NZIER: water taxes will suck Otago & Canterbury dry

Water taxes could become a regional tax on Canterbury and Otago, seriously impacting those regional economies.

This is the conclusion of a New Zealand Institute of Economic Research (NZIER) report for Federated Farmers.

Care needs  to  be  taken  when  considering  taxing  competitive  agricultural  sectors since  countries  which  have  done  so  without  strong  justification  have  performed poorly (e.g. Argentina).

While there is little policy relevant data to tell us how much water is being used by the rural sector, preliminary estimates suggest that for every cent (per cubic metre of water) the rural sector is charged, $39 million will be taken out of rural communities.

This assumes  that  the  policy  is  enforceable  and  that  any  exceptions  could  be adequately  accommodated.1

Further, if  focused  on  irrigation  only,  the  tax  will predominantly fall on Canterbury and Otago  water users  (see following table), while traditional dairying areas such as Taranaki and Waikato will pay a minimal water tax.

While water  quality  is  reasonably  good,  maintaining  water  quality  is  a  major challenge that needs  to be overcome  with the  spotlight firmly on non-point  source agricultural run-off. Farmers need to be proactive in addressing this issue or others (e.g.  over-zealous  regulators, foreign consumers)  will do so  instead, possibly in ways that are less efficient for farmers and the country than an industry-driven initiative.

Doing nothing about water quality  is  not a sensible  option.  Neither is rushing ahead without sufficient information.  

But this is not a new problem. New Zealand can learn from other countries’ water quality regulatory experiences here and hopefully avoid making their mistakes. Some key lessons are:

  •  Addressing water quality that impacts on agriculture is a long term game. Rash decisions made now could have significant and costly unintended consequences
  •  Use science to determine minimum flows to sustain healthy water ways, and be flexible and adaptive in the management of the environment as scientific knowledge improves
  •  Using markets to allocate water between competing uses can be efficient and effective when conditions allow, but be aware that market forces alone will not solve all problems
  •  Water taxes will not be an effective allocation mechanism if significant physical, regulatory or information barriers exist. Specifically, further work is required in understanding the detailed water use trade-offs since we lack the necessary policy-relevant information, data and institutional capability
  •  Where possible, including urban areas within the same water allocation and trading framework will improve efficiency. . . .

It compares the policies of the National, Labour and Green parties and says:

There certainly  needs  to  be  a  step  up  in  primary  sector  –  and  other  sectors’  – responsiveness to this issue. But durable, effective water  trading  solutions take time to develop and must be based on robust analysis and facts, not rhetoric and ideology.

Voters should  be  wary  about  promised  policy  outcomes  when  the  evidence  base around  the  economic,  environmental,  social  and  cultural  impacts  of  the  proposed policies is far from complete. . .

There are no credible arguments against the importance of good water quality, the need to prevent degradation of water ways and clean up the dirty ones.

But imposing a water tax on Canterbury and Otago farmers to address problems all over the country, some of which have nothing to do with irrigation or farming, is not the answer to poor water quality in some areas and will create other problems.

It will also impose huge costs on a relatively small number of farmers in two regions:

“Let’s not kid ourselves that the road Labour and the Greens are travelling down with Water Taxes, looks more like regional farming taxes to us,” says Ian Mackenzie, Federated Farmers Environment spokesperson.

“The NZIER have calculated that a water tax of one cent on every cubic metre (m3) of water used for irrigated and stock purposes, means $39 million would need to be paid by farmers. 

“While Labour and the Green Party won’t confirm what they are considering, in 2011, the Greens campaigned on ten cents a cubic metre.

“If that happened then Canterbury’s farmers would foot 62 percent of the cost ($248 million) while 21 percent of the cost would fall on Otago’s farmers ($82 million).  Those two regions being where most of New Zealand’s irrigation happens.

“This represents something like a 13 percent bite out of agricultural GDP in Canterbury and 12.5 percent out of Otago’s agricultural GDP.  That’s one heck of a wallop and for what?

“These taxes have little to do with the political rhetoric of tackling water quality. There are plenty of regions with little or no irrigation, which have water quality challenges due to agriculture, industry and municipal influences.  

“It seems more about revenue generation to plug big spending promises and farmers, horticulturalists and vintners in Otago and Canterbury are being lined up to foot the bill.

“There’s no mention that these same businesses already pay thousands of dollars each year in ‘taxes’ to regional and district councils for the privilege  of accessing water.

“It doesn’t take a rocket scientist to work out that water taxes will only drive up the cost of food production, especially locally grown fresh vegetables and fruit.

“Are Kiwis really prepared to gift our domestic food market to other countries by pricing ourselves off the market?

“Labour and the Greens claim it will drive better and more efficient use of water. Well they are too late. Over the past ten years or so, farmers have been spending hundreds of millions of dollars upgrading on and off-farm irrigation infrastructure to more efficiently use water.

“This is plainly obvious for all to see in Canterbury with the proliferation of centre pivot irrigators.  With each one costing some $250,000, they allow the farmer to use substantially less water producing more food and fibre over traditional border dykes.

“There’s only so much money to go around for farmers to invest.  These proposed tastes will only slow down or stop a farmers’ ability to invest in new technologies.

“You’ve got to remember that we’re only using a fraction of New Zealand’s renewable freshwater resource, but the proper word is renewing.

