Irrigation New Zealand

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12th April 2017

If there’s one thing every election has in common it’s tax. Usually one party promising to lower them; the others threatening to raise them. This year however, tax is being talked about in the context of water.

I’ve spent time with politicians over the past couple of weeks and so far, I’ve heard suggestions of taxing water at 10c per cubic metre, introducing a tiered pricing regime and imposing royalties on water exports. Depending on who you talk to, no one owns the water or everyone owns the water.

I think the water tax debate has been a knee-jerk reaction to a whole lot of wider issues around water. It has allowed some to push their anti-dairying agenda and others to be xenophobic. So, let’s look at a water tax from a common-sense perspective.

Because we all benefit from the use of water, then a water tax would need to be applied to everyone who uses it. You can’t just tax the people and/or uses of water that you don’t like – i.e. foreigners bottling it and selling it offshore or farmers because you think they’re getting it for free (they’re not).

Let’s just say, for argument’s sake, that Labour and the Greens do what they say they’re going to and impose a 10c per cubic metre tax on water.  In New Zealand, we allocate around 11 billion cubic metres of water for consumptive uses annually and on average, due to climatic variation, utilise 60% of this. A 10c per cubic metre tax on consumptive water use would therefore remove around $660 million from our economy. In a regional context, $422 million would disappear from Canterbury; the Hawkes Bay would lose an estimated $22 million and the ‘hit’ for a town like Oamaru would be close to $51 million.

These figures are scary enough on their own but when you consider that none of them include the water we use for hydro power generation, then the reality of a water tax becomes a whole lot more frightening for your average family.

When you call for a tax to be applied to a resource that is fundamental to energy and food production, the end result is that you are going to pay a whole lot more for your electricity and your groceries.

Don’t be fooled into thinking a water tax wouldn’t apply to you. The reality is if you tax commercial users, the true costs will be passed on to domestic consumers. If you ‘ring fence’ the tax to only be applied to one sector (e.g. bottled water exporters), then how long before it ‘creeps’ into other sectors and users?

On a positive note, surely the government would reinvest all this extra money from taxing water back into fixing waterways? We all know that won’t happen. Taxing water isn’t an effective way to incentivise water use efficiency or clean up our rivers. Farmers and growers are already at the forefront of efficiency – New Zealand leads the world in technological advancements in irrigation and sustainable farm practices, which are also now being driven through national and regional regulations. If you were to add another tax onto farmers’ and growers’ incomes, then you would reduce their capacity (and appetite) to make discretionary investment in environmental management.

Water is complex, which makes managing it difficult and taxing it nigh on impossible. No other country in the world has successfully implemented a water tax and I think we’d be foolish to attempt it here.  Our competitive edge on the international stage would be lost – no other country taxes food production! Exports would suffer – and the effect of that would impact big businesses, small businesses and communities. Ultimately, those that can least afford it will bear the greatest cost.    

What we should be doing to protect our fresh water resources and manage them for current and future generations is exactly what we’re already doing – continuously improving how we use the resource more efficiently and effectively; protecting it through regulation that underpins good practice; increasing its reliability and security so we’re not adversely impacted by climatic events; and being innovative and clever with it so it grows prosperous resilient communities.

All of this can – and will – be achieved without taxing it. 

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