But we already know that tax concessions stimulate output by lowering costs relative to profits, which is what they are supposed to do. Because he is either incredibly stupid or he does not want to admit that the real problem is the total tax burden. Colebatch s appalling grasp of economics can be gauged from his support for export bounties and his glowing endorsement of firms that generate export income. This is just mercantilist nonsense. Bounties, for example, are particularly bad as well as stupid.
Bounties are literally subsides from Australian taxpayers to foreign consumers.
The exception occurs is when the exporter can charge a sufficiently high price for him to absorb the bounty, in which case it is the producer who receives the subsidy and not foreigners. Where, however, a bounty has been imposed to compensate for taxes on inputs, for instance, the solution is to abolish the taxes, not call for more state intervention. Furthermore, it is not generally realised that wide ranging bounties can actually cause a fall in the terms of trade. The real problem is the total burden of government. For example, Lucent Technologies Australia has threatened to relocate to Asia unless the government grants it more tax concessions, that is, reduces its tax burden.