Willy Leferink reacts to the political storm the sale of one of his farms to an offshore family created; compares it with the Hotchin mansion sale

13th Dec 13, 8:52am by Guest

By Willy Leferink*

The death of Nelson Mandela seems like one of those ‘JFK’ moments.

Only he, in the year he was elected the first president of a democratic South Africa, could address Federated Farmers sister body there like this: “You have confounded the stereotype images, spurned the past and embraced the future. Perhaps one should dare to ask the question: what else could have been expected from a fraternity working on the land; committed to the soil and nurturing a love for the country in its bosom!”

Since Nelson Mandela knew how to milk a cow those words seem right for New Zealand today.

Here was a person born on a poor farm that was given every reason to hate but instead embodied St Francis of Assisi’s famous prayer, “Where there is hatred, let me sow love, Where there is injury, pardon…”.

Mandela was a freedom fighter who used words and not violence to win South Africans over.

His belief in freedom extended to trade, enterprise and exports, just take what he told farmers in 1997: “Successful farmers like their counterparts in industry will be those who seize the opportunities of a competitive global economy”.

In a 1999 speech, he said, “Despite liberalisation of trade, there remain areas of protectionism in the developed countries. In agriculture, for example, Europe seeks to protect its rural communities by capturing markets that are the true competitive advantage of the South”.

As we work towards a Trans Pacific Partnership and following the recent WTO meeting in Bali, those words remain true today.

Yet South Africa’s rainbow metamorphosis is a remarkable tribute to a truly remarkable human being.

In recent weeks, I have found myself in the NZ Herald after the sale of a farm that gave me a taste of the Overseas Investment Office (OIO). What I found after the event is that the OIO releases approvals at the end of the month, after the month in which approval is granted. This fact and the calls it generated came as a bolt out of the blue.

Okay, what we sold our farm for seems like a lot of money at face value but just like any homeowner, you have something called a mortgage to repay first.

While there is a sum left over my wife and I are not boarding the next plane for the Sunshine Coast, which seems the path for many small to medium sized businesspeople after selling.

Instead, we are pouring a great deal of the surplus into more sustainable farming particularly wintering barns.

I am putting my money where my mouth is because I am convinced these are a solution to nutrient loss; especially Nitrogen.

I am not saying it is ’the’ solution but one of many coming on-stream.

It’s a personal opinion, but for the farms I have interests in, I believe these barns are the right thing by our animals and the environment.

I can only hope the Canterbury Land & Water Regional Plan evolves to reflect this and other innovative ways of farming.

My wintering barns are also a solution any capital gains tax would rob me a slice of for productive reinvestment.

If we strip away the rhetoric, a capital gains tax is a penalty on success and I’m not sure that’s a good message to send to society.

While I don’t have an issue with public disclosure over the sale of my farm, it would have been nice to have been told when. As it was, I was caught on the hop at the Australian Dairy Farmers conference. If it caught me on the hop I imagine it caught the Barilla family too. It means their first taste of New Zealand was not Kia Ora but a media scrum.

Is this how we want to treat one of the largest family owned food companies in the World? The very people who can open doors for our exports.

My excellent sharemilkers remain on the farm but are now partners with a multinational family owned food business that started in 1877.

There’s is a ton of upsides for New Zealand here.

Being an immigrant myself we are not helping ourselves when politicians play the ‘johnny foreigner’ card.

On the same day the OIO revealed the sale of my farm, the Auckland house of former Hanover Finance director Mark Hotchin was sold to a foreign-born businessman for $39 million.

Where are Phil Goff and his rural land Bill on that?

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Willy Leferink is Federated Farmers dairy chairperson

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10 Comments

by Stephen Hulme | 13th Dec 13, 9:48am 1386881322

Hmmmmmm...

