Rodney Hide: Multinationals will leave if taxed

With multinationals, the costs fall entirely on us. They don't have to invest or do business in New Zealand. Photo / Getty Images

The allure of Government is the promise of getting something for nothing.

We school our children, attend hospital, get the pension, a dole, a house, almost anything these days - all courtesy of someone else, thanks to the Government.

Government would have little attraction if we only got what we paid for. Or worse, something less.

Of course, it's an illusion. We can't all get out of Government more than we put in. But many think we can.

The deception is made possible by the Government making taxes near-invisible. GST is buried in the price of everything. PAYE is whipped out of our pay before we get it. The average Kiwi has no idea the tax they are paying.

The Government makes a big hullabaloo about what it spends. It's deathly quiet on what it takes.

And when the Government doesn't provide us with everything we want, it's because the rich, some land-owning foreigners or multinationals aren't paying their fair share.

It's never us. That helps keep the deception alive. If only others were made to pay more, we could have more.

The latest is headlines declaring big corporates don't pay their fair share.

The stories miss out the fact that company tax is a withholding tax.

It's a tax paid on behalf of shareholders, just as employers pay PAYE on behalf of employees. The companies might write the cheques but it's not their money they are signing across.

We would be better off without company tax. It would stop the whining about companies paying their "fair share". Investors would pay tax as they earn dividends.

There's another hidden truth in all the ballyhoo about foreigners and multinationals not paying their fair share.

The cost of a tax doesn't necessarily fall on those paying the money. In fact, it seldom does.

Businesses collect and pay GST but that 15 per cent cost falls firmly and squarely on customers - each and every one of us.

It's administratively and politically easier for businesses to pay the tax and pass it on.

It's the same with PAYE. Businesses pay it but it's coming out of our wages.

With multinationals, the costs fall entirely on us. They don't have to invest or do business in New Zealand.

The extent to which they do is determined by their returns after tax.

The more our Government taxes them the less they will invest and do business in New Zealand.

The only losers are New Zealanders.

Imagine how much investment there would be if their returns were taxed entirely away. Who would be the losers? The multinationals? Or Kiwis?

The demand for multinationals to pay more tax is stupid and counterproductive.

But it's not going to end. The illusion and deception are here to stay - and the fiction is certainly one that our politicians are anxious to perpetuate.

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