The Role of Income Taxation in Natural Resources Management
It is widely accepted that accelerated depreciation concessions, such as sections 75B and 750, are a poor means for government to address environmental objectives. This position is further supported by recent information highlighting the limited behavioural effect of this form of intervention. The continued existence of poorly targeted subsidy measures, in the face of mounting evidence of their ineffectual nature, suggests they are an important source of political benefits. It is further proposed that as assistance to agriculture declines, the political value of 'generic' policies providing economic rents to industry, such as taxation concessions, will increase and potentially impede the development of agricultural-environmental policy. The further point made is that significant environmental gains will be associated with a greater degree of policy complementarity, not only among elements of the Income Tax Assessment Act 1936, but among elements of rural policy generally.
A Note on Accelerated Depreciation and Investment Allowances
Accelerated depreciation and investment allowances are frequently requested by industry as a means of encouraging investment and promoting the adoption of socially desirable practices by farmers. Examples include the 100 per cent tax deduction for capital expenditure to combat and prevent land degradation (Section 750), and the recently introduced 10 per cent investment allowance for fodder and water storage for livestock, water conveyancing and minimum tillage equipment. Farm level survey data are used to provide evidence of the extent and distribution of benefits to farmers that flow from different rates of depreciation, and from the introduction of a 10 per cent investment allowance. A priori, it may be difficult for the farmer (or farm financial adviser) to determine which depreciation period will provide the largest tax benefit, as the results are dependent on both future taxable incomes, and tax rates.
A Comparison of the Taxation of Livestock Farmers in Australia, Canada, New Zealand and the United States
Many farmers argue that the Australian income taxation system provides an impediment to the operations agricultural sector. It is common for individual components of another tax system to be cited as providing more favorable policy settings. The paper provides an overview of major income tax policies affecting farmers in Australia, Canada, New Zealand and the United States. To quantify the effect of the different systems, the income tax system of each country is applied to three case study Australian farms. In conclusion, it is argued that the New Zealand tax system is more neutral and provides less tax deferral than occurs in other countries studied. Income taxes payable vary substantially between and within countries, and no system provides lower tax payments in all case studies.