Word of the day

26/03/2021

Habbob – a violent dust storm or sandstorm especially of Sudan; a thick dust storm or sandstorm that blows in the deserts of North Africa and Arabia or on the plains of India.


Sowell says

26/03/2021


Rural round-up

26/03/2021

Sensible pause – Rural News:

Finally the Government has made a sensible move to temporarily pause the implementation of the impractical rules that accompany its proposed regulations on winter grazing.

Last week Environment Minister David Parker and Agriculture Minister Damien O’Connor announced a temporary delay, until 1 May 2022, of intensive winter grazing (IWG) rules taking effect.

For months farmers, industry groups and councils around the country have highlighted the unworkability of the rules and that numerous issues need to be addressed. Hopefully, this extra time will ensure that both politicians and bureaucrats will now listen to the real concerns of farmers and councils, and implement rules that will actually work to benefit the environment and farming.

It is unbelievable that despite empirical evidence about how the IWG rules, that were part of the Essential Freshwater legislation passed in August last year, had a number of unworkable parts, ministers and bureaucrats took so long to act. This ‘we know best’ attitude needs to change as it is a huge hindrance to making any real progress in improving the country’s water. . . 

South Island Agricultural Field Days expects to draw 30,000 to N Canty – Hugo Cameron:

The Canterbury town of Kirwee is expecting to see up to 30,000 people turn up for one of the country’s largest regional field days events this week.

The South Island Agricultural Field Days, founded in 1951, is the oldest show of its kind in New Zealand and is taking place through until Friday.

Event chairperson Michaela McLeod said she was looking forward to bringing the sector together after a tough year due to Covid-19.

“There have been a number of A&P shows and other events cancelled around the country. They are such important events for farmers and traders, and I know it’s been very hard on a lot of people not having them,” she said. . . 

Anger, guilt and optimism: young farmers’ complicated relationship with climate change – Charlie O’Mannin:

As farming confronts its climate impact, Charlie O’Mannin speaks to the next generation about how they feel. In short: it’s complicated.

“If you’re waking up every morning feeling awful about the job you’re in, feeling like you’re the reason climate change is happening, like you need to counteract your emissions, like you need fewer cows, well what would be the point in waking up and getting the cows in?”

Briana Lyons belongs to a generation of young farmers facing a radical future.

Agriculture makes up 48 per cent of New Zealand’s greenhouse gas emissions, according to the Ministry for the Environment’s 2018 Greenhouse Gas Inventory Report. . . 

Two million tonnes of greenhouse gas up for grabs with minimal production hit:

Ravensdown’s recommendations to the Climate Change Commission focus on three specific solutions that can save two million tonnes of carbon dioxide equivalent per year with minimal impact on agsector production.

The farmer-owned co-operative’s submission sent yesterday points out the potential savings of using inhibitors that reduce the amount of nitrous oxide being emitted and lost from granulated nitrogen fertiliser and livestock urine.

“Proven urease inhibitors are available for use at scale across New Zealand. Nitrification inhibitors have shown promise in the past and should also be pursued for the future. For both, we’re asking that the Commission looks into how obstacles to adoption can be overcome,” said Mike Manning, General Manager Innovation and Strategy at the co-operative.

“We agree with the Commission that agsector productivity is key – especially when the country is facing such debt and economic uncertainty. At the same time, we believe in smarter farming, in New Zealand’s ambition to hit its climate goals and in the need for practical, scalable innovations to do so,” added Mike. . . 

Leading kiwifruit companies to amalgamate:

Seeka Limited (“Seeka”) and Opotiki Packing and Cool Storage Limited (“OPAC”) are to join via amalgamation. This transaction will see Seeka expand further to be operational in all of New Zealand’s major kiwifruit growing regions in a deal that continues to consolidate the New Zealand kiwifruit industry.

The OPAC shareholders will receive new shares in Seeka at the ratio of 1.4833 Seeka shares for every 1 OPAC share held, valuing the net assets of OPAC at $33.94m provided OPAC shareholders approve the transaction with a 75% approval required. Seeka will assume approximately $25.06m of debt as part of the acquisition bringing the total deal to $59.00m.

The offer is subject to a number of conditions, including approval of OPAC’s shareholders to the amalgamation at a shareholders’ meeting to be held on Tuesday 13 April 2021; and approval by Seeka’s shareholders to the issue of up to 7,042,574 new shares in Seeka at the ASM to be held on Friday 16 April 2021. Further details will be advised in the respective Notice of Meeting to be sent to each Company’s shareholders prior to their meetings. . .

Flood damage: where to find help – Andrew Norris:

As we watch the damage emerge along NSW’s coastal regions as the flood waters move through, you can’t help but feel for those who have copped the brunt of it.

The sheer extent of the flooding has been incredible, and to hear multiple stories about how livestock have been stranded or have turned up in unusual places like the beach or somebody’s backyard is quite bewildering.

This is all before the damage assessment begins in earnest. The extent of infrastructure that will need repairing or replacing and the amount of pastures that will remain unsuitable for grazing will be extensive.

The federal government already has lump sum payments available for which those affected by the March floods can apply, although Moree, which is also dealing with major flooding now too, was not on that list as we went to print (visit www.servicesaustralia.gov.au). . . 


