The Government's Tax Working Group's proposed capital gains tax has been called ''a mangy dog'' by Federated Farmers, while the National Party says if the tax goes ahead, farmers would be used as a ''cash cow.''

National's Agriculture spokesman Nathan Guy says with all the recommended taxes a typical dairy farm could be paying up to $68,000 annually in new taxes if irrigated or $25,000 without irrigation, and an average sheep/beef farm could be taxed $20,000 a year.

Also, under the proposed tax, Guy said with a 33 per cent tax rate, if a farmer sold an average sheep/beef farm after 10 years, they would likely pay a tax bill of $600,000.

National's Agriculture spokesman Nathan Guy. Photo / ODT File
National's Agriculture spokesman Nathan Guy. Photo / ODT File

The working group's recommendations are short on detail and the group acknowledged:


''New Zealand has limited institutional capability to design and implement environmental taxes - a concern also raised by submitters.''

Besides water abstraction, the working group has highlighted possible taxes for animal emissions, and fertilisers, but recognised there was much work still to be done.


The Tax Working Group said greenhouse gases were well suited to the use of tax instruments.

''However there are serious shortcomings in the current pricing and coverage of emissions in New Zealand.

''Greenhouse gas emissions may not be a reliable tax base in the long term if New Zealand substantially reduces its net emissions.

''In the short to medium term, however, even modest changes to the Emissions Trading Scheme (ETS) settings could raise reasonable amounts of revenue.

''The group supports a reformed ETS remaining the centrepiece of New Zealand's emission reduction efforts but recommends it be made more tax-like - specifically by providing greater guidance on price and auctioned NZU's.


''Greenhouse gas emissions such as biological sources are more difficult to estimate accurately than point source emissions from fossil fuels.

''There is still much work to do on this issue but the group notes that even imprecise approaches could provide a useful price signal that accounts for land use and intensity decisions.''


The Tax Working Group said water pollution costs varied significantly by location and that pricing tools should allow for local variation.

''Locally variable pricing tools could involve significant administrative and compliance complexity.

''An alternative approach is nationally uniform charging - for example, a fertiliser tax.

''Revenue raised from a nationally uniform charge or a nationally administered pricing tool could still be regionally allocated.''

''The group estimates that a $2/kg charge on leached nitrates could raise approximately $270million per annum at current leaching rates and assuming 100 per cent coverage.''


The group said regulation or banning of pesticides could be appropriate in certain circumstances.

''The group did not have sufficient information to assess whether tax was the most appropriate response to the underlying concerns.''