The average dairy farmer is paying less tax than a couple on the pension – raising questions about whether the sector touted as the backbone of the economy is paying its fair share.
As the Government prepares one of the tightest Budgets in recent years, cutting into middle-class family benefits and KiwiSaver subsidies, new figures suggest those cuts will hit people who are also shouldering the greatest tax burden – wage and salary earners.
Inland Revenue Department figures provided to Labour revenue spokesman Stuart Nash show that, in the latest full year for which figures were available, the average tax paid by dairy farms was $1506 a year. The 17,244 registered as being in the dairy sector, including companies, trusts and individuals, paid only $26m in tax.
The figures also show that more than half – 9014 – reported a loss for the 2009 year and another 2635 reported trading income of between $1 and $20,000.
Federated Farmers chief executive Conor English said he was not surprised by the figures. "The reason why there's not much tax being paid is because there hasn't been much money made. The average dairy farmer ... made a cash loss of $50,000."
There was more debt because farmers had been borrowing from the bank to pay for groceries. "The myth of the stinking rich farmer is simply not true."
But Nash said Labour would investigate whether farmers in general were paying a fair share of tax. In the primary sector, 75 per cent made $20,000 or less and 55 per cent recorded a loss in 2009. Of the nearly 72,000 companies, nearly 40,000 were unprofitable.
"Either we have a sector in dire financial trouble or the sector is simply writing off a lot of income against expense and not paying tax," Nash said. "I hope it's the latter. If they are facing dire financial trouble then we as a nation are in the poo."
The IRD figures showed the agricultural sector, including forestry and fishing, paid $319m in tax in 2009. That compared with $486m from mining. Industry as a whole paid $9.7 billion tax and $23b came from personal tax.
Nash said the primary sector was of huge importance, but its tax bill was an issue of fairness. "It annoys me when Federated Farmers come out and say we need to cut Working for Families, we need to cut this and that, when they in fact are paying no tax themselves.
"They need to take a good hard look at the sector and say, `Are we actually paying our fair share?"'
Adding dairy giant Fonterra to the mix did not change the picture. As a co-operative, it pays out profits to its farmer shareholders, who are liable for tax.
Figures compiled by the Parliamentary Library show that, over the period May 2007 to January 2011, Fonterra earned pre-tax profits of $1.86 billion on turnover of $61.6b. But it reported an after-tax profit for the period of $1.88b after receiving net tax credits of $28m – equivalent to a tax rate of negative 1.5 per cent.
English said the primary sector was responsible for 66 per cent of exports but, for each dollar earned overseas, only 6c went to the farmer. "So the other 94c goes in ... all the cost structures around getting that kilo of meat from the farm gate to the shore."
Revenue Minister Peter Dunne said the figures released by Nash did not raise any policy issues.
The $26m tax mentioned came from those who identified themselves as in dairying, he said. Those not classified by industry paid another $1.5 billion in tax and a significant number would be dairy farmers.
WHAT THEY PAID
Tax paid by the 17,244 dairy farms in 2009: $26m
Tax paid by the agricultural, forestry and aquaculture sector: $319m
Tax paid by individuals through PAYE and source deductions: $23 billion
Total government tax take: $54.7b
Tax credit paid to Fonterra over 3 years: $28m
Average annual tax paid by 17,244 dairy farms in 2009: $1508
Tax paid by an unemployed beneficiary aged over 25: $1229
Tax paid by couple on the state pension: $3136
Tax paid by single person on the average wage: $8020
Tax paid by a single person earning $100,000: $32,869
- © Fairfax NZ News
Can we afford a commuter rail service for North Canterbury?Related story: Traffic delays force commuter rail services probe