Fed Farmers win battle against envy tax

02/11/2010

Federated farmers has finally won its 42 year battle against gift duty.

Federated Farmers is applauding the Government’s decision to abolish the arcane gift duty tax.  The decision will help ‘save our farms’ by smoothing farm succession.

“News the Revenue Minister, the Hon Peter Dunne, intends to abolish Gift Duty is the best I’ve heard in very a long while,” says Philip York, Federated Farmers economics and commerce spokesperson.

“Abolishing Gift Duty has been one of the longest held policy objectives of Federated Farmers.

“It’s been something like a 42 year slog for us against this envy tax.  While Government deserves a bouquet for this, so to do all of our staff and elected members who over decades, have kept the pressure on.

“Because it can take decades to gift a farm from parents to their children, farm succession, rather than land prices, is a major factor if we are to farm for generations.

“Yet Gift Duty itself is one example of poor regulation we’d avoid if we had a Regulatory Responsibility Bill in place.

“After the costs of administering it were deducted, Gift Duty only brought in around $750,000 a year.  But it made taxpayers spend $70 million a year on lawyers and accountants to get around it, as long as time was on their side.”

Gift duty should have been abolished when death duty was. Since it wasn’t people went to great lengths and expense to get round it.

Farmers weren’t the only ones who came up against it, but the value of land meant it was especially difficult for them in succession planning.

This is a good win for Federated Farmers and a reminder of the important role they play in advocating for us.


Gift duty to go?

12/06/2010

Federated Farmers has been campaigning against gift duty for years and is welcoming the news that  it may go.

“Federated Farmers is extremely happy as we’ve lobbied successive Governments to end this arcane but avoidable tax, for those who have the means and time to restructure their affairs,” says Philip York, Federated Farmers economics and commerce spokesperson.

“The current gift duty threshold of $27,000 per annum means it can take decades to gift a farm from parents to their children. Succession is a major issue in farming today so the end of gift duty is a major step forward for Federated Farmers priority of farming for generations.

“In tragic circumstances gift duty greatly amplifies any sense of loss if affairs are not in order.  Unless gifted, for every $1 million up to $250,000 is payable to Inland Revenue.   

“Yet gift duty is easily avoided over time thanks to accountants and lawyers, so that makes gift duty not only inefficient, but punitive and pointless as well. . . “

The ODT reports that the amount collected doesn’t  justify the effort anyway:

The scheme cost $435,000 to administer each year, but generated just $1.5 million in duties.

A lot of people were escaping the tax by selling their assets at market value in exchange for a debt which they progressively wrote off without requiring repayment.

Feds describes gift duty as an “envy tax”. Getting rid of it will mean there’s no need for avoidance and make succession planning a bit easier for farming families.

Twenty seven thousand dollars may be a lot to someone who doesn’t have much but it’s less than the average wage. It would take decades to give away the value of even a small farm at no more than that amount each year.

Gift duty doesn’t  just apply to farmers or other business people, though. It applies to anyone, including Lotto winners who have to pay the tax if they want to share any more of their winnings than $27,000 annually.

The state shouldn’t be standing with its hand out between people who want to give away what they’ve earned or won and the recipients.


Budget reaction

21/05/2010

Patrick Smellie sniffs an unusually successful Budget:

What makes the Budget particularly strong is the extraordinary state of the Crown accounts. If net Crown debt is to peak at less than 30% of GDP after the most wrenching debt crisis ever to hit the developed world, then we’re looking in reasonable shape.

If it weren’t for the fact that the Budget economic forecasts still have current account deficits at around 7% of GDP for the foreseeable future, there would be an argument that English could borrow a bit more and get the place really going.

Tax experts say it’s bold and radical:

“The property sector will understandably not welcome some aspects of this Budget,” said accounting firm KPMG’s chief executive, Jan Dawson. The surprise cut to 28% in the company tax rate from next April would help offset any negatives among a raft of changes removing or tightening property investment and other sources of tax deductibility.

The Budget was “the most radical in years”, said Deloitte chief executive Murray Jack, and represented “a big bet on the delivery of the required impetus for the government’s growth strategy.”

The New Zealand Institute of Chartered Accountants pointed out that it was history repeating. The corporate tax rate was 28% in 1989, while the top tax rate only rose beyond 33% in 2001.

