Falloon wants farm investment tax-deductible

Press, 1 June 1989, Page 26

Falloon wants farm investment tax-deductible

By

PATTRICK SMELLIE

in Wellington

A return to tax deductibility for productive investment has been proposed by the Opposition spokesman on agriculture, Mr John Falloon. “It seems to me that what needs to be done is to capture the first dollar of profit and channel that dollar into investment rather than into the public purse,” he told a farming audience in Tauranga. He rejected the theory of supply — side economics, that lower marginal tax rates would lead to new investment.

“It does not work that way in an economy like New Zealand’s,” he said. Much of the extra money generated went into consumer goods, putting pressure on imports and resulting in higher house prices, he said. He suggested that investors should be able to pay less tax in the year they invested their money rather than wait for future profit.

Mr Falloon said he did not believe industries such as kiwifruit, deer, or goats would have existed with low marginal tax rates alone.

“The National Party

does not intend to go back to the 100 per cent deductibility that used to exist,” he said. "We proposed during the last election that investment in agriculture, forestry, horticulture, and regional industry should be deductible on a straight-line basis over three years. This would remove any distortions in investment patterns.” Mr Falloon also hit out at the finance industry, saying there was no true competition among banks. “What the Government should be doing now is talking directly to the financiers and telling them very clearly that they must be prepared to slant their investment towards long term investments.”

Mr Falloon said the National Party opposed the sale of the Rural Bank because a long term restructuring effort was needed to assist farmers in debt and this was something “a new buyer might not be too interested in.”

He said there was no evidence of an upturn in farming, and that the outlook for many farmers remained “horrific.”