Closing Tax loopholes

How the Tax Working Group Can Make Polluters Pay and Encourage Business Growth.

The economy needs to shift rapidly this century in order to meet our environmental challenges. This is a huge opportunity to do things better, to be clean and clever with our growth and to improve our standard of living at the same time.

We urgently need to nudge businesses in a sustainable direction. But we also need to remember that government doesn’t always (or even often) have the answers. Instead of banning or regulating things as left wing governments tend to do, we need to encourage businesses to innovate and seek out new opportunities to take our economy in a new direction.

The Tax Working Group report (due out next week) is the next opportunity for this Government to take such an approach. What should they be recommending in terms of the environment?

A Price on Water

Looking long term, water is our greatest resource. It is the true backbone of our economy and society, and will only become more so. It provides us with life, energy and agriculture.

First and foremost we must avoid the mistake of favouring commercial water users over the public and customary rights. The access of the public and tangata whenua must be sacrosanct. This hasn’t been the case in the past, such as in Canterbury where nitrates are contaminating people’s water supplies.

Where water is scarce, which is most of the country, commercial water users should pay for their privilege. It is a scandal that water bottlers have got away with paying nothing but the cost of a consent. However the biggest users of water are electricity generators and farmers.

As the demand for water rises, the best way to respond (unless you are a Marxist) is with a price. And the money raised from that price should go to settling Maori rights over freshwater, to improving the quality of that freshwater, and to the local communities that water is being taken from.

Charges on Water Pollution

Charges can also help some forms of water pollution. Nitrogen, mainly from cow pee, is a major problem in many waterways. We need to use charges to make polluting farmers pay, and use that money to reward farmers that are farming in a sustainable fashion. Simple carrot and stick stuff, and so easy to do. Just watch those farming practices change when this is in place.

And yes, the same goes for our urban waterways. Councils should be fined for breaches of water quality and the money used for clean up.

A Decent Price on Carbon

The price of carbon has risen under this Government as they have made relatively minor changes to the Emissions Trading Scheme. The price needs to rise much higher – at least double the current level. We also need to move away from giving away free credits to polluting businesses.

Another big issue is removing the tax incentives that encourage people to use fossil fuels and not plant trees. Here are a couple of examples:

  1. Our tax system currently favours small scale pastoral farming (which benefits from tax free capital gain) rather than forestry.
  2. Our fringe benefit tax favours gas guzzling double cab utes and companies that provide car parks for their employees, but these same tax breaks don’t apply to public transport.

This provides businesses with certainty and incentives to change their practices in the long term. Ultimately businesses and people on the ground will be the ones finding the best way to reduce emissions, not governments.

A higher carbon price is how we will see change in our economy – not by banning oil and gas exploration and running the risk of importing coal in a few years time.


We are currently working on a Waste Policy but the same approach applies – we should use economic instruments to make polluters pay and provide incentives for them to clean up their act.

This stuff isn’t rocket science. Working with business, rather than against it, is essential to making our economy sustainable and lifting our standard of living at the same time. Sadly this is an anathema to many of the left wing politicians that claim to care about the environment. 

Read more about how TOP policy benefits sustainable business and our Clean Water Policy.