Farmers brace for GST shift

18 Sep, 2015 02:00 AM
The impact of broadening taxes on food does relate to agriculture

What farmers pay in tax

  • Australia's 115,000 farm businesses pay about $665m in taxes annually
  • That's only 0.5pc of total Australian industry tax collections, according to NFF
  • The farm sector paid about $100m in GST in 2012-13
  • Farming companies paid total taxes of $430m
  • Individuals with farming operations paid $133m
  • About 99pc of farm businesses are family owned

  • FARMER groups are bracing themselves for serious, and uncomfortable, discussions on the prospect of a higher goods and services tax or a broader GST encompassing fresh food.

    While farm leaders concede Australians enjoy a relatively unusual status in the world with our GST at just 10 per cent, plus full exemptions for fresh food, health care and education, suspicion is rising about the likelihood of any fruitful trade-offs to compensate the agriculture sector if a growing push succeeds in lifting value added taxation revenue.

    Overseas GST or value added taxes are typically in the range of 15pc to 20pc, including neighbouring New Zealand's flat 15pc on any purchase, even government charges.

    In Europe, including the UK, GST typically ranges up to 25pc, although taxes on food are often discounted to around 10pc.

    With Canberra's coffers running on empty and the cost of providing government services for a growing and and ageing population already blowing out, a federal government discussion paper into a review of the tax system is set to be released in the next few months.

    It is expected to be a precursor to taxation reform being a key election issue in the lead up to next year's federal poll.

    Fresh federal government hints about GST changes as part of broader tax system reform coincided with a recent Deloitte Access Economics report estimating up to $30 billion a year could be raised by lifting the tax by 12.5pc to 15pc and broadening the base to include fresh food.

    The report also advocated cutting company tax rate to boost investment and wages.

    Although the States recently failed to agree to NSW Premier Mike Baird's idea for a 15pc GST to help cover soaring health costs, federal Finance Minister Mathias Cormann has reiterated the government message that Treasury's revenue relies too much on personal and company taxes.

    The National Farmers Federation (NFF) has welcomed prospects of significant tax reform because it potentially could support emerging opportunities for farm exports in Asia by boosting Australian competitiveness through more efficient and equitable taxes and by focusing on using the tax system to encourage agribusiness growth and investment.

    Victorian Farmers Federation (VFF) vice president David Jochinke said any taxation system changes should prioritise removing State payroll taxes and stamp duties, particularly if the GST did lift and give States more revenue.

    NSW Farmers also wants an iron-clad commitment around retaining the off-road diesel fuel tax rebate for farmers, miners and fishing boat operators because they are not using public roads, which the tax was originally designed to fund.

    VFF has also called for any GST increase to deliver a bigger percentage of revenue to local government to help fund community infrastructure, particularly roads.

    Mr Jochinke, a grain and sheep producer from Murra Warra near Horsham, said stamp duty on land transactions was a major inefficient impost on farmers attempting to buy land to improve economies of scale or move into better farming areas.

    Payroll tax was a less obvious immediate cost to farm businesses, but it hit many horticultural operations which were big employers and it was a significant supply chain cost in the transport, food processing and trading sectors.

    Also head of NFF's competitiveness committee, Mr Jochinke, said talk of changes to the GST had been a slow burning issue this year and the farm lobby now needed more definite membership feedback to prepare arguments in time for the government's tax discussion paper release.

    An NFF meeting will debate issues later this month, with Mr Jochinke admitting the threat of GST increases was a worry, particularly if the rest of the tax system remained more or less unchanged.

    "We don't have first hand knowledge about the merits of a GST exemption on education or health, but the impact of broadening taxes on food does relate to agriculture, so in that area at least we want any changes to achieve a net gain to taxation efficiency and economic competitiveness for farm production," he said.

    NSW Farmers business economics and trade committee is also about refine its GST arguments, with chairman Peter Wilson highlighting the organisation wanted a focus on more efficient tax collection and better government expenditure control.

    However he admitted a lot of GST debate, even within the farm sector, appeared to be based on trying to get the best political argument to defend a vested interest position.

    "The horticulture sector is particularly opposed to a GST on fresh food because there's a strong belief fresh fruit and vegetable consumption will fall if the tax is added, or the fear retailers will push any extra price burden back to producers to absorb," he said.

    "But some larger horticultural producers see a flat tax as generally more efficient and believe it would capture a lot of product currently not accounted for anywhere because it sells on the cash market."

    Mr Wilson admitted he was unsure if tax-exemption status had actually helped fresh food sales when GST was introduced, or if introducing GST would change shoppers habbits.

    "I don't think too many people switched from buying chips and biscuits to eating more fruit when the GST came in, and I'd be interested to know if a GST on fresh food in NZ makes much difference to sales compared to Australia," he said

    "It's a very divisive topic, but I think the writing is on the wall - we're likely to see some sort of change to the GST.

    "But if we are going to have major tax system changes we need some serious consideration of the potential flow-on costs in other parts of the economy.

    "The overall context should be looked at carefully, because introducing a change to one area could drive of human behaviour to act in a counter-productive way in another area of the economy."

    Andrew Marshall

    Andrew Marshall

    is the national agribusiness writer for Fairfax Agricultural Media
    Date: Newest first | Oldest first


    18/09/2015 4:20:46 AM

    10% - 12.5% proposed GST, WHAT IS THE END POINT ?, 20%( VAT) in the UK 10% is enough , we have to learn to live within our means
    18/09/2015 7:14:06 AM

    My original understanding was that GST was the centre piece of tax reform and that the number of taxes would be rationalised so that the whole tax system was simplified with the core tax income coming from GST. For many farmers most of the GST is "no-effect" GST in that it is paid and then reclaimed through BAS. Simply moving money around. In the good ol days a farmers would simply claim Sales Tax exemption. No tax paid, no tax reclaimed.
    18/09/2015 8:18:19 AM

    GST increases are stupidity. Tax needs to be paid at the point of wealth creation not consumption. Tax wage earners and companies. The issue is that we are selling and giving our assets away and then not collecting tax from those overseas owners. Increasing GST is like chasing the bottom of a whirlpool.
    18/09/2015 12:17:40 PM

    I also recall the taxes that were suppose to cease when we got GST, their still going. How about we raise the fines on crime. Increase income tax on work visas, maybe work for the dole can help the cost of caring for an aging population.
    Ripped Off
    18/09/2015 1:19:52 PM

    We could reduce the GST to 9% by getting rid of all the polys entitlements.


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