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DairyNZ Sets Record Straight On Dairy Tax Figures

DairyNZ Sets Record Straight On Dairy Tax Figures

May 18, 2011 - DairyNZ says the average tax paid by dairy farmers over the last decade is $28,225, a far cry from the average reported today.

“We need to set this straight. Our figures show that on average approximately $300 million tax is paid per year by dairy farms, not $26 million as claimed. This includes companies, trusts and partnerships,” says DairyNZ CEO Dr Tim Mackle.

“The tax paid in 2009/10 was low in comparison to the taxable income because of the large losses made the previous year, which was a very difficult one for farmers and one of the worst on record financially. The tax paid in 2010/11 will be much higher, based not only on the 2010/11 high income levels but also a good season in 2009/10.

“The 2009/10 figures reported are also distorted by the fact many farmers received tax refunds for overpayment of tax in relation to income for the previous year - that is, their earnings were less than anticipated, because it was such a bad year.”

That year, the average farm had a cash operating surplus of $380,000 (ie cash income minus farm working expenses) but once interest, rent and depreciation were paid, the taxable income stood at only $126,000.

The figures reported earlier do not include the tax income from the PAYE paid by the 35,000 dairy farm workers.

“Dairy businesses work under the exact same rules as all small businesses, and have to deal with considerable market volatility,” says Dr Mackle.

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“Our figures show that about 10% of farmers are significantly at risk in terms of cash flow, but the majority are managing despite significant debt levels. Farmers would be struggling if it wasn’t for the increase in international demand of New Zealand dairy products.”

The NZIER report released in November 2010 states that the dairy sector employs around 35,000 workers and up to 10,000 people who are self-employed. It indirectly supports many more jobs in industries that supply dairy, and that experience the benefits of additional income flowing into the region due to dairy volume and/or price growth.

Dr Mackle says dairy's impact on New Zealand's economic health has never been about how much tax farmers pay to the IRD, although that in itself is not insignificant.

“The most important impact is at the level of our contribution to foreign exchange earnings - the fact we account for over 25 percent of total exports means we have a huge positive effect on New Zealand's balance of payments, which in turn greatly benefits the country’s economic position and influences factors such as interest rates. As the recent NZIER report demonstrates, an extra dollar of payout means every man, woman and child in New Zealand is $270 better off.”

ENDS

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