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Grass Tax - It's Happened

Brian Connell
National Party Associate Revenue Spokesman

3 February 2005

Grass Tax - it's happened

The Labour Government's decision to slap a tax on new farm grass is another example of taxation running out of control, says National's Associate Revenue spokesman, Brian Connell.

He is commenting on the Minister of Agriculture's announcement that new grass and fertiliser will now be treated as capital and therefore will not be deductible if, in the IRD's opinion, it changes the nature of the farm activity.

"Instead of allowing the costs of grassing and fertilising to be expensed in the first year, it now wants all the costs of a conversion to be treated the same way - to be capitalised and then written off over the following years.

"This will have a significant negative impact on cash flow," Mr Connell says.

"Clearly, Michael Cullen is not satisfied with an accumulated tax increase of $34 billion since 1999 - an increase of 40% - so he has now instructed the Inland Revenue vultures to tax farmers' grass.

"The cost of converting to dairy farming is expensive enough without this additional slug. Now, sowing new grass is to be treated as capital.

"Rather than considering methods of reducing tax, the greedy Labour Government has its claw out again.

"How many more tax increases can Labour come up with? So far it's been more than 30, but this one must be the most bizarre," Mr Connell says.


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