn't nicely collated or is not clearly disclosed on financial reports, then maybe this information should be!

Who out there agrees with me and is curious to understand these figures? It's one thing to talk about various people being paid too much or too little, or tax rates, or even tax dodgers. But lets start with the big money. Which companies are contributing to NZ and which just pretend to, but send all their profits overseas and minimise costs within the country?

All of the above metrics would indicate opportunities to contribute at some level. For example, if a 100 million dollar company pays little in the way of corporate tax, it might still hire full NZ staff rather than running sweat shops in Indonesia, and every staff member gets paid a salary and in turn contributes PAYE back into the government coffers. Better our government coffers than Isle of Man's or Maryland's, say I.

Thoughts, comments, stories?

Note: Graphic stolen from Tumeke, where they rabbit on about American Corporate Welfare, and throw in a few NZ examples mixed up with Government misspending (which can be a topic for my next post perhaps).

7 comment(s):

Matthew said...

Just in case you weren't aware...

I don't have any figures to hand, but I think you'll find one practice most foreign multinationals engage in. When they sell their product in NZ, the basic idea is to sell it for more than it costs to make. However, rather than import it into NZ at the cost of the good and sell it with a mark up (and therefore make a profit) the company will "import" the product at at same dollar value as what it will sell to the customer.

An example: Company A has two wholly owned subsidiaries: one in New Zealand and one in Seychelles. Company A sells a product to Customer B in New Zealand at an agreed price of $100. Company A Seychelles Ltd produces the product at a cost of $20 and sells it to Company A New Zealand Ltd for $100. Company A New Zealand Ltd sells the product to Customer B for $100. The Seychelles Company tax rate is 0% and the New Zealand tax rate is 28%.

Obviously the idea is to minimise, or maybe the company will argue, simplify, its tax accounting.

ZenTiger said...

Thanks Matthew, this is the kind of story I want to catalogue. I think my above list of key financial stats might quickly highlight these kind of profit moving techniques.

Large IT companies are also implicated in this kind of practice too.

One additional dimension to this is to compare media treatment of its advertisers to the media treatment of other organisations that don't spend much in the way of advertising.

Anonymous said...

Hi Zen,

Not sure about the relevance of some of your Q's. EG, PAYE has no relevance unless you are alleging fraud, PAYE will vary wildly between companies of similar size unless they have the same wage structure.

Another area of corporate welfare to examine is council rates.

As an example, my home is valued at $340,000.oo and I pay $2389.15 in rates.

Up the road, a property is valued at $1,040,000 and pays $0.00 rates.


ZenTiger said...


You think I was born yesterday? :-)

Yeah, OK, you can add charitable and religious exemptions to the list of "Corporate Welfare" provisions - it's all a fair part of the discussion, although another discussion on government largesse can continue this topic too.

I would have thought PAYE does have relevance though, as I'm interested to see how places like banks, who might pipe all their corporate income profits overseas still end up paying salaries and therefore taxes to their NZ staff.

For businesses reliant on the service industry, we'd expect to see a big push to keep wages low, and for businesses that need fewer people, we'd possibly find other forms of tax exploitation to minimise their contributions to the economy.

And then there are places like Amazon, where I am happy to buy a product direct from overseas (like an electronic book) because few other places have them, but the consequence is I escape even GST.

Matthew said...

Hi Zen,

on an individual company level, it may interest you that

lists each company and its financial returns each year. That way you can get an idea of some of what you're after. But it doesn't help when it comes to collating it altogether into industry sectors, or by revenue size.

ZenTiger said...

Thanks. I'm greedy, wanting the data all nicely collated. Might have to pick a few companies and do some work.

I was on the Charity Commission website the other day and they offer complete data export of all registered charities, with a wealth of information, as part of the open government initiatives. Fantastic, and well done the Charity Commission given it's small size and limited resources.

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