Racing tax cuts too costly: IRD
Winston Peters gave his racing backers what they asked, but the Electoral Commission has criticised their advert, writes Andrea Vance.
Inland Revenue officials have warned against tax breaks for the racing industry, saying they could cost the Crown up to $40 million in lost revenue – but the Government is proceeding regardless.
NZ First and its leader Winston Peters had been backed at the election by prominent racing industry figures, who demanded those bloodstock tax breaks, as well as an all-weather track and control of the NZ Racing Board.
Now one of Peters’ backers – top breeder Sir Patrick Hogan – has been ticked off by the Electoral Commission for breaking election funding rules with a pro-NZ First advertisement.
As Racing Minister, Peters last month announced tax deductions for the buyers of ‘‘goodlooking’’ horses. It was notable as the only tax cut in the Government’s first Budget.
Peters’ policy was a big win for the racing industry, because it had failed to convince the previous National Government to implement the tax relief. Inland Revenue documents seen by the Sunday Star-Times warn of the potential for racehorse owners to game the system.
Peters’ policy allows tax deductions for an investor who buys a racehorse and declares an ‘‘intention to breed for profit’’. He said it would cost $4.8m. He’d previously tried to introduce the deductions when racing minister in the previous Helen Clark Government.
Details of Peters’ new policy are vague. But a strikingly similar proposal was advanced by the Racing Board last year. Officials cautioned against it because the deductions could be claimed even if a breeding business never eventuated. The Racing Board believed the policy would cost around $5m a year.
IRD didn’t accept that figure and put the cost at around $40m a year because it had the potential to apply to an extra 7000 horses annually.
Former Revenue Minister Judith Collins confirmed she had been unable to come to an agreement with the Racing Board.
She said a 2013 court case involving IRD and a racing syndicate set out clearly that ‘‘just buying a horse and hoping you might breed from it one day was not actually a business’’.
Peters said: ‘‘The same arguments against bloodstock tax rules were raised during my previous tenure as Racing Minister, they were false then and they are false now. The evidence comes from when the previous Finance Minister Michael Cullen agreed to a similar approach and the positive impact that generated for the industry.
‘‘There are legitimate reasons bloodstock tax investment helps create investment in horse racing which in turn will generate greater revenue for the taxpayer. It will become fiscally positive.
‘‘The National Party has been na¨ıve and poorly managed the racing industry, nor did it maintain the previous rules on tax writedowns. The racing industry has become at best static and has not been achieving its genuine potential.’’
Peters’ party got vocal and financial support at the election from industry players.
Former Cambridge Stud owners Sir Patrick and Lady Hogan broke electoral rules by paying for a fullpage advertisement in industry newspaper The Informant in September.
This week, the Electoral Commission ruled the advertisement should have had written authorisation from NZ First. But it accepted the breach was unintentional, and it would take no further action.
Sir Patrick said placing the ad was a ‘‘last-minute decision’’. ‘‘I did it to assist in letting the industry know that at least the NZ First party had the best racing policies out there before the elections. All I was doing was saying that’s what people should consider. The last three elections they have had the best racing policies of any party. Any of the other parties don’t support racing at all.’’