Opinion: There was a certain inevitability the long-suffering taxpayer would be 'invited' to cough up for the pleasure of keeping the Tiwai Point smelter open

I guess the current politicians subsidise big business so when they retire from politics they can take up token positions on company boards.

I don't agree with the Government's strategy. Effectively by selling assets the Government can keep spending on new assets (NZ$5 billion to NZ$7 billion worth) without having to borrow. But of course it is losing dividends by selling shares and my basic contention is that as sure as night follows day the other 51% of these state assets will be sold eventually. That's just what tends to happen.

So, the country keeps spending at the same rate it was, but over time loses the income producing assets. Over time that will lead to trouble.

Certainly, as the sold assets are strategically important and will be bought back by the Crown once the private sector has had the chance to hollow them out with over indebtedness and hence no NZ tax  liability. Of course regular IRD collected tax would serve to lighten the costs NZers may incur bringing the asset up to working specification.

The formula is alive and well, just as Chalkie details: 

Of course, people say a dollar tastes like a dollar wherever it comes from, but Chalkie reckons overseas buyers of New Zealand assets tend to taint their acquisitions with a bitter tax flavour.

Powerco, for example, is a highly profitable business but has paid next to no tax for the last three years. Here are the numbers.

In the nine months to March 2012, Powerco reported earnings before interest and tax of $79.6m. The previous year to June its ebit was $118m and the year before that it was $136.3m.

Nevertheless, over those three years Powerco had an interest bill totalling $465m, which converted those operating profits into huge losses and obliterated its tax bill. Indeed, Powerco reported a net tax benefit for those years of $32m.

The arrangement is beneficial to Powerco's owners - Brookfield and Queensland Investment Corporation - because more than a third of the company's debt is related party, allowing owners to extract profits from the business as interest while paying no tax.

There are tax rules designed to limit the ability of overseas owners to do this, known as thin capitalisation rules, but Chalkie reckons they have been as useful as a fart in a fishtank.

For example, Powerco's debt at the time fell well within the allowable ratio of debt to total assets of 75 per cent, but that did not seem to hinder its ability to create large tax losses.

Another overseas-owned lines company, Wellington Electricity Distribution, has an even higher proportion of related-party debt than Powerco and in Chalkie's reading of its accounts has paid no company tax at all since its sale by Auckland-based Vector in 2008.

The tax losses came despite healthy profits at ebit level of close to $50m a year.

Wellington Electricity Distribution, incidentally, is owned by Hong Kong-based Cheung Kong Infrastructure through a holding company in the Bahamas.

From last month the thin capitalisation threshold has fallen to 60 per cent.

We have to remember that the ethos of this Govt is also to shaft the masses, on behalf of the 1 - or whatever minority - %.

 That's the same with the $15 mill 'seed money' for the Dunedin Stadium debt, as with this 30. They are quite content to screw taxpayers, while drawing attention to the 'book balancing'. The fact that they're still in the polls at all (still alive?) suggests a dumb or dumbed-down populace.

Either the Nats are planning to ramp up the value of Meridian by artificially underpinning the supply of electricty to NZAS and thus ripping off potential investors, or they are planning to rip off taxpayers by selling cash cows to their wealthy mates at bargain basement prices.

They cant be doing both can they?

Smoke and mirrors

In the "big-picture" scheme of things, $30 million is a very cheap solution (bribe?) to

(a) get rid of an irritating obstacle to obtaining a successful float of Meridian, and

(b) kick the irritating problem down the road to be picked up by the 2017 administration

The immediate problem disappears, the bigger problem remains, just postponed

And the irrigation seed money advanced to farmer owned irrigation companies - so they can take for free publicly owned water.

Am not remotely looking to support the Nats, who I long ago gave up trusting in either competence or integrity.

However there are at least two only partly linked issues here:

1) Is it sensible for NZ Inc to subsidise an aluminium smelter in a period of over capacity worldwide? and

2) Is it the best for NZ Inc to sell off the power companies?

On 1, in my view, there is a case for some subsidy, given the opportunity cost to NZ of closing the smelter. Who knows exactly whether the negotiations were well handled, and what cards each side had to play, but given an obviously low aluminium price, the outcome actually passes a sense check to me. Closing it would of course mean lower power prices for the rest of us; or the closing of some dirty or inefficient plants. These are not to be sniffed at- there is a compelling case for lower prices regardless frankly. But I do suspect lower prices would lead to some waste; while our current account would not welcome the loss of whatever earnings we do make from Tiwai Pt. We would quite possibly blow the difference domestically. David may know more than me, but I wouldn't take it as a given that in 2017 the plant will close. If PDK's hypothesis on energy is even a tenth correct in timing, energy will become a greater premium as we progress, and cheapish hydro will have an increasing competitive advantage internationally

On 2, I remain vehemently oppsoed to the sales for a myriad of reasons that many others and I have articulated before, so won't repeat them now.

I am glad to see the government has decided to spend $30 million on agricultural research, keeping Ruakura and Invermay open, for the long term benefit on New Zealand and regional development. Oh, wait...

My only hope is that the govt know that tiwai will evenutally close, and when it does electricity prices will crash horribly, so they are trying to sell off as much of the power companies while they are still worth something.  A bit nasty selling it to the NZ public, but buyer beware and all that.  This is the only reason I can see for the government to sell off these well performing assets that NZers obviously want to keep hold of.

You do have to wonder about this govt though - something really stinks with chorus.  Surely it would have made sense for fibre to be rolled out by another company and for fibre and copper to compete, creating a proper market and lower prices. Instead, the govt allowed chorus to own both and are going to keep copper prices higher than the commerce commissions already over inflated recommendation just to make fibre viable and thier mates at chorus rich.