Sainthood can be very sanitising, of course, and the right have a vested interest in smothering the realities of Mandela's radicalism under a lead blanket of tributes. Read more

And spare us the expedient excuses for tax avoidance - those that lent the money to facilitate banks capitalising farm debt interest paid tax on every single dollar at source.

by rastus | 13th Dec 13, 9:51am 1386881474

To an extent i believe the sale to foreigners is a distraction. I would prefer if we got focused on 'a right to roam' policy that operates in many European countries. We have never bothered with this in the past (though I recall an attempt at it many years ago) due to a generally co-operative bunch of cockies - though this is fast changing.

A' right to roam' would give me some consolation as our high counrty is sold off....not so worried about boring factory dairy land.

by Crooked Thumb | 13th Dec 13, 9:55pm 1386924907

"a capital gains tax is a penalty on success"- thanks Willy, you have outlined your position very clearly. I too oppose a CGT, a blanket land tax on unimproved value would be a lot fairer, and infinitely more efficient. Not that I expect many farmers, Willy included, to support such a move. Such a tax takes a step towards recognising that privately "owned" land came into being from forcibly taken from the commonwealth by the strong and powerful, with violence as their tool. In my book, he who buys stolen goods has no better title to them than the seller.

By all means improve your land - you won't be taxed on that. But explain please Wiily, why should any rise in the unimproved value belong to you, rather than the community?

by Omnologo | 16th Dec 13, 9:13pm 1387181602

While you come across well Willy, the statement... If we strip away the rhetoric, a capital gains tax is a penalty on success and I’m not sure that’s a good message to send to society.... is pure BS. Capital Gains has only meaningfully occurred in recent times, twenty years at most. Although farmers like yourself are successful and credit should be given for your foresight in seeing potential where you did, capital gains is hardly doing favours for the next generation of kiwi farmers. Most I know are starting to burn out by their forties, stuff getting up at 4:00am day in day out for some wealthy Italians, I'm sure you don't anymore.

by steven | 17th Dec 13, 7:19am 1387217986

Right wing mumbo jumbo. A captal gains tax is a tax on an investment gain, so you should pay tax to level the playing field. All gains and that includes shares etc should be taxed equally.

What not having one sends is a message to others that some ppl are favoured due to waht they do so dont pay tax.

Others can be just if not more as succesful, yet pay full tax. Lets look at "successful" it seems farming is supposed to earn us a lot as a Ntaion, yet through fancy tax dodges all that farming income seems lightly taxed, way too light if its a real success and not a debt mountain, or more likely a volcano.

Lets look at that debt mountain, when it blows and it will then the farmers and hence banks will need bailing out by the PAYEs, the very ppl its seems you think are not successes.

Any idiot can take on massive debt hoping like hell the payouts will improve so he can bail out tax free at the end...that hole needs to be filled so the tax distortion is removed.

regards

by Roelof | 17th Dec 13, 8:45am 1387223139

If we strip away the rhetoric, a capital gains tax is a penalty on success and I’m not sure that’s a good message to send to society.

When my father was a Farmer it was all about the income from production.

My understanding is that todays'Farmers see farming as being 2 businesses.. One is farming and the other is Property Investment..

When we start talking about "Capitalization rates"...etc... we are moving into the World of Finance .... the Financial sector

With the Financialization of the World...everything moves to the heartbeat of interest rates...(Almost everything becomes Capitalized.)

At 2% interest rates farm Values are worth X.. At 10% interest rates Farm values are worth Y.

This has nothing to do with hard work and success... It has nothing to do with being a hard working farmer.... Some of the Shifts in Capital values arise from the Financial Sector where money is created and interest rates are set. ( Of course some of the shifts are also a function of Income.. ie. price of their products )

Willie... if you had to chose between a Capital Gains tax or interest costs no longer being a tax deductable expense.... what would u choose..????

by Roelof | 17th Dec 13, 9:35am 1387226102

I'll just add....

A component of Capital Gains is kind of illusory.

As we increase the Money Supply we depreciate the value of money.

You could say that the value of Land has always been steady and it is the money we use that has lost value.

