Dairy farming tax claim misleading - BusinessNZ

Labour MP Stuart Nash. Photo / Hawke's Bay Today

It is misleading of Labour MP Stuart Nash to claim the average dairy farmers pay less tax than a couple on the pension, advocacy group
BusinessNZ says.

Figures showing the tax paid by dairy farms have been released by Labour's revenue spokesman, Napier-based Labour list MP Stuart Nash, ahead of the Budget announcement tomorrow.

Information from the Inland Revenue Department for the 2009-2010 tax year shows the average tax payment by dairy farms was $1506, despite a Fonterra payout understood to be more than $500,000.

A couple earning superannuation would pay $3136 in tax, while a wage earner on the average wage would pay $8000 in tax.

Of the 17,244 businesses listed with the IRD as dairy farms, 9014 were making a loss. Hawke's Bay has 175 dairy farms listed with the IRD.

"I understand the farming sector is a very important part of our economy. I just wonder about our tax system when so much can be written off to the point where you have very few farms paying any tax," Mr Nash said.

He acknowledged farmers were not breaking the law, but said the system needed looking at to ensure everyone paid their fair share.

BusinessNZ said the comparison made by Mr Nash was misleading.

Operating costs and business debt shouldered not only by farms but all businesses are reflected in their level of taxes paid, says BusinessNZ.

Commenting on claims by Labour revenue spokesman Stuart Nash that dairy farmers pay less tax than a salary earner earning $50,000 a year, BusinessNZ said the comparison was misleading.

"Businesses have income structures that take into account the cost of doing business. This is a cost not borne by a salary earner," the business advocacy group said in a statement.

"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.

"This means that many businesses would not have the $50,000 income that is being used as a comparison.

"Comparing this situation to an employed person's $50,000 income - that does not have to account for operating and business debt costs - is not a valid comparison."

Hawke's Bay Federated Farmers president Bruce Wills said the gross Fonterra payout was a misleading picture of farmers' incomes, as many made only a small net profit after costs.

- with Hawkes Bay Today