Growers on the water tax:
The Labour Party’s recent announcement that it will impose a royalty (tax) on commercial water users has raised concerns among growers and farmers throughout the country.
The policy will see those who make their living from the land, paying an unspecified royalty on water, with the revenue (minus a small amount that will go to local iwi) going to local regional councils to be used to clean up our rivers, streams and lakes. Labour has also said this tax is a royalty, or resource rental, and that it could be used for more than just cleaning up waterways. One suggestion was that it could be used for rates rebates.
The royalty would also see water bottlers being targeted, and farmers taking water for irrigation schemes.
So what is the cost? When the policy was first announced it was vague when it came to actual figures. There were many possible charges being bandied about, with some as high as 10 cents per litre. More recent figures now indicate that farmers may be looking at a price of 2 cents per cubic metre or 1000 litres; however this may very well change if Labour comes into power at our next elections.
While 2 cents a cubic metre may not sound overly high, especially to those who live in our cities, growers know that when multiplied by the volume of water they use, they are looking at thousands of extra dollars in tax annually. This was made only too clear at a meeting in Ashburton last month, when a local arable farmer said he had calculated that at 2 cents per cubic metre, his annual water tax bill would equate to half of his annual income.
The whole issue has understandably raised enormous concerns in the rural sector where the impact on farmers will be immense, and where it has the potential to cripple regional economies if it is ever implemented.
Michael Smith, an arable farmer in Canterbury, wrote an article in which he raised several thought provoking points about the impact of the water tax, and how Ashburton’s economy has grown and benefitted from local growers in the district.
“I live in a district, whose main town has virtually the lowest unemployment in New Zealand. We have a vibrant, multicultural community that offers a wide range of employment opportunities and a very high level of community facilities.
“Ashburton is a town that has been transformed in the last 25 years; this is a town that has been transformed by the development of irrigation, both in arable and dairying land uses. This district grows over half of the world’s carrot and radish seeds, along with a wide variety of other crops that are exported worldwide.
“I am an arable farmer using irrigation to grow seed crops that are exported worldwide, and grain and vegetable crops for domestic food consumption.
“We first put irrigation on in ’98 and then in 2011 installed pivots to achieve more efficient water use and lower leaching, than the older irrigators we had originally operated, at a cost of $1 million. We did that voluntarily because it increased our production, reduced our water use and significantly reduced our environmental footprint.
“Our business proudly supports local firms for the provision of goods and services, and like our fellow farmers, most of the gross income is spent in the local community, and profit if any is largely reinvested in our business via local firms.
“On Friday night I attended a public meeting to hear Labour Water Spokesperson David Parker present his proposal for a tax on irrigation water. At no point did I hear any positive comment of the actions of the farming community in New
Zealand. The purpose of the meeting and continuation of his presentation was to explain the Labour Party’s intention to impose a tax on irrigation in New Zealand, with the intent of using the money raised to repair environmental damage.
“The missing part of this logic was that his slide show did not depict irrigation as the cause of degradation and this is confirmed by a report by Irrigation NZ, which shows there is no correlation between areas of high irrigation development and regions with poor water quality in New Zealand.
“So why tax irrigation? And irrigation predominantly in Canterbury and Otago that are regions with good water quality?
“I sat in the meeting and heard a whole lot of vitriol and bitterness extended towards the agricultural community and I reflected on the fact that it was August 18 and that night our monthly bills would be paid, and a not insignificant sum would be transferred to local businesses, businesses that the attendees relied on for either direct or indirect employment, or for taxation to fund their social payments. The receipts from our production recycle many times through our local community, and I’m pleased about that.”
There is no doubt if a water tax is introduced, those districts where there are significant areas of irrigation could lose millions of dollars from their local economies in additional tax. There is also no doubt the ‘flow on’ effect of a tax will be felt by consumers as the cost of fresh produce will invariably rise.
Brendan Balle, of Balle Brothers Pukekohe, is one of a number of growers who have serious concerns about the proposed tax and what it will mean. “Labour’s policy appears to say that regional councils will be handed the power and discretion to set the rate of the ‘royalty’ (tax) and Iwi will be entitled to a share of it.
“Are regional councils capable of such a responsibility? Should central government devolve such a responsibility to regional councils that will likely create a bloated bureaucracy to collect the tax? What percentage of the tax will actually trickle out the bottom to pay for initiatives to improve waterways? What check and balance mechanisms will need to be put in place to ensure that the tax rate does not >
keep ratcheting up, and that the money collected will be spent wisely?
“Handing the power to regional councils to set a tax opens up a ‘pandora’s box’, and they are setting a very dangerous precedent by what they’re doing.
“They should be actually targeting the things or the activities that cause pollution and not water, because water itself does not cause pollution and the use of water does not cause pollution.”
