Tuesday, December 5, 2023

New forestry levy slated by industry

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‘Significant new tax’ is ‘very, very poor practice’.
NZ Rural Land also plans to borrow $25m from Rabobank towards the $64m purchase cost of lower North Island forestry estates to be settled on April 15.
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Forest owners are furious over new charges being levied for forestry registered in the Emissions Trading Scheme.

The government has announced a new $30.25 per hectare charge for forests, as well as new fees for 22 services, such as changing the classification of exotic or indigenous areas and asking for more time to collect forest measurements.

The Ministry for Primary Industries (MPI) said the principle behind the charges is that those benefiting from having forests in the Emissions Trading Scheme (ETS) should pay those charges rather than having them funded by the New Zealand taxpayer.

But forestry investment firm Lewis Tucker said the new levy is an indiscriminate tax on the entire forestry sector that has been rammed through by MPI. 

It’s unhappy the levy was announced three weeks before a general election and while the government is carrying out a review of ETS settings.

The company has around 30,000ha in two rotational forestry funds. 

Communications consultant Jonathan Hill said the new levy – or tax – would add nearly $1 million to Lewis Tucker’s annual costs. 

“Within the sector, there’s a high level of discomfort around what’s come out [this week].”

That was at least as much as Lewis Tucker spent on pest control every year, he said.

“The fundamental concern we have is that layering this additional tax on the sector at such a high level will just encourage the exact behaviours that we’ve been trying to discourage, which encourages people to plant flat, highly productive farmland where they can maximise their financial return over a short period of time,” he said.

Lewis Tucker managing director Will Leckie said $30.25 a hectare is a colossal number. Under production forestry, the average cycle is 30 years, but carbon credits could only be claimed for 16 years. 

Leckie said any move to charge registered forest owners should have been tied in with changes to the ETS as a whole. Lewis Tucker is a strong believer in incentivising the right behaviour of forestry through the ETS, he said.

“We’re a strong believer in making sure that trees are put in the right place. We think the current mechanisms around the ETS could be tweaked to encourage the planting of more marginal farmland.” 

That could be done through measures such as allowing a longer-term rotation option to encourage trees to be planted on hill country far from ports. The current 16-year cycle encourages forest planting on flat, highly fertile, productive land, Leckie said. 

Hill said Lewis Tucker supports costs being recovered from the industry on a user-pays basis. 

“This is a flat, universal tax that has been levied across all foresters.

“I’m concerned about the precedent here. If a government department can turn around and levy a really significant new tax on a whole industry, in this case, forestry, where does that end, and what other sectors could this be applied to? It’s a very, very poor practice.”

The Forest Owners Association (FOA) also hit back, saying the levy is another government disincentive to plant forests when they are most needed. 

FOA president Grant Dodson said it is a huge jump to a more than $14m-a-year cost recovery and is neither reasonable nor equitable.

“The ETS is for a public benefit. It has no other basis for existing other than to store carbon from the atmosphere to combat climate change, and that is of benefit to all New Zealanders,” he said.

Dodson said foresters had no say in setting up what he called a needlessly complicated scheme. 

He had talked to one forester with a 600ha block who will now be liable for an $18,000 annual charge but receives no services from the ETS administration. 

“He’s wondering why he’s in the ETS.”

Farm Forestry Association president Neil Cullen said small-scale woodlot owners are also facing huge increases because of the new charges for 22 different ETS services. 

“If someone transfers their ETS participation to someone else, then they will be charged $990 just for entering a new name in the system. How much work will that take?”

As at December 31, 2022, there were some 540,000ha of post-1989 forest land in the ETS.

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