Today we have released our latest report, ‘Socialism for the Rich’, by Jim Rose. The report shows that the annual cost of corporate welfare is now $1.6 billion - or $931 per New Zealand household.
‘Socialism for the Rich’ collates the costs of all the corporate welfare expenditure in Budget 2017. It shows that the company tax rate could be six percentage points lower if these favoured handouts were abolished and spread fairly across all New Zealand businesses.
Instead of rewarding profitable businesses with an across the board tax cut, these subsidies pick winners by directing subsidies to businesses that cannot keep afloat on their own.
Budget 2017 has allocated $294 million to commercialising science and innovation. In the past, the Government has directed investment at ‘public good’ science - research and development that has low commercial viability. Now, funding is going towards trying to commercialise technologies in the private sector. It’s socialised costs for privatised profits.
A further $148 million is going towards subsidising the film industry, $12 million less than the last budget. Since 2008, $997 million of taxpayer funds have been spent trying to attract the glitz and glamour of Hollywood.
The largest recipient of taxpayer funded corporate welfare is KiwiRail. The latest budget has allocated $396 million to KiwiRail, a 50% increase on the previous year. KiwiRail has now received more than $4 billion in taxpayer handouts since 2008 despite being valued as a $1.5 billion liability.
Corporate welfare is not only a waste of taxpayer money but also counterproductive. Look at Emirates Team New Zealand. Removing the direct corporate welfare saw Team New Zealand bring home the Auld Mug. Forcing private businesses to compete on their own footing, rather than rely on government handouts, will inspire competition and innovation. On the other hand, corporate welfare slows down the boat.
The report's author, Jim Rose, says, “The role of government is to provide essential public goods and social welfare that the market cannot. This Government has significantly overreached this role and actively engaged in picking winners and propping up failing businesses.
- Corporate welfare in Budget 2017 is $1.6 billion, an increase of $203 million on the previous year's budget and the highest since 2008.
- That cost is the equvilent to $931 per household.
- $394 million is going to KiwiRail bailouts (50% more than the last budget).
- KiwiRail has received more than $4 billion in bailouts since 2008.
- $294m is being spent on commercialisations of science and innovation.
- $212m is allocated to Primary Industries (i.e. irrigation), an increase of $103 million since the last budget.
- $148 million is allocated to subsidising the film industry, a $12m decrease from the last budget.