Megan Hands on Labour’s water tax

writes at The Spinoff:

When Labour’s policy was first announced, there was little detail of pricing. It appears now we are looking at a price of 2 cents per cubic metre, or 1000 Litres.

For some context, to apply 1mm of water over 1 hectare of land it takes 10,000 litres of water or 10 cubic metres. So, to supplement that shortfall of rainfall and sustain crop or pasture growth it quickly equates to large volumes of water.

To keep the maths simple, a 200ha cropping farm growing grain or grass seeds in mid Canterbury applying 500mm of irrigation water a year would have a new additional tax bill of $20,000 a year.

A 100hectare vineyard in Blenheim might use 199,500 cubic metres of water through a drip micro system and have an additional tax bill of $3,990.

Another dairy farmer well known on Twitter has calculated his annual bill on his farm to be $53,000.

Suddenly a couple of cents doesn’t sound so small.

And that is assuming it stays at 2c!

One arable farmer at a meeting in Ashburton on Friday said that he had calculated that at 2 cents/m3 his annual water tax bill could equate to half his annual income. Another wondered aloud what happens if he has a crop failure and he receives zero income for that year but still must pay the tax for the irrigation water he used?

This is generally why you tax profit.

In districts where there are significant areas of irrigation this tax would mean millions of dollars being removed from these local economies in additional tax. In these regional areas, the small towns and cities rely on primary industry to keep them going. For Ashburton and Timaru some estimates have come in around $40 million. Tim Cadogan, mayor of Central Otago, is quoted as saying the tax will cost his district $6 million dollars. That’s millions of dollars not transferred to local tradesman, the local café or the rural supplies store.

A tax on rural and provincial NZ only.

This proposed tax has been portrayed as the solution to NZ’s water quality problems, although the more we learn about this policy the more difficult it is to link the purported benefits with the method proposed. If Labour do as they say and return the tax to the areas from which it is collected (minus the percentage that goes to iwi), the areas with the poorest water quality will only receive a small slice of the tax. This is because there is almost no correlation between swimability of rivers and irrigation.

A key point.

When questioned on the price, Mr Parker warned the room that he wasn’t there to negotiate and threatened the farmers in the room that if they pushed him it would be 2 cents instead of 1 cent. He continually referred to the farmers in the room as “you people”, taking aim at them and telling them they alone were responsible for the rural urban divide.

It is the responsibility of us all to manage our water well and that includes irrigators, towns and cities, and other commercial users. If we are going to tackle these challenges we must do it together, instead of pointing the finger at one another.

The management of our freshwater is important for our ecosystems, our businesses and our recreation. Water is precious to all of us and deserves far more sophisticated and collaborative policy development then soundbites and feel good election policies if we are to deliver the kaitiakitanga it deserves.

A system of tradable water permits is a far better way to deal with water issues as the price will reflect the scaricty (or not) in each region. Far far better than a tax just on provincial and rural NZ.

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