BASIC STOCK ON FARMS

Press, Volume LXXXIX, Issue 27089, 11 July 1953, Page 8

BASIC STOCK ON FARMS

TAXATION IN EVENT OF SALE TREATMENT AS CAPITAL SOUGHT . The view that farmers should have the option of treating basic livestock on their properties as capital stock was embodied in a resolution approved at a public meeting of members of Federated Farmers and the Women s Division of Federated Farmers in Christchurch yesterday afternoon. The meeting decided to urge the Dominion conference of Federated Farmers, which will be held soon, to appoint a committee to take the question up with the Prime Minister (Mr Holland) as soon as possible after he returns to New Zealand. This decision was made after the meeting had heard an address by Mr Arthur Wheeler, a farmer, of Marton, who said that he happened to be perhaps more conversant with the subject than any other farmer in New Zealand. In advocating the “capital stock system,” Mr Wheeler said that farmers were not seeking any treatment more favourable than that already accorded to the rest of the community. The Royal Commission into the Sheepfarming Industry and the special taxation committee set up by the present Government had both recommended that the farmer’s permanent breeding flock or herd should be treated as capital, he said. In Britain the farmer had a choice whether his animals were to be treated as capital or trading stock; in Canada the basic herd was treated as capital; and the capital element, in livestock was also recognised in the United States. The Government itself had originally recognised the capital aspect of the basic flock when it introduced standard values in 1930, but because that was a slump year standard values adopted were invariably very low and had in general been increased very little since. In practice any increase in standard values\ could be made only with the consent of the commissioner.

In 1945 Mr Nash had realised the unfairness of the position and had given farmers an opportunity to write up >heir stock to the market value that would have applied when they first became liable for tax, but these market values, particularly in 1930, were very low, and this measure would have proved totally inadequate for subsequent seasons and for present conditions.

“The injustice under which the farmer labours arises from the fact that on the sale of his basic flock or herd the whole proceeds over and above the amount represented by those low standard values are treated as income, added to the normal income for the year and income tax and social security tax assessed accordingly,” said Mr Wheeler. “The result is that in the vast majority of cases the farmer is forced to pay income tax at maximum rates and social security also on a very large amount of purely fictitious income. This also means that in such sale the farmer in most cases nets less than half the price of his basic flock or herd.

“Gross Injustce” “The gross injustice is obvious if we compare the iarmer's position with that of the manufacturer,’’ he said. “The farmer’s land is equivalent to the manufacturer’s factory. Both are obviously the business premises and therefore capital. The farmer’s basic flock or herd is equivalent to the machines in a manufacturer’s factory. Both are in their nature capital assets producing the products which are sold. But the manufacturer is allowed to treat his machines as capital, while the farmer is forced to treat his basic flock as income. The meat, wool, and other products sold by the farmer are equivalent to the articles manufactured by the machines and which are sold by the trader.

‘‘The remedy lies in the adoption of the capital stock system. This recognises the obvious fact that the whole of our £228,000,000 worth of farming expprts for the last export year were the direct produce of the basic flocks and herds held throughout New Zealand as at the previous June 30. These basic flocks ana herds wintered by the farmers were the capital machines which produced the goods which were sold for that £228,000,000. “Farmers do not ask that wool, butter, fat lambs, cheese, meat or hides be treated as capital because these are obviously the products of the capital flocks and herds,” Mr Wheeler said, but they do ask that the basic productive machine in the shape of the basic flock or herd (that is, all that livestock depasturing in New Zealand on June 30) be treated as capital for all purposes, including disposition or realisation.”

Mr Wheeler said that not all farmers might prefer to adopt the capital system—but not one farmer to whom he had spoken had thought that it was not the right thing for New Zealand. He said that it would involve no deP ar l meata , l didicul ties, no different „° r . ni of by the farmer, en £ fortn 01 inetime tax return by the farmer, but merely a declaration of his basic flock. After a slight adjustment had been made to allow a right of choice, the I? ™ n V l L d , ot ? ed a resolution moved te.- M , r Hall and seconded by Mrs A. A. Stott, president of the Canterbury, provincial executive of the . on ?.?s s Dlv “‘on of Federated Farmers. We are not asking for any special concessions; we are not asking for a reduction of income tax or gift or death duties,” said Mr Hall. "All we ask is that capital should be treated as capital and income as income.”