“Ever since then, the tax system has fallen into disarray as governments have tried to apply band-aid arrangements to avoid the 39% rate,” said NZICA’s Craig Macalister. “This is a welcome return to a simpler tax system, and it removes some of the incentives to structure for tax purposes rather than for commercial purposes.”

Chapman Tripp tax partner Casey Plunket said “no one should mourn the passing of the 38% top personal tax rate.”
“It was always a fraud, the cost of which was not borne by the wealthy but by those who earned … income which they could not shelter in companies or trusts,” Plunket said. “People with substantial assets, the real wealthy, were almost completely unaffected by it.”

. . . The New Zealand Property Council wasn’t happy with the investment property tax changes, but called it a “bold Budget” that was “good for New Zealand, at the property sector’s expense.”

Federated farmers applauds the tax incentives but wanted more for agriculture:

Federated Farmers is welcoming Budget 2010 with some misgivings about the ongoing growth of Government spending and the impact of higher Government charges, particularly the Emissions Trading Scheme (ETS), will have on inflation.

“The Government’s ambition to rebalance the economy in favour of the tradable sector is admirable,” says Philip York, Federated Farmers economics & commerce spokesperson.

“The Government’s emphasis on encouraging sustainable growth, based on productivity and competitiveness is strongly endorsed and we welcome a much improved economic and fiscal outlook. . .

. . . “Federated Farmers is very disappointed the Regulatory Responsibility Bill, something designed to introduce discipline to regulation, continues to languish. There’s actually no need for further consultation, as stated in the Minister’s Budget speech.  It’s a high quality well drafted Bill so let’s get on with it.

“All in all this is a Budget that looks good but it is very much work in progress with more needed to be done if we are to get the tradable sector led growth we all want,” concluded Mr York.

The Business Round table says there are sound steps but no step change:

“The government deserves credit for correcting some of the economic mistakes of its predecessor but is still well away from putting the economy on a strong and balanced growth path”, Roger Kerr, executive director of the New Zealand Business Roundtable, said today.

Colin Espiner writes English sprinkles the  fairy dust:

Somehow, English has managed to please all of the people all of the time – at least, everyone except the unions, Labour, and Hone Harawira. And it’ll be a cold day in the Beehive before those three agrees with anything National does. . .

. . . Overall I reckon this is easily a better Budget than last year’s effort and probably trumps anything Labour came up with in the past nine years as well.  

And over at No Minister The Veteran discusses whose views can be disregarded and why.


Feds talk straight to Obama

24/05/2009

Federated Farmers aren’t mucking about with their response to the USA’s reintroduction of export subsidies for dairy products.

In a media release headlined US dairy subsidies a potential catostrophe they start by inviting President Obama to New Zealand to explain why his administration has decided to subsidise 92,000 tonnes of American dairy products destined for international markets.

“I cannot express the anger I feel about today’s decision,” says Philip York, Federated Farmers economics and commerce spokesperson.

“The precedent this sets is actually worse than the European Union’s (EU) decision in January to go down the same path.

“Federated Farmers had respected American restraint from not retaliating against the EU. That has all been thrown away on the compost heap that is the US dairy lobby.

“The US dairy lobby is more interested in protecting subsidies than in exporting on free market principles. The fact President Obama caved into their demands is a genuine shock. I honestly thought the age of pork barrel politics had passed but I’m sadly mistaken.

“What’s worse is that this comes at a time when international prices for dairy commodities had started to stabilise.

“Now, from left field, comes this ludicrous decision which takes the world to the edge of trade anarchy.

“The World Trade Organisation needs to get to Washington and Brussels urgently to discuss this with the EU and the Obama administration. I know Don Nicolson, the President of Federated Farmers, will be raising this at next month’s meeting of the Cairns Group.

“This could easily set off a domino effect as smaller economies rush to follow the irresponsible ‘example’ being set by the EU and the United States. Tariffs and tit-for-tat trade barriers could depress international prices and trade volumes before spreading to other trade categories.

“The world is back to five minutes to midnight for an all out trade war and President Obama needs to get his hand off the trigger,” Mr York concluded.

That’s a very direct message.

I don’t think the chances of Obama hearing it are very high and the chances of him heeding it are even lower but no-one can accuse Feds of taking a half-hearted approach to their fight for free trade.

Hat Tip: SOLO


%d bloggers like this: