IRD advised against good looking racehorse tax break

IRD advised against giving tax breaks to the race horse breeding industry nine years ago, as they did recently, this time warning it could cost ten times what Winston Peters has suggested. But the Government went ahead with the only tax cut included in this year’s budget.

Stuff: Officials warned against racing tax breaks

Inland Revenue officials have warned against tax breaks for the racing industry, saying they could cost the Crown up to $40 million in lost revenue – but the Government is proceeding regardless

NZ First and its leader Winston Peters had been backed at the election by prominent racing industry figures, who demanded those bloodstock tax breaks, as well as an all-weather track and control of the NZ Racing Board.

Peters’ policy was a big win for the racing industry, because they had failed to convince the previous National Government to implement the tax relief. Inland Revenue documents seen by Stuff warn of the potential for race horse owners to game the system.

Officials saw no need for tax relief to the industry, but worked on tax rule changes with tighter restrictions. But that policy was dismissed by industry players just before the election.

Peters’ policy allows tax deductions for an investor who buys a race-horse and declares an “intention to breed for profit.” He said it would cost $4.8m.  He’d previously tried to introduce the deductions when racing minister in the previous Helen Clark government.

Details of Peters’ new policy are vague. But a strikingly similar proposal was advanced by the Racing Board last year. Officials cautioned against it because the deductions could be claimed even if a breeding business never eventuated.  The Racing Board believed the policy would cost around $5 million a year.

IRD didn’t accept that figure and put the cost at around $40 million a year because it had the potential to apply to an extra 7000 horses a year.

My mother loved horses and every one of them looked good to her. It wouldn’t be hard to find someone who has an eye for good looking horses – which could be any that apply for the tax break.

I don’t know where the ‘7,000 horse a year’ come from – NZ Racing: “In 2015-16, the industry produced 3500 foals and exported 1700 horses”.

Stuff;

Former Revenue Minister Judith Collins confirmed she couldn’t reach agreement with the Racing Board. She said a 2013 court case involving IRD and a racing syndicate, known as Drummond vs the Commissioner of Inland Revenue, made it difficult to implement the tax breaks that the industry was asking for.

“I wouldn’t have or couldn’t have opened up a complete change in policy without actually complying with the law. The law was pretty clearly stated in [that case] that just buying a horse and hoping you might breed from it one day was not actually a business.”

Collins said she would be “deeply surprised” if Peters wasn’t given the same advice. “It does smack of a lack of rigor when it comes to policy development.”

A similar claim from former revenue Minister Peter Dunne.

Peters said:  “The same arguments against bloodstock tax rules were raised during my previous tenure as Racing Minister, they were false then and they are false now.  The evidence comes from when the previous Finance Minister Michael Cullen agreed to a similar approach and the positive impact that generated for the industry.

What would the IRD and previous Revenue ministers know.

“There are legitimate reasons bloodstock tax investment helps create investment in horse racing which in turn will generate greater revenue for the taxpayer.  It will become fiscally positive.

“The National Party has been naïve and poorly managed the racing industry, nor did it maintain the previous rules on tax write downs.  The racing industry has become at best static and has not been achieving its genuine potential. The bloodstock tax write downs announced in Budget 2018  help attract new investors to the breeding industry.  And next year’s Yearling sales at Karaka will be one to watch.”

Peters’ party got vocal and financial support at the election from industry players. ​

With the tax breaks he has given them there could be more spare cash available for donations and campaign assistance.

See Bloodstock tax rules to change

Minister for Racing Winston Peters today announced changes to bloodstock tax rules for the New Zealand racing industry as part of Budget 2018.

“The Budget allows $4.8 million over the next four years for tax deductions that can be claimed for the costs of high-quality horses acquired with the intention to breed”.

“These changes mean that a new investor in the breeding industry will be able to claim tax deductions for the costs of a horse as if they had an existing breeding business. To qualify, the horse must be a standout yearling.”

Yearlings don’t race. I don’t know how it will be decided if a yearling is a stand out so it qualifies for the tax break. This hadn’t been decided by budget time a month ago.

Stuff: NZ First gets tax change for race horse investors through the gates

Each yearling would need to be assessed based on the “virtue of its bloodlines, looks and racing potential”.

“Further consultation with the industry will be undertaken to finalise policy settings, draft legislation and set up administrative processes,” a statement released by Peters said.

Will IRD get to determine “virtue of its bloodlines, looks and racing potential”, or will ‘the industry’ be allowed to decide this for themselves?

15 Comments

  1. Gerrit

     /  June 24, 2018

    Sooner or later Labour is going to have to stand up to NZFirst and their neptoism policies.

    Racing industry and fishing, what next?

    However the industry paints a rosy picture of how good they are, so why do they need tax incentives?

    “In economic terms, the New Zealand Racing Industry ($1,635 mil) is
    comparable in size to the Wine Industry ($1,500 mil) and the Seafood Industry
    ($1,700 mil)”

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&cad=rja&uact=8&ved=0ahUKEwixqZjtvevbAhWOM94KHXp9BWEQFghvMAU&url=https%3A%2F%2Fnzracingboard.co.nz%2Fsites%2Fdefault%2Ffiles%2Fdocuments%2FNZRB_Size_and_Scope_Final.pdf&usg=AOvVaw3a_tggezx44DFQvcofthjg

    • Grimm

       /  June 24, 2018

      You’re just annoyed because you have ugly horses.

      • PDB

         /  June 25, 2018

        Why aren’t Labour & the Greens up in arms that this is discrimination against….ugly horses?

  2. Blazer

     /  June 24, 2018

    very difficult to objectively assess this…’Each yearling would need to be assessed based on the “virtue of its bloodlines, looks and racing potential”’.

    stud masters will be rubbingtheir hands together.

  3. PartisanZ

     /  June 24, 2018

    LTSA probably advised against RoNS being extended beyond Warkworth too …

    First to Wellsford in the bye-election …

    Then, in a shameless piece of Pork Barreling by National for the 2017 General Election, all the way from Wellsford to Whangarei for an additional $4 billion!

    Northland’s $7 billion economy comprises 2.6% of NZ’s GDP … The next smallest GDP-percentage region receiving any RoNS is BoP at 5.3%.

    Since all politics is now Pork Barrel politics the issue becomes relative Pork Barreling, surely? The comparative scale of Pork Barrel promises …

    Winston’s is minor … Just reward for an old warrior.

    • Yeah, its really silly to allow a deprived and economically backward region, Northland, to be connected to the major industrial, commercial and shipping transit hub in the country Partizan… Yip that is just not going to make life in the Far North any better having better access to Aucklands markets for its produce…. yip making the journey from Whangavegas to the Big Smoke quick and less deadly is just plain stupid, because you know everything you need is just in Kamo… Connecting Northland to the points south is just plain dumb….

      SARCASM MODE OFF….

      • PartisanZ

         /  June 24, 2018

        Hello hello … Who’s this then?

        – Northland is already connected.

        – The new transport strategy will improve both safety and speed … commensurate with the economic evidence … (We Righties need our “evidence-based”, don’t we?) … plus it will potentially advantage some freight movement by rail …

        – Additional money will be spent on roads and bridges North of Whangarei … This being genuine regional/provincial development as in “spread across the region” …

        – National’s $4 billion RoNS Pork Barreling is justified but Shane Jones $3 billion PGF Pork Barreling isn’t, Right? Shane’s isn’t because Righties believe in regions, like people, “standing on their own two feet” and not being given unwarranted vote-buying and welfare handouts …

        But we need it for the Holidays!!! Okay … Why isn’t there a Roads of National Significance 4 Lane Motorway planned for Auckland-to-Coromandel Peninsula?

        Answer – Coromandel is now a safe National seat.

        • PartisanZ

           /  June 24, 2018

          REALISM MODE REMAINS ON …

        • Trevors_Elbow

           /  June 25, 2018

          Holidays = Tourism. Tourism is one of the top 3 industries in NZ. Northland is FULL of low skill labour doing not a lot. Tourism provides plenty of entry level jobs. Grow roading connections – improve Tourism, even if only long weekenders from Auckland.. They spend nice amounts. Currently AKL to BOI is a painfully slow and quite dangerous trip when it should be an easy trip for a weekend away.

