Opinion: Will we be taxed back to the 80s?

By David Clark

OPINION: David Clark writes "I am proud to be a farmer, doing what's right, we are not in the '80s, please don't let us go back." File Photo / Amos Chapple
OPINION: David Clark writes "I am proud to be a farmer, doing what's right, we are not in the '80s, please don't let us go back." File Photo / Amos Chapple

OPINION: I also have a Vision...

...of where NZ is going to be taken.

When I was a young fella growing up, all I wanted to do was go farming, just like my Dad, my grandfather before him and my great grandfather who had jumped ship in Thames as an orphan in the early 1870's. I knew that there was something very special about being able to farm the land and grow food.

Then along came the 1980s and the brutal recession brought on by the changes made the Lange Labour Government. As a teenager I still vividly remember watching Television News coverage of a farmer by the name of Dan Dufty being escorted off his North Waikato farm like so many other families where at the time. I remember the tears running down his face and the anguish in his voice.

I remember worrying about whether that would happen to us, things where pretty tight on our family's small South Auckland Town Supply dairy farm during this time.

When I left school I was very fortunate to be employed by a family at Orere on their large Sheep and Cattle farm.

They demonstrated to me that there was a future in farming if you worked hard and this set me on my course.

I wanted to get ahead and found that by starting a small contracting business, initially as a fencer, with a lot of determination, late nights and early starts I would be on a path to make my own way. There was no O.Es, no leering up.

In 1994 my parents and I each sold up our assets in Clevedon and set off for the South Island to take up arable and stock farming in Mid Canterbury.

We started contracting out of necessity to help us fund the development of irrigation on the then dryland farm and in 2010 sold that Contracting run to then fund the installation of Centre Pivot Irrigators that were much more water efficient and resulted in less leaching than the earlier machines.

My wife Jayne and I farm here with our three young sons and my parents still live here on farm. This is our Turangawaewae.

But I sit here, thirty years on from that farmer being dragged off his farm and I wonder, no, I fear we are heading back to those very grim days. In my view we are standing in 1984.

Since I wrote my last article, I have seen overwhelmingly positive feedback who buy into the idea that poor water quality has many causes, urban, rural and industrial. Those many causes have many solutions best worked through on a catchment by catchment, community by community basis.

But sadly I have also seen the hatred and vitriol, and I've paid a lot of attention to the policies being proposed or hinted at by Labour and the Greens. I have come to the view that these policies, not in isolation, as a compounding effect will likely result in the biggest drop in agricultural economic confidence since the '80s.

A Water Tax levied on irrigation, primarily on the East Coast of the South Island to resettle or renegotiate Treaty Grievances with Iwi and then pay for waterway restoration across the Nation is inequitable and will be ineffective. There is no correlation between areas of poor water quality and areas of intensive irrigation; in fact quite the reverse applies.

The tax will exempt all other farming systems and all urban and industrial takes from municipal supply even though it is very clear that poor water quality is also caused by other activities.

The Greens Nitrogen Tax intends to levy Dairy Farmers initially and other farming types soon after for Nitrate discharge even though other land forms leak Nitrogen, as does the DoC estate, Plantation Forestry and of course the discharges of treated and untreated human effluent and storm water, all of which will be untaxed.

The cost of compliance with an Audit Quality Overseer assessment required on every farm, every year would be enormous. The suggestion that funding be used in part to coach farmers on Organics is nonsense.

I fully understand that the agricultural sector must work to address water quality issues and I believe that we are already making very good progress with riparian fencing and plantings, upgrading of older irrigators to precision application of water, more targeted fertiliser usage and a major rebuild of farm effluent systems in the last 15 years.

We have reduced our calculated Nitrogen loss here by 25% in the last six years. Progress is being made, largely voluntarily, however nationally and certainly in Canterbury, Regional Plans have been introduced to put significant onus on land owners to demonstrate a measurable reduction in agricultural externalities.

Farming under the Canterbury Land and Water Regional Plan will, is, delivering results for the environment, but it is expensive to make the changes required in our farming systems, taxing more money out of our business will slow the progress that we can make on farm due to cashflow restriction.

An inclusion of all agricultural emissions into an ETS will see us as farmers compete in the International Marketplace with another layer of cost as we compete against produce that is largely directly or indirectly subsidised and will see farmers struggling to compete with the same overseas product in our domestic market. An ETS on Agriculture in NZ will simply move food growing to a less efficient producer elsewhere in the world.

I hear people regularly saying we all must pay our dues to fight climate change, but I note that International Air Travel is excluded from the Kyoto Protocol because of the damage it would do to global tourism. Research and Development is the way to reduce livestock emissions, not Tax.

