Tax recommendations threaten future prosperity [6/3/19]

Tax recommendations threaten future prosperity

Source: Federated Farmers

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Federated Farmers is calling on the Government to reject the majority of the raft of new taxes proposed by the Tax Working Group.

"Small business would pay the costs, large business would spend thousands avoiding the costs and tax advisors and valuers would have a field day," Federated Farmers Vice-President Andrew Hoggard says.

"There is possibly an argument for a Capital Gains Tax aimed at rental properties if there was some sound evidence it would dampen investor speculation, and reduce price pressure and first home buyers being out-bid. But even with that, we haven’t given the tougher ‘bright line’ test rules a chance to really kick in.

Labour and their Coalition partners must be aghast at the chorus of anger from so many sections of New Zealand society about the Tax Working Group’s proposals.

Feds believes they should heed the comments of the group’s chairman, Sir Michael Cullen, who publicly reminded people that he had not promoted a comprehensive capital gains tax during his nine years as Minister of Finance for the Helen Clark-led Labour Coalition Government.

"Sir Michael also said that New Zealand was so clever we knew a comprehensive capital gains tax was a bad idea or not clever enough to put one in place," Andrew says.

"I go for the former conclusion - that on balance a capital gains tax is a bad idea. It’s clear that a CGT would do little extra, above what the government is already doing, for housing affordability but would just add an additional layer of costs for businesses, and given it won’t even apply to the vast bulk of houses, again how will it solve housing affordability.

"Fairness has been mentioned a lot in this discussion - why should the capital gains on a $2 million small farm in Eketahuna be taxed, but a similar valued house in Ponsonby not. Either everyone is in or no-one is."

The National Party has been quick out of the blocks to start putting some numbers on the financial implications of the Tax Working Group’s proposal.

"If anything, their estimates on the fall-out may be a bit light as, for instance, they took a mid-point view on a number of figures.

"For example, a 2018 Landcare report calculated that a charge on methane for a sheep and beef farm could be as high as 123% of their net profits - a nationwide cost in the order of $2 billion and a cost per sheep and beef farm of about $120,000."

"In our view the environmental taxes that have been mooted will be even worse than a CGT," Andrew says.

A tax on nitrogen loses will require the use of the Overseer modelling programme but it has a 20% margin of error.

"How many people would like IRD applying a 20% margin of error to their taxes. Overseer is a fantastic tool for what it was developed for, but it wasn’t designed as a tax calculator. Also, nitrogen is not the issue in every catchment in this country. Taxing every farmer and grower on nitrogen losses or a tax on nitrogen fertiliser, just takes money away from primary producers that they could spend on the mitigations that are needed for their specific catchment."

ENDS

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