Yes Sir Humphrey

26/03/2021


First they came for the landlords

26/03/2021

Business NZ asks: will my sector be next?

BusinessNZ has warned a removal of tax deductibility on interest payments for residential property has other sectors worried whether they will be targeted, likening it to the uncertainty created by the 2018 oil and gas ban.

Kirk Hope, chief executive of the influential lobby group, also accused the Government of being “misleading” in the way it is describing the issue as a “loophole”, because in all other sectors of the economy business expenses are tax deductible.

Defenders of this policy change have tried to justify it by saying home owners don’t get a deduction for the interest they pay.

There’s a reason for that, they aren’t businesses and that difference applies across the board.

It’s just like farms or racing stables being able to claim vet bills as legitimate business expenses but no-one can claim a deduction for vet bills for their pets.

Hope said the move had clear and significant implications for property investors, but now people were left wondering whether it affected other parts of the economy and was likely to see investment decisions paused.

“They’ve removed deductibility [of interest payments] from this group of people. Would that happen for a different sector for a different purpose, in terms of businesses being able to deduct particular types of businesses expenses? 

Now the government has opened the door, what else might they shove through it?

“There are certainly going to be some people thinking about how they make investments, and it will have a stalling effect; there’s no doubt about it,” Hope said.

“The last thing we need right now is probably a stalling in business investment because of a decision made around housing.”

Investors would be worried about whether deductibility more generally was being targeted by the Government, given the lack of signalling on the issue.

“If there are other areas they really need to be upfront about that. There’s no doubt they should have signalled it in advance. It’s a really substantial change.”. . 

It’s a change to tax policy, it’s not as the government claims, closing a loophole.

Tax expert Robin Oliver, a former deputy commissioner at the IRD, described the Government’s move on interest payments by landlords as “out there”.

Oliver, who sat on the Government’s tax working group in the last term said he could not think of an example of a sector being unable to deduct an expense which was available to all other sectors of the economy.

It would amount to “a massive tax penalty on renting out property,” he said.

“You’re taxed on income that you don’t actually have, because your profit is your income minus your expenses, but they just ignore the expenses part,” Oliver said.

“You could have almost no profit, maybe a loss, but you still have to fork out thousands of dollars to the IRD. It’s not an income tax, it’s just a penalty.” . . 

It’s a penalty that will push up rents, hitting the poor the hardest and making it harder still for renters to save for a deposit to buy their own homes.

Bryce Wilkinson explains why the policy is shambolic:

Suppose you have an apple orchard. You hire labour to pick and pack your apples. You sell each box of apples for $40. You deduct labour costs of $30 and earn a profit of $10. After paying tax at 33 cents in the dollar, you have $6.70 per box to live on.

Now the Government announces that it is rushing legislation through Parliament to remove what it calls the wage deductibility tax “loophole”. After this Friday, anyone buying your business will pay tax at 33 cents on the dollar on the $40 per box revenue.

This raises the “income tax” on the business from $3.30 to $13.20. Costs now exceed revenue by $3.20 a box. You no longer have a buyer for your business. Worse, in four years, you will be in the same tax situation. Your business will be bust. Your workers will have to find other work or go on welfare. Your former customers will have to do without apples.

The government is pleased you are gone. Orchardists are speculators; they are hoping that the market value of their business will rise. Speculation is bad. Speculators should be driven from the apple market.

Does this sound far-fetched? Not if you are a landlord. This week the Government closed the “interest deductibility loophole” in rental housing for new investors, effective from this Saturday. For existing investors, it is being closed over four years. The Government explained that it wants to remove incentives for speculators, equating them with investors. . . 

He lists what’s wrong with the policy:

First, an income tax should tax income (ie profits), not revenue. Income is what is left of revenue after all business-related expenses have been paid. The apple orchard case illustrates why it is wrong to tax revenue. If there is little or no after-tax profit, there is no business.

In the extreme, if landlords cannot make an after-tax profit, there will be no houses to rent. Those who cannot afford to buy a house are at the mercy of the only remaining landlord – the government. Former East Germans have experienced that situation. . . 

Second, how can it be that landlords are speculators, but owner-occupiers are not? How many recent home buyers paying high prices have not been expecting prices to go even higher? Why discriminate against rental accommodation?

Third, the tax system was already seriously biased against the supply of private rental housing. Owner-occupiers do not pay any tax on the income they receive in the form of forgone rental payments. . . 

Fourth, speculation is a symptom, not a cause. The Reserve Bank has lowered interest rates and flooded the banking system with liquidity to an unprecedented degree. It has jawboned the banks to lend more freely since Covid-19. These actions must have boosted house prices. Imprudent borrowing is the only game in town, with the Government leading by example. . . 

Perhaps the worst aspect is the signal that the Government cares so little for sound income tax principles or prior public debate or scrutiny. If interest deductibility can be wilfully declared a tax loophole, what category of business expense is not a tax loophole?

This tax change will do nothing at all to address the cause of the housing crisis – a shortage of supply that has several causes, not lest of which is the long, slow and expensive consenting process which didn’t even get a mention in this week’s announcements.

It will also worry other businesses. Now the government has made landlords a special class by preventing them deducting interest costs from their income as all other businesses do, there’s very real fears over what other legitimate costs they might declare loopholes.

There is no good time for this sort of anti-investment tax policy and doing it when the country is in recession makes it worse.


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