A Land Tax with an annualised charge levied over the value of an asset is just simply a new tax, not based on productivity or profit, just a tax and in my view a tax of envy. Farms have high asset values and low profitability, the affordability of an annualised charge will further undermine farming, especially in the sheep and beef sectors.

A Capital Gains Tax and its' necessary partners, Death and Gift Duties will threaten the very core of New Zealand Agriculture, but not only Agriculture, but intergenerational ownership of all types of businesses across New Zealand and will result in more land and productive assets being lost to long-term corporate and offshore ownership.

Many families struggle to meet the cash flow and capital raising requirements of family succession at the time of the intergenerational transaction, which is done at or near to market values.

The new generation of farmer invests their own capital and relies on either internal family or external borrowings to then buy out non-farming siblings; help expand the business to accommodate multiple siblings and provide money to buy a house for parents or otherwise fund their care and welfare.

If Government put their hand out for a Capital Gains Tax on the lifetime growth in the value of the asset, then that cash removed by way of a tax would be the very cash that was so badly needed to complete the intergenerational handover. I certainly understand the extreme difficulties caused by Death Duties in years gone by in New Zealand. They were abolished for very good reason.

Capital Gains Tax and Death Duties will make continued family ownership of the farms and businesses, on which New Zealand is built, extremely difficult.

In my view the most significant policy of this election is Labour's Employment Relations Policy which hands total control of workplace pay, conditions and terms across all sectors and all skills and puts the Unions in a centre role of negotiation and "Remove the ability for employers to deduct pay from workers taking low level protest action during an industrial dispute".

I would argue that most New Zealanders have a relationship with their employer built on mutual trust and respect and I don't believe that most Kiwis wish to return to the '70s and '80s were the Ferries went on strike at the start of the school holidays, the works went out just as the lambs came on in January or Unions went out in sympathy for a workplace scrap going on at the other end of the country.

In my opinion, this election has got nothing whatsoever to do with the House Prices or Swimming in rivers, this election and the campaign of Labour is a desperate attempt by the Trade Unions to seize control of the New Zealand workplace.

At present we are living with an asset bubble, certainly in house prices in the upper North Island and arguably in farmland, this is no different to most Western economies that have binged on cheap and plentiful credit generated by the madness of Quantitative Easing.

Arguably it is not the Government's fault that we have "traded up" our family home, put a boat or overseas holiday or new car "on the house", or generally lived beyond our means and racked up massive private sector debt secured against the family home.

We are enjoying interest rates well below the recent long run average and a credible statistical correction could easily see cost of borrowing lift from 5% to 8-9%, I'm not convinced that many home owners would not find their financial situation severely compromised by a near doubling of interest rates, nor do I think many farming businesses could stand such a shock.

I fully support the need for our society to have a robust and compassionate Social Welfare system to provide an outstretched helping hand to our fellow man as they go through a vulnerable time, but this must be a based on the principle of a hand up, not a hand out, and for us to be able to provide that compassion, we need to have a robust and stable economy in the first instance.

It is a culmination of all of these policies, not just one in isolation that I believe has the very real potential to create a collapse in economic confidence not seen in New Zealand since the 1980's.

The brutal and stark reality is that even with our business, which is very sound and holds only a very modest level of debt, there is simply not the money to pay these taxes and increased costs. The cumulative total of these taxes will far outweigh the taxable profit of our farm and will leave us cash flow negative and therefore un-bankable.

I don't know where the Labour Party think the cash will come from, I can assure you it is not under the pillow in a cake tin.

I can very accurately tell you where the money for these taxes and charges will come from. These costs will come straight out of the till of the businesses in our local town that supply us with goods and services. I fear for the future of those business and the families employed by them, I really do. The '80s was very tough for service industries as well.

We have already suspended all none urgent expenditure pending the election outcome.
I and many other New Zealand farmers today are proud to have grown the grain for your cereal or toast; multiplied the seeds that were planted by other farmers to grow your vegetables and spuds; raised your tender meat; clipped wool for your warm clothes; produced the milk for your coffee and supported a multitude of local businesses along the way.

The words that resonate with me are those of retired US Secretary of Agriculture Tom Vilsack...

"Every one of us that's not a farmer, is not a farmer because we have farmers. We delegate the responsibility of feeding our families to a relatively small percentage of this country... so the rest of us can be lawyers or doctors... or all the other occupations because we never have to think - Do I actually have to grow the food for my family? No, I go to the grocery store and buy it."

I am proud to be a farmer, doing what's right, we are not in the '80s, please don't let us go back...

My previous comments on Water Quality can be found here

David Clark is a Mid Canterbury arable farmer.

- The Country

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