Stuart Nash has used the media’s thirst for content to push various messages of late, one of them being that the Overseas Investment’s Office needs to implement audits on foreigners who bought properties under the condition it would generate an economic benefit to the country.
On the surface of it, this seems entirely fair, until you think it through a little, and come to the penalty or enforcement portion: do you take the properties off them again? Nash, cleverly, left that unsaid.
ACT’s ex-candidate Jamie White equally brought joy to media still on holiday skeleton crews when he penned a response to Nash’s proposal.
If you want to sell your farm to a foreigner, you must get permission from the Overseas Investment Office (OIO). They usually give it. Indeed, they decline only 1.5% of requests.
According to Stuart Nash, the new Labour MP for Napier, they should decline more, because allowing foreigners to take profits out of the country is a “dead end street.”
Last week William Rolleston, president of the Federated Farmers expressed agreement with Mr Nash.
Both are confused, as was David Cunliffe and many other politicians who peddled the same idea during the election campaign.
When a foreigner buys a New Zealand business, all the expected future profits of the business come into the country in the purchase price. When the actual future profits then go out to the new owner overseas, there is no net loss.
In fact, the transaction must involve a net gain for New Zealand. By hypothesis, no New Zealander valued the future profits as high as the foreigner did. Otherwise the foreigner would not have been the highest bidder. So the amount any foreign purchaser pays for a farm or other business must exceed the present value of its future earnings to any New Zealander.
In other words, there must be a net gain to the country. And this gain is easily measured: it is the difference between what the foreigner paid and the highest bid from a Kiwi.
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