          And think about organic farming based in the North where cropping windows are longer – Auckland is full of high value consumers. Ship high quality produce quickly from stem/branch directly to organic markets – attract premium prices which will support high wages….

          I don’t have a view on the regional growth funding. It depends how its spent and what the returns are. The Regions need investment. But that doesn’t mean RON’s are not important as road linkages drive our economy, our topography and spread out nature doesn’t support rail transport of much of anything EXCEPT bulk commodities like logs, milk….

          • PartisanZ

             /  June 25, 2018

            All of this can happen with an upgraded ‘Two Lanes plus Passing plus Safety’ and indeed all this is already happening with just the existing highway …

            You guys fell right into the Pork Barrel and then National put the lid back on.

            • PartisanZ

               /  June 25, 2018

              RoNS might be justified where the GDP of the region warrants it … that’s all … and Northland is well down that list …. The rest is buying votes …

  4. Blazer

     /  June 25, 2018

    using the arguments of posters here,development of rail in Northland would be a boon to the region.
    Investing in irrigation sure would be.
    Nationals holiday highway scheme to make it easier to get to the luxury beach home is not well targeted…spending.

    • PartisanZ

       /  June 25, 2018

      Even trevors_elbow’s argument for Tourism isn’t all that great …

      In 2017 Tourism earned the entire region of Northland $537 million, 8.9% of the entire region’s GDP. How much of this ends up in the Far North I cannot ascertain, despite numerous searches.

      Nor can I find out what average speeds drivers can reliably and safely maintain on various types of NZ roads, e.g. four lane motorway or two lane highway.

      I’m absolutely certain it’s not 100 km per hour. Trucks are only allowed to go 90kph max. Personally I’d say 80kph average over a long journey on the best roads would be doing quite well, given traffic congestion, slow vehicles, hills, weather and other factors are unavoidable.

      So RoNS might make the duration of the 158km trip Auckland-to-Whangarei 1hr 58 mins … down a whopping 9 minutes from the present estimated 2hr 7min.

      This is to say nothing of the fact that, where tourists are concerned, we WANT them to STOP! Stop and spend money … Right?

      How much of the Far North would be serviced by RoNS is a known quantity though … Effectively Zero.

      And under National our Far North provincial roads would probably have continued to deteriorate.

      • High Flying Duck

         /  June 25, 2018

        It’s not just the “clear road” times that change. It is road safety – the RONS are undeniably safer – and the easing of congestion during peak periods when the roads can become clogged.
        Increased freight and business opportunities through North Port, more tourism and easier local access will lead to increased jobs in one of the poorest parts of the country.

        Your argument about the size of the economy seems to be that because it is restricted right now it does not deserve the investment to grow.

        • PartisanZ

           /  June 25, 2018

          Of course it deserves the investment to grow. I’m saying it deserves a rational and evidence-based (or evidence-informed) amount of investment … warranted to bring it up from 2.6% of NZ’s GDP to say 5.2% same as BoP which was originally targeted for RoNS … Northland wasn’t … RoNS only went as far as Warkworth … Look it up on LTSA website …

          RoNS isn’t required to increase freight and business through Northport – any improvement to the roads will do that – or more tourism, and, North of Whangarei, RoNS isn’t gonna make a scrap of difference to either tourism or “easier local access” … in fact, arguably, RoNS could result in more congestion and bad visitor experiences North of Whangarei …

          Northland doesn’t need RoNS to double its GDP … That can be done with improved 2 Lanes + Passing + Safety … Plus improved provincial roads, spreading the development, plus a bunch of PGF projects like Kerikeri Airport, Hundertwasser in Whangarei & Kawakawa and Hokianga’s Manea-Footprints of Kupe if it can negotiate the current controversy around support infrastructure and resource consent …

          How does a project expected to bring 35,000 additional visitors in the first year and “up to 60,000 in year 5” to a holiday area with a permanent population of 700 qualify for a non-notified resource consent application!?

          Northland isn’t a basket case … although that makes it look like it might be … It’s just a marginal electorate which has become the target for absurdly expensive & unethical Pork Barreling … a branch of unethical governance …