Editor,

It is with some interest that I read Prime Minister Key's announcement of aid contributions for Tonga.

The first aspect I find amusing is the absence of any recognition, in the announcement, that this is money being collected from citizens of New Zealand in taxes and therefore is coming from the people of New Zealand for the people of Tonga. Instead he gives the impression that this money is the result of his/government's generosity.

The second interesting aspect is that the announcement gives the impression that $12 million this year, $16 million next year, and $18 million the following is easy money for NZ. He said nothing about the fact that giving this money to Tonga must mean that some services to the citizens of New Zealand must be curtailed by the same amount.

Little wonder that the people of Tonga must think that foreign aid is like monopoly money and large amounts are readily available from the printing presses at any time.

The last and most interesting aspect is that, in fact, the amount of NZ annual aid to Tonga comes very close to the total tax revenue that the NZ government would have collected in income tax from income derived in NZ on the NZ$70 million of exports to Tonga in 2007. I am not an economist but would estimate that:

Company tax 30% of 20% of $70 million = NZ $4 million
Employee income tax 25% of 40% of $70 million = NZ $7 million

Total = NZ $11 million

Therefore what PM Key should have said in his announcement is that the NZ Government is actually giving back the money that the Tongan people sent to the NZ Government in the first place.

Best regards,

Peter Goldstern

goldsternp [at] alum [dot] mit [dot] edu