What the Opportunity Party policies could mean

There are a number of Opportunity Party policies that align with B+LNZ’s priorities, such as restrictions on pine trees in the ETS, rewarding farmers for on farm sequestration and biodiversity, supporting trade, and increased investment into research and development.   

Two potential areas of concern are the land value tax and the potential impact of bringing agriculture into the ETS. Beef + Lamb New Zealand has completed an indicative analysis of both of these policies using B+LNZ Sheep & Beef Farm Survey data.   

On average, the land value tax would add an additional tax of $4,500 to $23,655 on top of income tax, depending on whether a single or married couple.   

On average, going into the ETS at a 90 per cent discount would add a further annual tax of $10,413. 

The analysis below shows that this varies significantly by land class.    

South Island High country farmers, in particular, would be the most heavily impacted with a combined additional potential cost of the two new taxes of $71,359 on top of traditional income tax. These farms had average profit before tax $189,762 over the last five years.  

B+LNZ analyses the potential impacts of the policies proposed by political parties where there is demand from farmers.  

The party’s Land Value Tax proposal 

• A Land Value Tax, set at 1.75 per cent annually on land value only. Rural land would be subject to an annual Land Value Tax rate of 0.5 per cent. 
• A Citizen’s Income, which would pay most adults up to $370 a week, or about $19,400 a year. 

In addition, farmers would still be paying income tax, which the Opportunity Party is proposing is broadly similar to current tax rates.  

We’ve modelled the tax package across more than 500 B+LNZ survey farms, a representative sample of commercial livestock properties we monitor continuously to track the economic and physical performance of the sheep and beef sector. 

Our analysis give farmers a practical starting point for understanding the possible scale of the impact of the policy across different sheep and beef farm classes. 

There are important caveats. The impact of the land value tax was modelled using farm values, which includes infrastructure such as woolsheds, dams, fences, etc. These may be excluded under the land value tax, meaning the overall impact would be slightly lower.  

Full policy details are not yet available, and these estimates do not include any payment farmers may receive for sequestration, which the Opportunity Party has proposed.  

This could materially change the net position for some farms, particularly those with significant native vegetation, forestry, shelterbelts or other sequestration opportunities. 

Across the farm classes assessed, the estimated annual impact varies widely. Some farm types come out ahead once the Citizen’s Income is counted, while others face a sizeable net cost. 

By the numbers 

South Island high country farms show the largest negative result in the indicative analysis. For that class, the estimated land value tax is about $80,100 per farm, while the Citizen’s Income for a couple is estimated at $38,800. That leaves a net annual impact of about minus $41,300 per farming couple. 

South Island hill country, North Island hard hill country and South Island finishing-breeding farms also show negative results, with estimated net impacts ranging from about minus $11,600 to minus $18,500 per farm. 

The picture is different for some other farm classes. North Island hill country farms show a small positive impact of about $2,200 per farm, while South Island finishing farms show a larger positive impact of about $12,000 per farm. This is based on the farmer receiving a couple citizen income and would be negative if only a single income.  

Overall, the analysis estimates the land value tax would raise about $394.6 million from the sheep and beef farm classes assessed, while Citizen’s Income payments to farmers would total about $355.6 million if all farms received a couple citizens income.    

On these assumptions, that leaves the sheep and beef sector facing a net cost before any sequestration payments or other policy design features are included. 

We understand the proposed tax and other reforms are aimed at shifting New Zealand away from investing in property to invest in things that will drive productivity, which is positive.  

The sheep and beef sector is, however, one of New Zealand’s leading sectors for productivity improvements. We are concerned, therefore, about the potential unintended consequences of the land tax proposal on our sector.  

We encourage farmers to run their own farm-level numbers before drawing firm conclusions – use this Opportunity Party Tax Calculator. 

Agriculture in the ETS 

The Opportunity Party proposes adding a mechanism to the ETS for agricultural emissions. It is unclear exactly what is envisaged, but B+LNZ has modelled what including agriculture in the ETS could mean for sheep and beef farmers, based on the emissions profile of the 500 farms in our sheep and beef survey. The Green Party has also proposed pricing agricultural emissions.   

The results show the scale of the potential exposure. With a 90 per cent discount (which is what export exposed industries currently in the ETS face), the estimated cost averages $10,413 per farm, or $95.4 million across the sheep and beef sector.  

Without a discount, the estimated cost rises to $104,133 per farm, or $954.4 million across the sector. 

The impact would not fall evenly across farm classes. South Island high country farms face the largest estimated cost, at about $30,089 per farm with a 90 per cent discount and $300,886 per farm with no discount.  

South Island hill country farms are next highest on a per-farm basis, at about $15,839 with a 90 per cent discount and $158,392 with no discount. 

At the sector level, North Island hill country farms account for the largest share of the estimated cost, reflecting the number of farms in that class. The table estimates costs of $29.5 million with a 90 per cent discount and $294.7 million with no discount for North Island hill country farms. North Island hard hill country farms also show significant exposure, at $14.2 million with a 90 per cent discount and $142.3 million with no discount.  

Analysis of the impact of similar prices on agricultural emissions undertaken by MPI in during the He Waka Eke Noa process, estimated that there could be a 20 per cent reduction in sheep and beef production.  

A final note 

We’re studying other parties’ policies and potential impacts – please let us know if there are any in particular you think should be analysed, using the [email protected] email address.