BASIC STOCK ON FARMS

Press, Volume LXXXIX, Issue 27090, 13 July 1953, Page 10

BASIC STOCK ON FARMS

TAXATION PROPOSAL EXAMINED MR A. L. WHEELER’S CASE ATTACKED The address by Mr A. L. Wheeler to a public meeting of members of Federated Farmers and the Women’s Division of Federated Farmers on Friday has drawn a reply from the secretary of the Canterbury District Council of the New Zealand Federation of Labour (Mr R. H. McDonald). After hearing Mr Wheeler, the meeting passed a resolution urging that farmers should have the option of treating basic livestock on their properties as capital stock. “If Mr Wheeler is, as he himself states, more conversant with this subject than any other farmer in New Zealand, his exposure of its weaknesses is most valuable,” says Mr McDonald’s statement. “The exposure is now complete. When Federated Farmers inaugurated this campaign for a different livestock taxation system the serious economic consequences of their unreasonable proposals were not easily recognised. Now, however, the more explicit terms being used by their representatives are seen as a reaction to the criticism these proposals have deservedly received. “Mr Wheeler endorsed my criticism by drawing an analogy between the farmer and the manufacturer and for this I am indebted to him. Mr Wheeler 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.’

“This is not true. The manufacturer cannot sell his machines without incurring liability for income tax and since he has written down the value of his machines by depreciation allowances he has obtained income tax relief on the amount of depreciation. This very same course is followed when the farmer writes his stock down to the standard value. If the manufacturer sells his machines on a market bringing higher prices than his depreciated book value he will certainly be required to pay income tax. In this way the manufacturer is subjected to exactly the same taxation hazards as the farmer. If anything, the farmer has a far more favourable ‘depreciation’ scale. “If Mr Wheeler doubts this statement he need not take my word for it. — he could ask his own or any other accountant. It would save him some embarrassment if he obtains immediate advice on the matter. “None of the Federated Farmers’ representatives who have taken part in this campaign have so far admitted that the farmers themselves established the present standard value system as an equitable taxation basis and they accepted the opportunity given to them to fix the standard values they desired “It is obvious that when Federated Farmers use the word ‘capital’ they are using terminology intended to confuse the issue. Stock which is turned over once in every four or five years can be called capital or anything else other than stock until it is sold and produces income. The scheme is not designed to obtain equity but to offload the farmers' share’ of taxation on to other sections of the community,” said Mr McDonald’s statement.