Exports and growing the pie

Reading Rod’s post on the budget, I agree that it looks good, but lacks a focus on exporters. Here’s my comments on the real role of exporters in the economy and how and why tax policy should focus on supporting it.

New Money and the Growing the pie equation:

If I pay less tax on profits made in my export business, then I reinvest this money into building my business, which gives me more leverage to build more export sales. More export sales means more money coming into the country - aka a bigger pie. Conversely, if I sell only domestically, then I’m just redirecting money from somewhere else already in the economy - I get the money, someone else doesn’t.

The Real Role of Exporters in the economy

The job of export businesses in the economy is not to create profits so that the government can tax it, the job is to increase the money supply for the country. Once there is more money in the supply (and I mean real money - equity not debt) the government has more money to tax as it moves around domestically, and this is where government should focus on making its tax revenue.

No need to tax it at the door in

It’s a short-term outlook to see exporters just like any another business and should be taxed the same as any other business. If the government is willing to take a short term reduction in tax revenue from exporters it will get medium and long term gains in tax revenue from the money moving around the economy that far surpass any initial taxing of the profits as the money comes into the country from export sales.