Brendan says the new tax would have a serious impact on the economy and in no small way on the price of fresh and frozen vegetables in New Zealand.
Geoff Lewis of Tendertips Asparagus (Levin) believes there are two main issues.
“We have a world class agricultural industry; our horticultural industry supplies the vast majority of the fruit and vegetable requirements of the nation. If the cost of production increases for fruit and vegetables, this cost has to be borne by someone. From a nation’s health and wellbeing point of view the most important part of the community’s diet are fruit and vegetables. If we continue to load costs on that production, the price of the food has to rise. The downstream effect of this is reduced consumption of these products.
“Why doesn’t the government of the day spin the equation around and encourage health and wellbeing and take the GST off the cost of fruit and vegetables?
“The major concern for water use is the effect of the waste water from this water use on the environment. What is the difference between towns and cities that use water the waste of which goes into waterways or land based discharge, and farms where the outcome is the same?
“In other words, if there is a tax on water use on farms there needs to be the same tax on all water users, as the urban waste has the same effect on the environment as rural waste.”
Mike Arnold of Leaderbrand South Island says there has been a lot of conversation around the proposed tax recently and describes it as quite an ‘emotional’ subject.
“There are lots of numbers and figures being bandied around, but we really have to wait and see if Labour will be elected first.
“If they are elected it could mean $40 million dollars is lost from our local economy.
“I think the main thing people are saying if you want one word, is ‘unfair’ and it’s unfair how we will distribute that extra cost I suppose.
“Its worrying a lot of people, that’s what it’s doing. The cost will have to go up if a water tax does come in; there is no question about it the cost of vegetables will go up. Businesses have to recoup that money and there is no way there won’t be price increases.”
Chairman and director of Vegetables NZ Inc., Andre de Bruin, says he believes strongly that water is a ‘common’ and as such needs to be available to water users.
“Now I don’t see how charging for a ‘common’ can be applied fairly. We’re going to take water, we’re going to release water back into the environment, we are actually only utilising the water, it’s not disappearing.
“We’re over simplifying a very complex issue and I think they are trying to find a one size fits all which does not work. Water is one of those things that is important to every person in New Zealand.
“We should be using it with careful management throughout the country for the best of the whole country, I don’t believe just applying a charge to use it should be done. I think it starts to set a very dangerous precedent.”
Mark Apatu (Apatu Farms Ltd) in Hawke’s Bay says he has heard that Labour don’t think there will be any increase in food costs.
“Of course there will be increases. Personally I think it’s just another cost that we don’t need and it brings up a lot of other issues doesn’t it, such as who actually owns the water and how do you determine who is going to pay and who’s not.
“I heard early on in a discussion there was talk of Coke Amatil not having to pay anything because they already pay special water rates for municipal water they use, but that’s crazy.
“I think this is a political stance that has obviously created a lot of attention and probably people are going to vote for it, particularly those in the cities, but really they don’t know what the ramifications of it are.
“The crazy thing is the minister is saying there will be no effect on the price of food, which is incorrect.
“I just think the more people who are aware of that prior to the election the better; we need to get it out there.”
Simon Watson managing director of NZ Hothouse Ltd believes Labour have been very ‘vague’ about the policy.
“From a business point of view a vague policy is very disturbing because we can’t make any plans, because we don’t know what’s going to happen.
“Will vegetable prices go up? Yes definitely. What you have to remember is we are farmers, we are growers and we produce food, fresh, clean, healthy food and we do it in a very sustainable way. That is what they are threatening, our food production.
“My concern is if you introduce a tax and it might be 10 cents a litre or whatever the number is it’s there, it’s a creeping thing. A year later they may make it 20 cents a litre, then two years later it becomes 50 cents a litre, there’s no end to it, it just becomes an easy method of collecting revenue. It’s a very frightening thing.
“There’s another point too, in New Zealand our rainfall, the water that falls from the sky is one of our very great competitive advantages that we have over the rest of the world. It’s the reason we are sustainably able to produce large volumes of food and sell it to the rest of the world, our rainfall is our huge advantage.
“So from our point of view in New Zealand, we are 4.8 million people and we’re producing enough food for more than 30 million people and that’s unusual in the western world. Most western nations don’t produce enough food they have to import it, we don’t we feed the rest of the world. It’s our rainfall that enables us to do that.
“Another important thing is that commercial growers are very active harvesters of water. What I mean by that is with glass houses for example, the majority of the water we use in our glasshouses is collected off our roofs and stored, its harvested water.
“Are they proposing to tax water that falls from the sky? Is that what they are proposing? At the moment we don’t know.”
▴ Mike Arnold.
▴ Geoff Lewis.
q Andre de Bruin.
q Simon Watson.