Thursday, May 03, 2007

6 Bad bureaucracy design

I just commented on the plans from the NZ government to introduce a "Resale Royalties" fee... and accompanying taxes of course. Today I received a newsletter from the big idea, which points to an article with "15 interesting facts about the resale royalties debate". After my calculations using those figures. If the amount of royalties to be distributed to qualifying artists is $374,000 NZD and the number of qualifying (eligible) artists is 636... each artist would receive an average of $588.05 on royalties each year. Which is a risible amount.

Just like the "working for families" scheme, artists would be better off if they had a net tax break like that amount. Instead of building more bureaucracy to collect the money, and then just giving back a small part of it, because of the high price to pay for bureaucrats. And just like it is normal, they would certainly allocate funds from other tax payers to generate and maintain that new collection agency. Not all the money to maintain them will actually come from the 25% collection agency commission. Why can't they understand the (bad) economics of government agencies? Usually for each dollar collected by taxes, 70 cents are used to pay for any government agency, and only 30 cents are usable to pay for stuff. That's the reason why governments around the world are cutting off useless agencies, and privatizing services.

Using this example, the NZ art royalties collection agency would have to live with just $124,500NZD per year, if they charge a 25% commission. That's the salary of two bureaucrats and rent of a tiny room for the whole agency. Forget about printing forms, telephone, website, flyers, etc. It's just bad economics.

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