Friday, March 29, 2024

ALTERNATIVE VIEW: Fert tax would increase run-off

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I was more than a little disturbed to read the front page of Farmers Weekly telling me it was highly likely farmers would be in line for another tax, one on nitrogen fertiliser.
The bills for fuel, fertiliser and agri-chemicals have all shot up in recent times and that’s threatening the profitability of some farming businesses.
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I don’t like taxes full stop, especially punitive taxes as a tax on nitrogen would be.

Two main reasons were given for the tax.

The first, according to Local Government NZ regional sector chairman Doug Leeder is that Environment Minister David Parker wants regional councils to implement plans to improve water quality.

I’m sure Parker is well aware that according to the Land and Water Aotearoa report, released just last month, water quality is improving. So what’s the immediate problem?

Leeder’s position was supported by Landcorp environment head Alison Dewes who told us the Government could do something like a tax on nitrogen fertiliser as something of a proxy tax on intensive farming.

That it would affect all farmers be they intensive or extensive seemed beside the point.

Dewes said the Government has to look good within one term so it will not be looking for any complex policy that takes time to develop.

She likened a tax on nitrogen fertiliser to tobacco tax.

That’s extremely simplistic. Tobacco use has a massive cost to the health system. A tax on nitrogen would cost both the economy and productivity.

The cost of all this to farmers would be $4500 for an average 147ha dairy farm.

It would also mean less money spent locally and more given to central government.

The quote I took most exception to was Dewes claiming a tax could also prove invaluable for upgrading and adding more horsepower to regional plans to be developed and ultimately enforced.

It begged the question as to why a Landcorp employee would be advocating greater taxes on the entire farming population.

Further, the science doesn’t add up.

For a start, what’s the correlation between reducing nitrogen and reducing profitability?

There was research done some years ago on nitrogen reduction but the author and farmers involved pointed out a change in the Overseer version used at the end of the research in comparison with the beginning had made a significant difference in the reduction in nitrogen leaching.

In addition, the Lincoln Dairy Farm manager said nitrogen application is an important tool in grass management and keeping cows in good condition.

Federated Farmers environmental spokesman Chris Allen told me nitrogen is an essential element for growing food. It didn’t matter if it came out of a bag, from animals, people, ducks, chicken litter, clover or gorse – it was still nitrogen’.

He said everyone wants the same things with water quality but people need food.

A tax won’t achieve anything.

As Parker has noted, the most polluted waterways are in urban areas, mainly in Auckland. 

In addition, there are many factors governing water quality and nitrogen is but one. Putting a tax on nitrogen won’t solve anything. There are too many other issues that will influence water quality.

Further, as I’ve written on previous occasions, farmers are spending a fortune improving water quality.

Through the two farmer-owned fertiliser co-operatives it is easy to see a $10 million spend on research aimed at improving the environment.

That’s a considerable commitment from the 25,000 farmer shareholders.

Ravensdown has just had a considerable environmental win after a $1.5m investment aimed at reducing the environmental impacts of effluent discharge. It looks good.

Thinking through the issue logically, if farmers don’t use nitrogen their pasture production will suffer.

So, a farmer has a choice – to not apply nitrogen and suffer production losses or apply nitrogen, pay a tax of $150 a tonne and maintain production.

Of course, a farmer has other options – tro not use nitrogen and not pay tax on fertiliser but to substitute poor grass production with imported palm kernel or other supplements that aren’t taxed. 

Another option would be to fertilise with chicken litter and avoid the tax.

Iniquitously heavy palm kernel use and chicken litter will increase nitrogen runoff but would be tax-free under the nitrogen tax proposal. 

It makes a mockery of the nitrogen tax argument.

As has been argued ad nauseum with the Emissions Trading Scheme, taxes on inputs don’t work.

As horticulture is a heavy user of nitrogen would a government encourage a tax with the direct consequence of increasing the price of fresh vegetables?

One answer is to boost research into Overseer as the Government has committed to.

Landcorp isn’t profitable now so why is it suggesting taxing all farmers.  

Finally, I asked the Government if there was any plan to tax nitrogen fertiliser. Agriculture Minister Damien O’Connor assured me there wasn’t.

Parker told me it wasn’t policy at the election and isn’t now.

Why then would you promote a nitrogen tax?

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