Taxing Times for Regional Australia

Taxing times for regional Australia

Opinion Editorial for Queensland Country Life

Published: 9 April 2009

by

Ben Fargher

CEO

National Farmers’ Federation

WITH the Federal Government plunging headlong into a Carbon Pollution Reduction Scheme (CPRS) it must ensure that regional families, businesses and entire communities will not be slugged with a disproportionate share of the economic burden.

Under the Government’s Tax Review, the National Farmers’ Federation (NFF) is calling for an overhaul of the tax system to offset inequities and spark commercial encouragement for farmers to adopt carbon reduction practises.

In light of enormous fluctuations in the oil price and the shock this has had on all sectors of the Australian economy, including agriculture, the inevitable fuel price hikes from the CPRS must be offset for at least the first three years of the scheme.

Indeed, the Government’s own analysis calculates an additional cost of around six cents per litre in fuel once the CPRS is in place.

In addition to productive needs, the offset is essential for those living in regional areas. Given regional people have further to travel, a fact compounded by a lack of public transport, they are more exposed to fuel costs.

While agriculture contributes over 12% of GDP, factoring in downstream economic activity, the sector represents up to 80% in regional economies. Most communities very much remain ‘farming towns’, with their prosperity aligned to the productivity and sustainability of the farms around them.

This dependence on one industry makes the economic risks the CPRS poses significantly higher for regional Australia.

To correct the existing, and likely future, biases against living and working in regional Australia, the Tax Zone Rebate Scheme for individuals needs to be reviewed, with the potential for the scheme’s extension to businesses fully examined.

Such a reform would inject a major new incentive for people to live and work outside capital cities and correct the disproportionate cost incurred by regional communities owing to the impost of a cost on carbon emissions.

Australia’s taxation system has the potential to play a major role in influencing the behaviour of Australia’s farming community and, if used effectively, induce positive outcomes for the economy, the environment and society.

Regarding drought policy, the NFF has consistently stated that drought policy must deal with the ‘here-and-now’ as the first priority. That is, ensure farms in the grip of drought continue to get existing assistance measures. However, equally, all farmers acknowledge that relief, although important, is a stop-gap measure.

As a nation, we are at a point where we must think strategically about how we plan for, and deal with drought – especially in the context of climate change.

Through tax-driven measures, positive market signals can reward farmers for better preparing for future droughts. Agriculture and the Australian economy can benefit from a tax system that fosters a partnership between government and farmers, where co-investment in drought preparedness measures is the key feature.

Incentives including accelerated depreciation and tax deductibility on capital items that stimulate investment in preparedness measures – such as better pasture and soil management, upgrading irrigation systems for increased water use efficiency (also contributing to energy efficiency, energy savings, and labour savings), building storage facilities, silos, haysheds and fencing – are all proven mitigation tools in drought management.

These would complement Farm Management Deposits in meeting drought preparedness objectives and help farmers to manage risks – including climate change.

In combination, over time these proactive upfront investments would significantly alleviate the need for drought ‘relief’ and ease pressure on the public purse.

Taxation can play a similar role in inducing farmers to undertake further positive environmental actions.

With over 150,000 farms covering 61% of Australia’s landmass and accounting for 70% of water resources, agriculture must be recognised for its genuine, positive management over natural resources.

Creating the Environmental Stewardship concept, the NFF has driven its acceptance by the current and previous Federal Governments, scientists, environmental groups and farmers. All recognise the need to move from ad hoc environmental actions and over-regulation to long-term active management, supported by clearly defined outcomes.

In August 2008, the Federal Governmentlaunched a $42.5 million pilot of the Environmental Stewardship program. It targets endangered Box Gum Grassy Woodlands in the Lachlan and Murrumbidgee Valleys of NSW and, soon after, was expanded to include the Northern Basin.

This is the first stage in remunerating farmers in going above and beyond their normal duty of care to deliver environmental works on behalf of the broader community. However, tax measures should complementEnvironmental Stewardship to provide further incentives for farmers in this important area.

Tax concessions for conservation work undertaken by farmers that will improve soil and vegetative carbon storage capabilities, improve biodiversity outcomes and improve the health of natural water resources.

The Government must see changes to the tax system as a positive way of ensuring its CPRS is equitable in its affects, and that complementary policies around drought and sound environmental management are given the boost they need.

[ENDS]

NFF Feature Articles – Taxing times for regional Australia- 1 -