Encouraging Production Aim Of Farm Tax Plan

Press, Volume CIII, Issue 30447, 22 May 1964, Page 10

Encouraging Production Aim Of Farm Tax Plan

A system of farm taxation that would favour the farmer who increased his production and would penalise the farmer whose level of production was low was put to the Lincoln College farmers’ conference by Professor W. E. Candler, professor of agricultural economics and farm management at Massey University.

Professor Candler said that the “factor tax” proposed that each farm should be assigned an “effective acreage of an appropriate land class.” An appropriate tax per acre would be derived for each land class and a farmer’s tax liability would merely be his acreage multiplied by the appropriate tax per acre. The resultant effect of the divorce of tax liability from actual production on individual farms would mean that increased production could be achieved without ■an automatic increase in a farmer’s tax liability. By the same token a farmer with a low level of production and low income would be taxed as if he had an average production and average income. If introduced, such a system of tax would allow an efficient and progressive farmer in a backward district to become a wealthy man in a relatively short time. On the other hand a farmer who in the past had been operating a large holding at a fraction of the intensity of his neighbours, and by virtue of a low income had incurred little tax, would find himself forced either to increase the intensity of his farming or sell out. It was quite conceivable that some backward farmers would find their tax liability exceeded actual farm profits. Recognising that large profits would be made, Professor Candler said that a likely effect of such a tax was that there would probably be an influx of a new type of young, aggressive and well-trained men into the industry, either as managers or owner-operators. Difficult Treatment

The factor tax would involve treating agriculture differently to the rest of the economy. The objective was to obtain increased production and this tax system would help. It was to be expected that different sectors of the

economy should be treated differently. There was, for example, the export incentive scheme, under which firms received a proportion of their net profit tax free, in relation to increased export sales to total sales.

“Apply this to agriculture and you get all taxation on increased production wiped out at once,” he commented. Dealing with the objection that the scheme would be politically unacceptable, Professor Candler said he was tempted to respond to this argument with simple abuse and say that the alibi of “political unacceptability” was the instinctive reaction of people who did not understand what was proposed, saw nothing wrong with the status quo and had np intention of understanding the past or the future, But'in more serious vein, whether the scheme would be politically acceptable depended on the one hand how badly more agricultural production was wanted, and on the other on the relative strength of traditionalist and progressive attitudes in the farming community. Forecast Professor Candler said it was his belief that New Zealand would eventually abandon the auction system for wool—when the Wool Commission was holding wool to the value of £2om. He thought that the factor tax, with progressive income tax, would be introduced when £2om had

been borrowed from the International Monetary Fund, and it was his belief that these events would take place about the same time —say between two and six years hence.

He would not say that the factor tax was a perfect tax, or even a good one, but from the point of view of increasing agricultural production it was from 300 to 500 per cent better than the present method. Effect on Land Price

Asked how much a system would effect land values, Professor Candler said that there was likely to be a fall in the price of unproductive land in generally well - developed areas, because such country would carry a level of tax similar to the developed country, but the value of undeveloped land in generally undeveloped areas would quite possibly increase. Some people might be rushing to get out of farming, but at the same time there could be a rush to get into fanning by those who were confident in their ability to farm well.

Under such a system, as agricultural production increased, and the proportion of the national income generated by agriculture increased, the politicians would be faced with the big problem of deciding whether or not the proportion of moneys collected from the industry should be increased or remain the same.