Yes! We are allowed to make money while saving the planet.

Wednesday, February 16, 2011

Tax rates are a minimal factor for business when it comes to location.

Every week commentators whinge about business taxes.  How payroll taxes are stopping investment in NSW.  How windfall taxes on miners will drive them overseas.  How a 2% drop in corporation tax will transform overseas investment in Australia.  But what is the reality?

The reality, my fellow Green-Capitalists, is that business taxes have minimal impact on investment decisions.  There are dozens of criteria that any business will take into consideration when deciding where to open a factory, base a head office or open a call centre. 

The key ones are logistic.  Where are the customers, where are their key suppliers, where are the transport links, is their a good pool of labour to draw on,  how reliable is the key infrastructure - water, power, telecommunications.  Second comes total investment cost.  How much are land and construction costs.  What will the equipment cost.  How much to link into the rest of the business operating systems.  Then they look at running costs. What are salary levels, what about energy costs, how high are rents.  Then external factors.  Will the location attract good staff.  What is the security like.  How strong are government institutions.  How corrupt is the country or state. 

Finally, right at the very end, they will plug in a company tax figure and whether that tax rate is 20% or 40% really makes very little difference compared to all the other criteria.   Total business taxes are a minor input in the overall decision making process.  There are occasional exceptions.  Ireland gave tax free holidays to attract business to their economy in the nineties - but every eligible business in the world did not suddenly uproot and move to Dublin, which is what you would expect if you listen to the propaganda.

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