Shakedown finances

There are a lot of problems with the Paul Goldsmith / Willie Jackson media bargaining bill. 

I hit on some of those over in the Stuff papers this week.

A snippet:

If the bill goes ahead with only that change, some things are predictable.

Meta will exit news in New Zealand, as it is set to do in Australia. Australia’s government has been mulling over whether it ought to compel Meta to continue providing news in Australia – which is a bit odd. This all started from a notion that Meta was stealing news. One normally doesn’t encourage thieves to keep at it because of the benefits of the fines assessed against them.

When Meta leaves, outlets where Meta provides a lot of free distribution and links will take a substantial hit. They will appear at the minister’s door asking why he has done this to them. They will be right to do so. He will have to come up with an answer despite the fiscal situation and explain to his Cabinet colleagues why he needs to boost media subsidies.

Moreover, New Zealand’s reputation among tech investors will decline. What should they think about places that shake down the tech sector to subsidise other industries?

There is a completely defensible case for public support for journalism. This bill fails to help and causes substantial additional problems.

I wish Minister Goldsmith luck.

The more I think about it though, the more the tax policy aspect of it really bothers me.

NZ has had a decent tax policy process overall. Some bits are incoherent - depreciation settings on commercial buildings and interest deductibility for rental property businesses seem to flip on political whims rather than on any sound basis. But overall, the generic tax policy process is good.

What Minister Goldsmith and National are setting up here is an end-run both around the generic tax policy process and the vote allocation process. 

The legislation that Minister Goldsmith wishes to progress would set the Minister as decider on whether to designate a platform for compulsory bargaining. A Minister could tell Meta/Google/Twitter/Microsoft that if they give some specified amounts to whichever media companies, that would be enough to avoid designation. 

Whatever the resulting de facto tax is, it will not have gone through any kind of IRD tax policy process. Nobody will have checked whether it makes sense, how it interacts with other taxes, what it does to BBLR norms. It won't have to be voted on by Parliament, except in the legislation enabling the Minister to act as extortionist. 

Normal drill in spending measures is that different Ministries put budget bids up to cabinet. Those bids fight against each other for scarce public funding. There's an implicit evaluation of all of them against each other - ideally via cost-benefit assessment, but often also against political considerations. 

None of the money handed over to media companies through Goldsmith's extortion bill will go through that process. Nothing will adjudicate whether the money is appropriately allocated across media outlets/objectives, or whether spending in that area is more important than in other areas that normal vote bids have to compete with.

It is an end-run against both IRD and against the normal vote allocation process. We wind up with tin pot funds for different things, contributed to 'voluntarily' by sectors heavied to make the contributions. 

It is terrible precedent. 

If Government learns that it can avoid all manner of fiscal and procedural constraints by heavying a disfavoured industry to fund a favoured sector through regulatory impost or through promise of regulatory forbearance if the heavied sector does 'enough' to pay off the favoured sector, do not expect it to stop with tech platforms and news media.

Other applications are obvious.

The Grocery Regulator could be instructed to go hard against supermarkets in areas that are of little public benefit but massive cost to the sector, unless the grocers 'voluntarily' agree to do enough to supply food banks free of charge. Who could object? Anyone who does would be painted as either being in the pockets of Big Supermarkets, or as hating the poor, or both - good policy be damned. 

It isn't hard to come up with more of these. 

It's a terrible path. 

I hope Paul Goldsmith comes to his senses.