Labour's image of a tax doger - dairy farmers
Politics is a dirty game and this year’s election looks as though it is going to be dirtier than usual.
Now farmers have been unfairly drawn into the firing line.
It appears that part of Labour’s election strategy this year is to portray dairy farmers as ‘rich pricks’ and tax evaders.
This comes after recent ‘revelations’ by Labour’s revenue spokesman Stuart Nash claiming that the average dairy farmer only pays $1506 a year in tax, despite an annual Fonterra payout of over $500,000.
Nash’s clear inference is that dairy farmers don’t pay enough tax and is a crude attempt to raise anger and envy among voters about the dairy sector, and the wider rural economy in general, and that it’s not paying its fair share tax compared to wage and salary earners.
However, Nash has played the man and not the ball in this case. He is not comparing apples with apples, more like sour grapes with lemons.
The dairy sector’s contribution to the nation’s tax take and economy needs to be put into perspective.
PWC chairman and member of the tax working group John Sherwan points out that dairy farmers are subject to the same tax rules as all businesses.
BusinessNZ says the comparisons are misleading because businesses have income structures that take into account the cost of doing business – a cost not borne by a salary earner.
“Farm businesses face capital investment and depreciation servicing costs, debt costs, feed costs and labour costs, in the context of fluctuating cash flows often affected by weather, necessitating further debt for operating costs before receiving end of year payouts.
Comparing the situation to an employed person on $50,000 income – who does not have to account for operating and business debt costs – is not a valid comparison. Maybe the Labour Party is not aware that when you’re in business you are legally allowed to write income off against expenses – providing they’re business related ones?
Surely Nash and his Labour colleagues would be better off thanking the agriculture sector for its ongoing and important contribution to New Zealand’s economy – especially when we are borrowing $380 million a week to keep the country running – instead of taking cheap shots at dairy farmers.
As Conor English of Federated Farmers says the primary sector is responsible for 66% of the country’s exports, and for each dollar earned overseas only 6c goes to the farmer with the other 94c spread throughout the wider New Zealand economy.
A NZIER report – released in December last year – on the contribution of the dairy sector makes to the country’s economy proves just how out of touch Nash and Labour are with reality. It found that of the $7.5 billion of revenue received by farmers in 2009, $3.6b was spent on domestically produced goods such as fertiliser, feed and agricultural and financial services – all providing much-needed tax revenue.
It also pointed out how the dairy sector provides 26% of New Zealand’s exports, employs 35,000 people directly and another 10,000 contractors – all paying tax funded by dairy farmers.
Meanwhile, DairyNZ says the average annual tax paid by dairy farmers during the last decade was actually $28,225 – somewhat higher than Nash’s $1500 claim!
“Dairy businesses work under the exact same rules as all small businesses, and have to deal with considerable market volatility,” says Dairy NZ chief Tim Mackle.
“The most important impact is at the level of our contribution to foreign exchange earnings – the fact we account for over 25% of total exports means we have a huge positive effect on New Zealand’s balance of payments, which in turn greatly benefits the country’s economic position and influences factors such as interest rates.”
Meanwhile, Nash says Labour will investigate whether farmers in general were paying a fair tax share.
Fair enough. I am sure the vast majority of farmers would agree to anyone avoiding or evading tax – including dairy producers – being punished accordingly. However, will Labour also be as keen to investigate state housing rorts, trade unions not paying taxes, eligibility around student loans, working for families, sickness benefits and the DPB as well?
That is politics for you and some people have the cheek to claim that dairying is dirty!