Opinion: Fertiliser tax unlikely to benefit environment

An opinion piece by Executive Manager Greg Sneath on the potential taxing of fertiliser and what that might mean.

There's been a lot of talk this year about the potential taxing of fertiliser in New Zealand and what that might mean. You won't be surprised that the Fertiliser Association has an opinion on this.

In our submission to the Tax Working Group in April we outlined the reasons why we felt a national tax on fertiliser wouldn't benefit the environment. The cynics amongst you will be proclaiming 'Well, you would say that'. We're not negating the need to manage nutrient loss or mitigate against the effects of climate change. We're simply suggesting that tax is not the best way to achieve this.

There is a complex and varied relationship between land use activities and the impact on water quality, catchment by catchment. In one catchment the impact of concern might be bacteriological contamination. In another, the issue could be the adverse impact of nutrients, and in another sediment load. A national tax on fertiliser wouldn't be able to address these complexities. As a result, a fertiliser tax becomes more about revenue gathering than a genuine solution to climate change or environmental issues.

Nitrogen is an essential component for farm production. Without it half the global food production would fail. For most farm systems the cost of fertiliser is already the single biggest expense after the cost of labour. It's already in farmers' best interest to use fertiliser as effectively and efficiently as possible, to keep costs down.

The farming industry is focusing on nutrient efficiency more than ever before. In most intensive farming areas, accountability for nutrient use is enforced by regional council requirements, with clear direction to work within environmental limits by managing nutrients well or reducing their use.

Farming businesses are investing heavily in farm system changes to comply with regulatory requirements, adopting new mitigations and new technologies to farm within environmental limits. While an additional tax burden on an essential component of rural business may raise revenue, it will also constrain the ability of these rural businesses to invest and respond as required to meet the challenges they are facing. Supporting farmers rather than imposing an additional financial burden would be far more effective - for instance, by providing a tax incentive for mitigations and enabling farm system changes.

The Fertiliser Association supports the principles that any tax system should be fair, avoid complexity, and be as effective and efficient as possible in achieving its purpose. It should enable economic stability and development, while retaining as much international competitiveness as possible.

The ultimate aim of any environmental tax should be to create behavioural change. However, the reality is that fertiliser is an essential item in modern day farming systems. Farmers will need to use it - or face a drop in productivity. What they must choose to do is select products and practices that will improve effectiveness and reduce negative impact.

There are other potential risks around the taxation of fertiliser. A low tax could discourage a proper focus on mitigations. On the other hand, with a high tax, farmers would struggle to compete internationally with other countries that don't pay similar taxes.

New Zealand's primary industry remains the backbone of this country's economy, generating more than half of our export earnings. This does not mean we can be silent about the impacts of agriculture on water quality or greenhouse gas emissions.

For the Fertiliser Association, promoting good practice to manage impacts is not something new. It is 20 years since we first published our code of practice for fertiliser use. This emphasises the need for good nutrient management and advocates the use of nutrient planning tools. The code has been revised over the years to keep abreast with changes. It will need to continue to evolve as practices and farm systems change.

There is much that can and must be done to reduce our emissions. The Fertiliser Association is playing its part through our investment in research, our support of certification schemes such as the Nutrient Management Adviser Certification Programme, support for training and as a long-term supporter of Overseer, a nutrient management tool.

So where would a new tax fit alongside other initiatives addressing on-farm losses, such as regional council requirements for nutrient reporting and the Government's clear intention to introduce some sort of accounting regime for greenhouse gas emissions? How can we integrate current initiatives in a way that makes sense to the farm manager on the ground and delivers the outcome we all seek?

We need to work to find integrated solutions to the challenges we face and promote pathways to innovation - enabling New Zealand agriculture to be the best it can be.