If National wins ...

[elZorro]

From what little I know about the capital side of business, the company tax rate (28%) is on profits held inside the company. If shareholders want to take some of it out for personal spending, there is a topup figure which brings it into line with normal income tax rates that an individual pays. But the bulk of the tax that is paid on company income for the shareholders at least, is corporate tax. The implication from govt tax records is that this stated income is low, usually, compared to the assets deployed.

[fungus pudding]

From what little I know about the capital side of business, the company tax rate (28%) is on profits held inside the company. If shareholders want to take some of it out for personal spending, there is a topup figure which brings it into line with normal income tax rates that an individual pays. But the bulk of the tax that is paid on company income for the shareholders at least, is corporate tax. The implication from govt tax records is that this stated income is low, usually, compared to the assets deployed.

Income is irrelevant. Profit isn't, and if there is a profit, someone will be paying tax on it.

[elZorro]

Well there's a summary so full of unqualified ridiculous generalisations that there's little point in commenting.

Sorry FP, I should have qualified that. An example might be dairy farmers, and of course their income is all over the place depending on the payout. Their income is high at the moment, so if the drought has not had too much effect, the govt should see more tax income. But strong new car and tractor sales around the place, are an indicator of a mopping up effect in the provinces.

Dairy farmers in NZ have an average of 44% debt to asset ratio, $30billion of borrowing at about 6% average, so that implies capital values of $68bill in total. If they were to achieve value for those deployed assets (10% return), $6.8bill in net profit each year, the tax on that at 28% would be $1,900 mill.

In 2011 the sum of NZ's dairy farmers paid an aggregate of just $26mill in income tax.

http://www.stuff.co.nz/the-press/new...-paying-no-tax

[fungus pudding]

Sorry FP, I should have qualified that. An example might be dairy farmers, and of course their income is all over the place depending on the payout. Their income is high at the moment, so if the drought has not had too much effect, the govt should see more tax income. But strong new car and tractor sales around the place, are an indicator of a mopping up effect in the provinces.

Dairy farmers in NZ have an average of 44% debt to asset ratio, $30billion of borrowing at about 6% average, so that implies capital values of $68bill in total. If they were to achieve value for those deployed assets (10% return), $6.8bill in net profit each year, the tax on that at 28% would be $1,900 mill.

In 2011 the sum of NZ's dairy farmers paid an aggregate of just $26mill in income tax.

http://www.stuff.co.nz/the-press/new...-paying-no-tax

And that's the trouble in the Labour party - working out how much tax everyone else should be paying with a simplistic analysis like that, that tells us nothing.

[slimwin]

Yes. The whole argument is based on the word "might"....

[elZorro]

And that's the trouble in the Labour party - working out how much tax everyone else should be paying with a simplistic analysis like that, that tells us nothing.

I was just watching Marilyn Waring on Q&A. She is just as fascinating now, as she was when she first became an MP. She said that back in the 70's the govt was subsidising farmers, and here we are in 2014, still doing it. She didn't mention tax handling, although I am sure that's a big part of the picture for many investors in farms, who didn't grow up on one. Instead, we now subsidise the farms' effects on our environment. Dairying has expanded as far as it can go, according to Rod Oram, as far as land use. New regulations have halted most conversions, but not imposed new costs on those already in the system.

Anyway, there is no "might" about my fundamental argument using dairying as an example. If $68billion of assets results in income taxes of $26mill a year, that means the average ROI for 2011 was apparently ($74mill NP on $68000mill invested)...a massive 0.1% ROI.

If farming was really that bad, there would surely be farms selling a lot cheaper than they are. So what is the secret about farms, that means they are sought after by those with cash to burn?

[macduffy]

If farming was really that bad, there would surely be farms selling a lot cheaper than they are. So what is the secret about farms, that means they are sought after by those with cash to burn?

Until recently at least, its been largely about capital gain on sale.

[neopoleII]

my understanding of dairy farmers is...... (my neighbors are dairy farmers)
they work 7 days a week from very early to late, they spend BIG money on farm machinary
they spend big money on land care, they spend big money on fert, then the capital cost of the land and the herd.
for the hours spent by them and the cash they pay to the myriad of farm service suppliers and contractors
it would seem that alot of other folks a earning a living from providing services to the dairy farmer.

once the white gold leaves the farm in raw liquid form........ the next step of wealth creation starts.....
ie cheese making, export milk powder, domestic milk, baby formula etc etc.
everyone in this long chain makes an income and pays tax
all told...... its this countries biggest earner and tax payer......
singling out a dairy farmer land owner and his tax payment is a bit simplistic.
i'd be more concerned with the city slicker property renovators with a paintbrush making several 100k tax free after a years work of tv style diy.

[Sgt Pepper]

EZ
Do you think that an unfair proportion of tax is paid by middle to upper income earners? Are we an easy source of revenue in that we are are not a complex cohort of individuals, we receive, usually every fortnight, a wage/salary and a formula removes a proportion and transfers it efficiently to inland revenue. There are no complexities to contend with, and no opportunity to off set income against tax liability, the only exception is income protection insurance premium.

[elZorro]

my understanding of dairy farmers is...... (my neighbors are dairy farmers)
they work 7 days a week from very early to late, they spend BIG money on farm machinary
they spend big money on land care, they spend big money on fert, then the capital cost of the land and the herd.
for the hours spent by them and the cash they pay to the myriad of farm service suppliers and contractors
it would seem that alot of other folks a earning a living from providing services to the dairy farmer.

once the white gold leaves the farm in raw liquid form........ the next step of wealth creation starts.....
ie cheese making, export milk powder, domestic milk, baby formula etc etc.
everyone in this long chain makes an income and pays tax
all told...... its this countries biggest earner and tax payer......
singling out a dairy farmer land owner and his tax payment is a bit simplistic.
i'd be more concerned with the city slicker property renovators with a paintbrush making several 100k tax free after a years work of tv style diy.

Neopole, I agree it's a complex issue, had some family members involved in dairy farming too. It's easier to get picked up for tax in the home renovation area, than in farming. Farms take a while longer to tune up and wait for the inevitable peak in the milk price. Therefore no tax on the gain. It's like any business, you don't always need brand new gear and cars to get the job done. Many farms just stay in the family and intergenerational sales are made, new loans recycled. But some others are owned by city dwellers relatively new to farming, who are there for a hobby and the tax-free gains available to big investors. Net result, a very poor income from these investments on paper, but we all know that's not the full story.