10 reasons to question Labour’s water tax

31 Aug 2017


1 - There is no detail, it is uncertain and its keeps on changing.  The only certainty is there will be a water tax if Labour are elected.

2 - No one in New Zealand pays for water. What we pay for is the infrastructure to deliver water and for water treatment. Legally, you can’t be charged for water. For example, one rural bore to draw water from could cost around $200,000 to put in, and that’s before it’s operational – it then costs to run it.

3 - Only rural businesses will pay the water tax; urban businesses will not. This means it is incorrect to portray this tax as being on large commercial water users. If your farm or processing plant is on urban water supply, you’ll only pay for infrastructure but, if your farm or processing plant is taking rural water, you’ll pay for infrastructure plus a water tax. Global drinks manufacturer Coca-Cola is on Auckland’s town supply, and so will get an advantage over rural water bottlers for example.

4 - Water users are not necessarily water polluters. If the intention is to clean up waterways, the tax should be focused on polluters. In its proposed form, the tax is a disincentive to famers and growers who are doing all they can to protect the environment.

5 - Timely use of water allows the management of nutrients and subsequently any leaching – the water tax is a disincentive to this.

6 - No matter what rate the water tax is set at, it will cost growers, farmers and consumers. My estimate, based on 2 cents per 1,000 litres, is that $6 million will need to come from fresh fruit and vegetable growers. That’s a lot of money from intergenerational family businesses that are not large corporates.

7 - Faced with a water tax, growers have two choices; either keep irrigating at present levels, producing fruit and vegetables of good quality and achieving good productivity per hectare, or reduce watering. A reduction in watering will see a reduction in the amount of food produced. If there is a shortage of vegetables for example, prices increase; this is basic supply and demand. It has been the case this winter because heavy rain impacted on harvesting. Shortages could therefore occur due to the tax meaning growers reduce watering.

8 - There will a cost of administration and the tax, according to comments made by Labour in media, will be used for different purposes including, settling iwi claims and rates rebates. So what is the problem this tax is trying to solve? Some of the worst polluted waterways are where there is high rainfall and little or no irrigation. What is being proposed with different rates and different applications will be complex and expensive to administer.

9 - Calling it a royalty and using it for general purposes makes it just another tax. A royalty, or resource rental, begs the question: who owns water? It falls from the sky and is a renewable resource, it is not like minerals or oil. Ownership opens up questions under the Treaty of Waitangi similar to those a few years back about the foreshore and seabed.

10 - Finally, it is in New Zealand’s long-term interests for the government to promote healthy eating and incentivise the production and consumption of fresh fruit and vegetables. The health system is where the cost of an unhealthy nation is borne. Therefore, a holistic approach should be taken recognising the part fresh fruit and vegetables play in keeping New Zealand healthy and keeping them affordable for the wider population.

- Mike Chapman, CEO