Remarks by a Federated Farmers leader are a boon to beneficiary-bashers, and they’re utter rubbish, writes tax expert Lisa Marriott
On Monday, newsletter comments by Federated Farmers Marlborough President Phillip Neal expressing his distaste for proposed tax reforms were quoted and reiterated on Stuff.
Neal didn’t restrict himself to the proposed tax reforms. Instead he used the opportunity to engage in divisive rhetoric and beneficiary bashing. In case you missed it, he said: “Farmers are in danger of becoming an ATM industry, providing the government with farmers’ hard-earned money so the government can then redistribute money to those they perceive as the helpless and needy, but in my opinion, useless.”
Asked about the newsletter, sent to his members on 15 March, Neal extended his comments to note that: “This government seems to be happy to take the money away from those people earning a living and giving it to the downtrodden, who often don’t want to work.” According to him, “there’s lots of people who abuse the system”.
Neal is unlikely to reflect the views of all farmers with his comments. Notwithstanding this, he must be held to account for his statements. Not only are they divisive and seemingly intended to reignite beneficiary bashing, they are also ill-informed.
There are three points worth highlighting here. The first relates to tax paid by farmers.
I recently made an Official Information Act request to Inland Revenue asking for the amount of tax paid by the agricultural sector. The most recent year where data was available was 2016-17. These figures are outlined below and include income tax paid by companies, trusts, individuals and partnerships:
In 2016-17, the government collected $75.6 billion in tax revenue, while the agriculture sector paid $758 million in tax. This is a large sum, but not a large proportion of tax collected. It equates to the agricultural sector contributing 1% of tax revenue in the period. If we isolate dairying from the broader industry, its contribution is 0.33% – one-third of 1%.
The second point worth challenging is that a large proportion of taxes collected go on spending for welfare beneficiaries. Total expenditure in the 2016-17 period was $76.3 billion. Of this, $16.2 billion (21%) was spent on health; $13.3 billion (17%) on education; and $13 billion (17%) on more than 700,000 New Zealand Superannuation recipients. More traditional welfare benefit expenditures are a much lower proportion. To be precise, expenditure on the Jobseekers Support benefit in 2016-17 was $1.7 billion (2.2% of total expenditure), on the Supported Living Payment $1.5 billion (2% of total expenditure) and on Sole Parent Support $1.2 billion (1.5%). I’m not sure which of these groups Neal feels contain the “useless” people the government should not support.
The final point worth highlighting is Neal’s claim that lots of people abuse the system. Yes, there are people who do not comply with the rules relating to beneficiary entitlement. There are also people who do not comply with the tax rules. The value lost to society from abuse of the tax system is around 50 times higher than the value lost from abuse of the welfare system. Neal would have a stronger argument if his distaste was directed at non-compliant taxpayers rather than beneficiaries.
Taxes are not paid by people who have no income and no assets. If people are being asked to pay higher levels of tax, it is because they have higher income, more assets or they may be being asked to pay for externalities they generate. Let’s also not forget everyone benefits from greater tax collection – not just beneficiaries.
Lisa Marriott is Professor of Tax and Associate Dean (Research) at Victoria University of Wellington’s Victoria Business School.
The Bulletin is The Spinoff’s acclaimed, free daily curated digest of all the most important stories from around New Zealand delivered directly to your inbox each morning.