Amazon’s $160m rebate from NZ Govt is VERY shortsighted: Here’s why

Do you want to be in the film business? Well, you already are – New Zealand taxpayers money has been subsidising the industry for decades. Nothing new there. 

But is the memorandum of understanding, announced in April, between Amazon and the government over Amazon’s Lord of the Rings TV series inviting a dance with the devil we’ll come to regret?

One comment left under a Stuff story outlining the deal summed it up nicely – “Getting in the swim with Amazon? Too many hungry crocs and sharks in that creek for my liking”.

If you thought John Key changing our labour laws in 2010 to placate Warner Brother’s Lord of the Rings trilogy (yes, that film again!) a low-point, get ready to be surprised.

Amazon, who recently bought MGM studios for $8.45 billion USD, negotiated an extra 5% subsidy from the government’s Screen Production Grant – meaning that Amazon gets roughly NZ$160m back on a NZ$650m investment for the first season, with following seasons to be negotiated separately. 

The rebate’s chump-change for them and while there will undoubtedly be positive flow on effects for tourism (sometime!) and employment, if the government were expecting to get some of that investment back in tax, good luck. 

Amazon paid no tax in the U.S. in 2017 and 2018 and somehow managed to get a refund. 

The government is also opening the door to a company that is well-known for its controversial employment practises and its business-strategy swagger of crushing smaller competitors like Mum’n’Dad stores using its enormous scale (most recently, allegedly, gaming its search results.)

While there’s no indication yet that an Amazon distribution centre is marked for NZ, it is expanding its presence in Australia with a huge distribution centre opening in Melbourne. It’s also opening up its Australian website to Kiwis – meaning much faster shipping time, potentially impacting on local retail businesses.

Last year in Australia Amazon launched Amazon Flex – its Uber-like delivery service. That immediately ran into trouble with Australia’s Transport Workers Union, which accused Amazon of underpaying drivers and, if you’ve seen Nomadland, you know the dispiriting, monotonous work many Amazon workers face.

Still, our Economic Development Minister Stuart Nash waxed ecstatic over the LOTR deal, telling RNZ’s Morning Report that “what we have got out of Amazon in terms of the MOU and the industry and how we’re going to train people and our ability to use footage for tourism, the ability to leverage off a lot of what Amazon is doing, is fantastic.

“The bottom line is if we want a film industry in this country, part and parcel of that is government subsidies. Where’s the downside?”

Well, that downside might lie in the deal’s more opaque details which see the company building a “wider relationship” with New Zealand and entailing that the company send a team here to scout for “opportunities” – and – let’s face it – that doesn’t sound like it will end well for anyone but Amazon.

The ease with which Amazon, one of the richest companies in the world, with annual revenues greater than the size of our entire economy, secured millions of dollars in rebates from NZ tax payers, is troubling.

If doing a deal was inevitable given the large investment, get a good one!

Still, securing the production is great for the local film industry and the wider economy. Deloitte estimated that the production would contribute $500 million to the economy by 2024.

I know people who are working on the LOTR series here in Auckland; the money’s good and there’s likely to be work for many years. Happy days – for now.

But does the government know who it’s dealing with?

Other governments, belatedly, do.

Last week President Biden appointed Alina Khan, an outspoken critic of Big Tech, as chair of the Federal Trade Commission, the U.S. body that protects consumers and competition by clamping down on anticompetitive business practices.

Biden has expressed his frustration over the monopoly power and tax machinations of Amazon and its ilk; describing the fact that firefighters and teachers pay more tax than one of the largest companies in the world “an outrage”.

Still, many were still surprised over Khan’s appointment – and it’s likely Amazon will be chief in her sights. 

In 2017 Khan penned a paper  – Amazon’s Antitrust Paradox – in the Yale Law Journal. The paper singled out issues, apart from price, that are destructive to the wider economy, telling the BBC that –  “Even when services are good for consumers, they can hurt a whole set of other interests – be it workers, be it business formation, be it democracy at large.”

In the paper she went on to compare Amazon to the railroad combines Cornelius Vanderbilt and other “robber barons” put together to squeeze out competition.

If, like those robber barons, Big Tech has enjoyed roaming pretty much regulation free for years, their Wild West adventure looks like it’s going to get a lot more constrained in the coming years.

Khan’s appointment is one factor. Then, earlier this month, the G7 backed a global minimum corporate tax rate of at least 15 per cent, aimed at ensuring Big Tech pay their way and can’t reduce tax through international loopholes.

Just last week, in Washington, five bills were drafted by the House Judiciary Committee’s Antitrust Subcommittee to reign in Big Tech, that’s in addition to Amazon being sued by the attorney general for Washington over its anticompetitive practices.

Meanwhile here in NZ, while the cameras roll, the question of what Amazon’s presence might mean for us in a wider context, is still up for debate.

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