Livestock Incentive Can Be Worthwhile

Press, Volume CVI, Issue 31089, 18 June 1966, Page 9

Livestock Incentive Can Be Worthwhile

Budget commentaries already published have by and large been unenthusiastic. This is hardly surprising as there have been no major changes from last year or no new radical ideas formulated. The farming community may see some analogy in Mr Lake’s present situation to a situation that most farmers have faced when they themselves are developing. That is a shortage of liquid cash.

It is generally accepted that good farm management is made up of three phases—planning, execution and control. It seems to me that good government incorporates thfe same three phases. On Thursday night Mr Lake spoke at some length about planning, but rather skipped over the execution and control phases. That he should do this is not surprising when New Zealand is showing a history of current account balances of 196263 plus £7.2m, 1963-64 minus £7.9m, 1964-65 minus £12.2m, and 1965-66 minus £58.8m. Superficially one might label this situation the result of poor management, but provided one can see the situation being rectified then all is well.

creased production has caught policy circles on the hop. Mr Lake has decided to continue the present incentives to fanners for another year and to introduce a new livestock increase incentive. This incentive was mooted almost as soon as the Agricultural Development Conference started, but has been progressively delayed since then. The new scheme as outlined in the Budget does at last recognise that one major impediment to

All farmers who have been involved in development will recognise that it is at about the third or fourth year of a development programme that problems of liquidity normally become intense. Mr Lake obviously finds himself in this situation at the present moment His major concern. must be 'the level of overseas earnings in the Hear future, particularly in' relation to the U.K. shipping strike and the reopening of marketing negotiations with Britain. The farmers of New Zealand have given the Government a stock increase of 8.5 per cent this year. The question that farmers want answered is what is the Government going to do with the increased production—on the basis of the Budget speech very little that is new, except to open two new overseas trade offices. One almost gets the impression that the great response of fanners to the plea for in-

rapid land development is the intensifying effect that tax on stock increases has on a developing farmer’s problems of liquidity. Obviously this scheme would have had more impact if it had been introduced earlier, but what is its impact likely to be now? First, it must be recognised that this incentive is a tax deferment scheme—that is farmers are not getting something for nothing. They are merely being allowed to pay the tax on livestock increases after the livestock have generated some income, rather than before they have done so. Second, the relief the scheme is going to afford the individual farmer will be directly related to the level of his standard valu&and his marginal

rate of tax. That Is the higher the standard value the greater the potential relief. Also the faster the rate of increase the greater the potential relief. Thus the scheme will be of greatest benefit to those farmers who are still in a state of dynamic development. Some of the possible gains accruing to a farmer can be gauged from the following table relating to an increase of 100 sheep:

in the £ then the tax saving under the new scheme would be £lO4. Thus for farmers still involved in development, where stock increases are liable to be significant, and standard values are high, the new incentive is of a worthwhile nature. For farmers who have completed their development, or for farmers still developing but with low standard values, the new Incentive

On the basis of the table above it may seem that the benefits of the scheme are small, and this is undoubtedly true where increases in stock are small. There are, however, properties in Canterbury which in the last year have increased their stock numbers by 25 per cent and more. In these cases you would perhaps be thinking in terms of stock increases of 400 or more sheep. At this level of increase, particularly if the standard value is in the region of 30s, then some worthwhile saving can accure. For example 400 sheep at a standard value of 30s means an increase in assessable income of £6OO. If the farmer’s marginal tax rate was 3s 6d

offers nothing. In its defence it can be said that farmers with low standard values have been getting the effect of the new Incentive in large measure already. Farmers who have been developing over the last three years and have struck problems of tightening credit would be pleased to hear the minister state that the Government planned to ensure that adequate seasonal finance would be made available to fanners. Young farmers would also be pleased to hear that State Advances, marginal lands and the life assurance companies have been requested by the Government to make more finance available to farmers.

The accompanying commentary on the Budget presented by the Minister of Finance, Mr Lake, on Thursday evening, has been written by Mr N. G. Gow, lecturer in farm management at Lincoln College.

Stand. VaL Inc. In Assess. Inc. at Stand. Vai. Tax Saving at llarg. Bates. 3s 6d 5s 10s s. £ £ £ £ 10 50 8 12 25 15 75 13 19 37 20 100 17 25 50 25 125 22 31 62 30 150 26 37 75 35 175 31 44 87 40 200 35 50 100