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WPMA apprehensive over environmental taxes and overseas competition

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Fuseworks Media
Fuseworks Media

The Wood Processors and Manufacturers’ Association (WPMA) has called for a cautious approach to the Tax Working Group’s recommendations for more environmental taxes in New Zealand. WPMA chair, Brian Stanley said "a lot of media attention and commentary has been given to Capital Gains Tax options, but the Working Group report makes some significant recommendations for environmental taxes which also need fervent debate".

Environmental taxes have the potential to materially change New Zealand’s economy, for example by influencing the shape of investment in land. WPMA has long backed policies to encourage investment in forestry and wood processing. WPMA claims the sector could contribute materially to a future low-carbon and clean-water economy if it grows to meet international demand for sustainable housing, packaging and other products. "The Working Group appears to have correctly identified some sectors are not paying their share of the costs for environmental issues" said Mr Stanley, "So, further environmental taxes can assist, for example including agriculture in the ETS is one appropriate way of improving the system".

However, the WPMA believes not all the Working Group proposals on environmental taxes will support the economic transformation desired. The greatest concern is the lack of acknowledgement of what other countries do. Brian Stanley said, "It’s just too simplistic to suggest you can tax your way to a green economy". He cited a report commissioned by the Wood Council of New Zealand in 2016, which outlined the myriad of subsidies, support schemes and trade barriers faced by the New Zealand wood industry. "Our policies need to factor the very aggressive policies in some countries, which aim to directly promote the investment they want". He highlighted the example of free ETS units issued to wood processors, suggesting the Working Group recommendation to phase-out so-called ‘EITE assistance’ could have a perverse impact by discouraging investment in renewable energy and low carbon building products because it would increase costs for the sector while the same sector in other countries enjoy direct subsidies and tax relief. "The approach may work if New Zealand was isolated from other parts of the world, but we will lose out if we increase costs at the time our competitors are reducing costs for bio-energy, wood processing and similar low-carbon activities".

These concerns are underlined by the Working Group noting one of New Zealand’s long-running economic challenges is its low rate of capital investment. While WPMA supports the recommendation for a carefully designed regime to encourage large, nationally significant infrastructure projects as one remedy, the Association suggests the report is disappointing in its limited consideration of how the tax system could be used to encourage investment in green manufacturing, particularly in comparison to other countries’ strong industrial-support policies.

"If we want to build a green economy, it is important to get the balance right between ‘carrot and stick’, to understand the investment we want and to be mindful of competitor countries’ policies" said Mr Stanley.

Mr Stanley encourages attendance at the WPMA Conference on April 4th in Christchurch where this and other major issues affecting NZ manufacturing will be aired and discussed in more detail (link below to register).

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