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Cheap and Nasty

Tax is a difficult and controversial subject. Most people don’t like paying it but everyone (whether they accept it or not) depends on services which tax pays for. Of course the best individual strategy would be to pay no tax yourself and yet make use of the benefits of the tax other people pay.

If you were the type of person or organisation who follows the simple commercial imperative of maximising profits (using whatever justification you favour: giving investors a fair return, making the economy in general more vigorous, providing employment, of whatever other half truth is currently in fashion) then paying as little tax as possible is not just a good idea, it should be your duty.

In fact Google recently described their avoidance of paying billions in tax as “just being good at capitalism”. Well yes, I guess it is. But is capitalism itself a good thing? Clearly if making use of your position of power to make minimal contribution to society while relying on those with almost no wealth to make up for your refusal to participate is seen as good then the process itself must be bad. Yes, pure capitalism is undoubtedly bad.

Leaders in large corporations almost have to be greedy and self-serving to even be in that position so we really can’t really act surprised when they engage in all of these dirty tricks to avoid their fair obligations to the society they exploit. But the rest of us who are paying for what is effectively corporate welfare don’t have to like it, and we should act accordingly. But apparently we generally don’t.

Governments are to blame in the end, of course. I know that whatever laws are put in place there is usually some smart corporate lawyer or accountant with no morals who will find a way around them, but that doesn’t mean the governments shouldn’t at least try.

Let me give some examples of the outrageous dishonesty big business gets away with around the world and here in New Zealand.

Warren Buffett, one of the world’s richest men, pays an effective tax rate of 0.06% on his total income. He can do that because his accountants make it look like he earns a lot less than he really does and it is all (as far as I know) legal. Ironically he is the same person who says he isn’t taxed enough and thinks the rich should be taxed more. Well if he really thinks that why does he put so much effort into avoiding paying it?

My favourite company (based on their products, not their business practices), Apple, are well know for the dirty tricks they use. Some sources credit them with inventing the “Double Irish With a Dutch Sandwich” which apparently describes the practice of routing profits through Irish subsidiaries, then to the Netherlands, and finally to a Caribbean tax haven. After selling over half a billion dollars worth of products in New Zealand last year they paid 0.4% tax. Yes I know that is sales, not profit, but we all know what large profit margins Apple works on. Maybe they should hire Buffett’s accountants, then they might get away with paying even less!

I’ve already mentioned the contempt Google displayed in their answer to the accusations of tax avoidance there. Clearly their motto of “don’t be evil” has well and truly been forgotten.

The examples above are just that: examples, because I’m sure that every successful company and every hugely wealthy individual pays very little tax – it’s just part of the way they operate. After all capitalism is driven by greed so there should be no surprise that those who rise to the top are generally greedy. OK, fair enough, but if that’s the case then we need strong government regulation to control these people and extract a fair contribution from them.

But that doesn’t seem to be what most governments are doing. Here in New Zealand we are short of funding for many worthwhile projects. What is a major reason for this? Well the tax cuts for the rich which have resulted in a loss of $2 billion per year might have been a contributing factor I would guess.

You might think that increasing taxes on those who can easily afford them might be a reasonable strategy but not for our government. No, they want to tax paper boys instead. My son delivers papers and has recently been taxed on his income which is probably about as much per year as many of the rich, who pay almost no tax, make in an hour. And my daughter does two part time jobs but is being charged secondary tax on one of them. And for that matter, why do I pay tax at a rate of 500 times more than Warren Buffett?

The whole thing is just cheap and nasty. What possible motivation can there be for such despicable policies apart from a dogmatic view that giving the rich more freedom helps the economy (if you believe that you really are out of touch with reality, all it does if give them the freedom to move their undeserved wealth out of the country). Or maybe it’s a bit more cynical than that. Big business funds right wing parties, so I guess there should be no surprise when they get the rewards they paid for.

It’s not just the current New Zealand government who are totally lacking in any moral character and are ethically bankrupt, it’s the western world in general. So I don’t what this rant to be construed as a criticism of the Nats in particular, although they are undoubtedly amongst the worst practitioners.

Again I have to wonder how they ever win an election. I guess it must reflect rather badly on the Labour opposition who really do seem to be rather politically incompetent. That’s democracy for you: do you want incompetence or immorality? Tough choice!

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