More than a CGT

The proposed capital gains tax (CGT) has got most of the attention, but worryingly there’s more, including the proposal of a water tax that would affect everyone:

IrrigationNZ says a proposed nationwide water tax would affect all Kiwis, and there needs to be more discussion about how this would impact households, farmers and businesses.

“The Tax Working Party has recommended the government consider introducing a water tax on all types of water use including hydro-generation, household use and commercial water use,” says Nicky Hyslop, IrrigationNZ Chair.

“This would result in higher power and food prices for households and businesses and higher rates bills to pay for the irrigation of parks and reserves as well as direct water tax on household and business water use.”

An increase in the cost of production inevitably leads to an increase in the cost of what’s produced.

The working party is proposing that the water tax could be used to fund the restoration of waterways.

“While we all want to see cleaner rivers, often the solutions to improving rivers require people to change their existing practices both on farm and to prevent urban wastewater discharges into rivers. Just allocating money will not be the most effective solution,” says Mrs Hyslop.

This was proposed before the last election and was rightly criticised for taxing the good to clean up after the bad.

“We need to think about whether a water tax is equitable as water use varies hugely across regions based on rainfall. For example a Christchurch resident uses an average of 146,700 litres of water per year, while the average for a New Zealander is 82,800. Someone living in Christchurch would pay nearly twice as much in a water tax as someone living elsewhere and would also pay more in rates because in a dryer climate the Council will use more water to irrigate their local parks. Is taxing dryer regions such as Canterbury, Otago, Hawke’s Bay and Marlborough more heavily with a water tax a fair way to fund river restoration nationwide?”

Mrs Hyslop says there are similar equity issues for farmers and growers.

“Some regions receive a significant amount of rainfall and farmers don’t need to use irrigation. Central Otago receives less than half the rainfall of Auckland, so farmers and growers rely on irrigation to grow stonefruit, wine and for pastoral farming to provide feed for animals. Only 7% of farmers use irrigation nationwide – why are those farmers being targeted to pay a tax which 93% of farmers won’t pay when there are many regions which have very poor waterways but little use of irrigation?”

Generally waterways with more irrigation are cleaner than those with less or none.

Mrs Hyslop says that a water tax on hydro-electric power generation would also add to power bills for households and businesses and this tax doesn’t make sense at a time when the government wants to encourage the use of renewable energy to meet climate change targets.

The poor already struggle to pay their power bills, why make it worse for no environmental gain?

“Currently a number of regions are suffering from very dry conditions and we need to be developing more water storage as climate change is predicted to bring more frequent droughts in the future,” she adds.

“We disagree with the suggestion in the report that introducing a water tax will encourage greater investment in water storage. If you look at the most recently approved water storage project – the Waimea Dam – a price increase for the dam construction nearly resulted in it not being built. Introducing a new tax on water use will add to be long-term costs of this and similar projects and make them less viable and less likely to be built. We really need more investment in these projects to ensure we have enough water to supply our growing population and get through more frequent future droughts.”

“We also have concerns that farmers and growers in many regions may face significant water tax costs in excess of $10,000 a year which will make it more difficult to fund the environmental improvements we all want to see to improve waterways,” she says.

“The report discusses how a water tax will encourage more efficient water use. There are already a number of existing incentives that encourage efficient water use including electricity costs and regulatory nutrient limit rules which require farmers to only use water when needed. The biggest improvements in water use efficiency come from modernising irrigation systems.Farmers and irrigation schemes have already invested $1.7 billion to modernise their systems since 2011, resulting in significant improvements in water efficiency. Introducing a major new tax will reduce farmers ability to replace an older irrigation system with a more water efficient model.” 

The capital gains and water taxes aren’t the only monsters unleashed by the TWG .

The Tax Working Group has gone much further than a Capital Gains Tax with a raft of new taxes targeting hard-working New Zealanders, National Leader Simon Bridges says.

There are eight new taxes including; an agriculture tax, a tax on empty residential land, a water tax, a fertiliser tax, an environmental footprint tax, a natural capital enhancement tax, a waste levy and a Capital Gains Tax.

“This is an attack on the Kiwi way of life. This would hit every New Zealander with a Kiwi Saver, shares, investment property, a small business, a lifestyle block, a bach or even an empty section,” Mr Bridges says.

“For farmers, who are the backbone of our economy, this is a declaration of war on their businesses and way of life. They would pay to water their stock, feed their crops and even when they sell up for retirement.

“Labour claims this is about fairness, but that’s rubbish. The CGT would apply to small business owners like the local plumber, but not to investors with a multi-million dollar art collection or a super yacht who won’t pay a cent more.

“The TWG has recommended one of the highest rates of Capital Gains Tax in the world. The Government would reap $8.3 billion extra in its first five years from ordinary Kiwis – small business owners, farmers, investors, bach and lifestyle block owners. After 10 years it would be taking $6 billion a year from Kiwis.

“It will lead to boom times for tax lawyers and accountants and even Iwi advisers, given recommendations for exclusions that include Māori land in multiple ownership.

“We believe New Zealanders already pay enough tax and the Government should be looking at tax relief, not taking even more out of the pockets of New Zealand families.

“National says no to new taxes. We would repeal a Capital Gains Tax, index tax thresholds to the cost of living and let Kiwis keep more of what they earn.”

The government keeps trying to counter the accusation it’s not a good economic manager.

Introducing new and higher taxes is not the way to do it.

It should be aiming for higher quality spending not more spending and reducing the burden of tax to allow us all to keep more of our own money.

 

One Response to More than a CGT

  1. adamsmith1922 says:

    Reblogged this on The Inquiring Mind and commented:
    As much as the CGT plan is flawed there were further significant imposts proposed especially at the rural sector

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