14 July 2011

At a time when New Zealand really needs to grow its economy and exports to collectively pay back debt and improve our living standards, the prospect of more asset taxes on top of taxing biological emissions from agriculture, is a step in the wrong direction.

“Farmers and the rural community will be concerned at this afternoon’s policy release by the Labour Party”, says Bruce Wills, Federated Farmers President.

“The Labour Party need to explain how new taxes on the productive sector will grow the size of the economic cake. They need to explain how new taxes will make housing cheaper for young families or for farmers wanting to buy their first asset.

“Labour’s capital gains tax, central to its revenue model, doesn’t seem to raise much revenue until 2018.

“To balance what could be seven budget deficits means either heavy borrowing or deep spending cuts. Right now, we know that Government borrowing is having an impact on our exchange rate. Any additional borrowing will likely see the exchange rate higher for longer, making things tougher for our exporters.

“Agriculture is already in the Emissions Trading Scheme. Like every other New Zealander, we’re playing our part by paying extra for our fuel and energy. It’s not helpful to force biological emissions into the ETS earlier than planned, when Australia and our other trading partners have no intention of doing likewise.

“It’s hard to see how it will make the size of the economic cake any bigger. Bringing biological emissions into the ETS early seems to be about increasing potential government revenue and little to do with combatting climate change.

“It’s also concerning to see foreign currency transactions included, because it seems like a financial transactions tax on exporters who often hold currency hedges.

“We talk much about building an entrepreneurial culture in New Zealand, but to do that, risk takers need to be rewarded for the risks they take. Our lack of a capital gains tax and reasonable personal and company tax rates are all positives when attracting people, ideas and much-needed capital to our shores.

“Once a capital gains tax is introduced, its scope and reach can easily be widened by any future government. We also know from other countries that considerable compliance costs and wasted unproductive resources are put into lawyers and accountants.

“We need to find ways to grow our economy. We are yet to be convinced that more and higher taxes will help the productive sector grow the economic cake for all New Zealanders to benefit from,” Mr Wills concluded.

ENDS

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