“As the NZIER also notes, there are large informational, institutional and implementation gaps on water taxes. In our view, water tax proposals should have ‘use with caution’ in flashing red lights.

“If you want an example of a country with ill-founded and ill-thought out taxes that are like a wrecking ball through the primary industries then Argentina provides it.  Dr William Rolleston visited it earlier this year and saw for himself how everyone loses out there.

“By attacking Canterbury and Otago irrigators, there is such a dislocation between who you tax and the problem you want to solve, that the only thing you hurt is the economy.

“That’s why the media, politicians and commentators need to heed NZIER’s advice that, “care needs to be taken when considering taxing competitive agricultural sectors since countries which have done so without strong justification have performed poorly”.

“With some trading partners increasingly believing we are not responsibly harnessing our water resources to guarantee production, this is no place for policy experiments,” Mr Mackenzie finished by saying.

We don’t need an expensive experiment the direct costs of which will be carried by a relatively small number of farmers and the indirect costs of which will impact on Otago and Canterbury.

We need more of what’s already working.

This includes independently audited environmental plans for farms, which is what the North Otago Irrigation Company requires of all its water users.

Farmers already had lots of reasons to vote for another National-led government. This report provides them with more.

12 Responses to NZIER: water taxes will suck Otago & Canterbury dry

  1. The farmers’ union is doing its usual scaremongering and ‘sky is falling’ act.
    Nothing new here.
    Nothing of value here.
    [ Deleted – off topic]

    Like

  2. Gravedodger says:

    That is an established fact clownton or is it just you scare mongering and it is a much more simple issue of random and unforeseen entirely natural toxicity.
    I once was caught out with Nitrate poisoning from olde world maize over 40 years ago, grown with basic low level npk with absolutely no added nitrogen fertilizer, never sprayed either pre or post emergence and that had absolutely no connection to your straw man alarmist anti GE preaching.

    Btw when will the xxxx communist and the material chick announce the tax on oxygen and nitrogen in any quantities where the two gasses exist in roughly 1 to 5 ratios.

    Like

  3. Mr E says:

    Robert,
    Off topic. GD – don’t let him lead you there.There have been plenty of threads by Ele on the swede issue. Robert is hijacking another thread.

    Like

  4. My comment is right on topic. Here’s an up-date:

    Waitaki District Council loans $17 million to a local irrigation company.

    http://www.odt.co.nz/regions/north-otago/316275/conditional-17m-council-loan-irrigation-company

    Can anyone imagine what Mr Joyce or National generally would be saying if they were propping up any other damaging industry? A mining company? A gaming software exporter? A used car dealership?

    What indeed does Act’s ex-Federated Farmers president have to say about this egregious capitalist favouritism?

    And why is a fairly poor Council like Waitaki spending it on this rather than say, oh, running a District’s roading, social housing, stormwater runoff, or children’s parks?

    http://thestandard.org.nz/open-mike-18092014/#comments

    And a question for Ele: have you personal interests in the Waitaki scheme?

    Like

  5. [ Deleted – off topic]

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  6. [ Deleted – off topic]

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  7. Mr E says:

    Way off topic Robert.

    Like

  8. jabba says:

    what tax could the Greens/Labour dream up next .. I know, an air tax and I’m not kidding .. they will find a way.
    Re the water tax (and carbon tax) .. I know 2 major companies who will go to the wall within 2 years if these tax’s are introduced .. mind you, the Gweens hate Tiwai Point anyway.

    Like

  9. “Snitch of the Week” award – wait for it… It’s Mr E! Mr E!
    Congratulations, Mr E!

    Like

  10. Mr E says:

    Ladies and Gentlemen – I present to you…

    Robert Guyton, elected Regional Councillor for Environment Southland.

    As a Southland rate payer, I’m beaming with pride!

    Like

  11. “elected”

    https://homepaddock.wordpress.com/2014/09/18/nzier-water-taxes-will-suck-otago-canterbury-dry/#comment-289698

    With very strong support from Southlanders who appreciated my candour and willingness to speak out against the old-guard fat-cats and their self-serving, industry-friendly mutterings. Southlanders have read my comments in the regional newspaper for years and are in no doubt about my views on the subjects that are important to our future, in particular those that relate to the Southland environment.
    Do I sound proud of myself, Mr Enonymous? Because, I am.
    I made no secret of that. At all.
    To learn though, that you are beaming with pride also, at having me as your representative, has made my day. The results of Saturday’s poll will, I expect, leave me delirious with joy, so thanks for the warm-up.

    Like

  12. Mr E says:

    Robert

    Who are these “old-guard fat-cats and their self-serving, industry-friendly mutterings”? I’m looking for some of your “candour and willingness to speak out”

    I leave you in no doubt. I am pleased you are on the council. Not because I agree with your views. Because your presence represents a democratic process. The same process that put a dairy farmer opposite you.

    People have heard your views and seen your name in the paper and that wins you some votes, no doubt.

    I’m sure your comments on blogs also win you public support. Although with democracy being what it is, I wonder how many you lose too.

    How is your own blog going? Thriving from your candour? How about on other blogs? Do you think your candour gets a warm welcome?

    “The results of Saturday’s poll will, I expect, leave me delirious with joy, so thanks for the warm-up.”

    Something tells me you will be happy regardless of the outcome.

    Like

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