I know that most movers and shakers see savers as being the lowest on the food chain... but if Willie wants his Capital Gains to be Tax Free then he should also want Savers to be allowed a depreciation component on their invested savings... ( because money loses value).

I've babbled on ....and nothing of it has been about production or productive activity.. It has been all about the Financial Economy.. It all stems from the nature of a Fiat Money system that has fed the extreme growth of the Financial economy... which is now probably bigger than the productive economy.

by Roelof | 17th Dec 13, 10:28am 1387229303

http://ftalphaville.ft.com/2009/01/20/51401/public-thrift-private-profligacy/

by Andrewj | 18th Dec 13, 6:59am 1387303181

Willy, capital gains tax is going to occupy our leaders for years. I don't see it as an effective tax at the present time. The problem is how to create discipline in a fiat money system, it does require discipline. If you look at the western world in the last 40 years you witness enormous growth. The problem is that banks and governments have a lot to win from a little inflation and money creation, they just don't know when to stop. As more and more money is created to fund non productive assets like housing and poor returning assets like farms, we ride a wave of new prosperity. The banks get to create lots of new money, the government gets more tax and gets to look good to the voters and even local councils ride the wave of asset increases. we all fell rich if we own property, bad luck if you don't. But its all debt, it all has an interest component. Under the Clark/Cullen regime we grew M3 at nearly %15 pa. In the end the banks get greedy and create a situation like we have now, where you need to be on the ladder or you have missed out. lots of money chasing the same assets and after 40 years, its hard to see how you could ever lose and why it would ever change. The problem is paying the interest, banks don't create interest,that we get to earn. Eventually the interest bill exceeds our production and desperation sets in especially if we have borrowed to much against non-productive or poor performing assets, or we become too reliant on one or two commodities in one or two markets. The music has stopped all that's left now is a desperate attempt to keep the ship afloat, aka Beknake et al and QE which has kept commodities high even as consumption has fallen. The reason property taxes are talked about is because without discipline from Government and banks we run ahead of our selves and end up falling flat on our faces. We need a mechanism to reign in Fiat currency creation. I don't think CGT is the answer but probably, we will get it, as the disadvantaged grow in society and vote for change. Over time our economy has become focused on asset appreciation instead of investment in ideas and production, we fail to make it, mine it and grow it, instead we want to own it. The best minds end up in Banking, real estate and insurance. The best and brightest toil for most of their lives, to pay homage to foreign owned banks China has used fiat money to grow beyond imagination in a very short time but it too lacked the discipline required with fiat currency. Its the biggest bubble of all. Now wealthy Chinese are coming to NZ and using us to launder their ill gained wealth. We get to sell assets to keep the illusion up for a few more years or till the next election. We sell our farms, we sell our energy production. We give up assets past generations toiled to build. You sold your land because it was giving you a lower return than your barns, because some cannot see that land could ever fall in value and also because many in the Northern hemisphere are wanting a bolt hole. Now you need income and banks, like lending against assets not unreliable income streams. China will crash and correct, markets will be in turmoil we won't come out unscathed. WE will probably have to work harder and we won't be as wealthy. I just hope we don't end up killing each other. In South Africa this is the age structure 0-14 years: 28.3% (male 6,909,066/female 6,866,163) 15-24 years: 20.6% (male 5,041,412/female 4,960,190) 25-54 years: 38.1% (male 9,561,452/female 8,948,398) 55-64 years: 6.9% (male 1,450,420/female 1,916,960) 65 years and over: 6.1% (male 1,177,999/female 1,769,038) (2013 est.) http://www.indexmundi.com/south_africa/demographics_profile.html Unemployment SOUTH AFRICA UNEMPLOYMENT RATE Q2 2013 25.6% youth ,double that. http://www.tradingeconomics.com/south-africa/unemployment-rate The unemployment rate is probably manipulated and much worse. This is a country heading to crisis like so many others. Look at another countries close to home. http://www.tradingeconomics.com/indonesia/unemployment-rate http://www.indexmundi.com/philippines/unemployment_rate.html With Indonesians working for $333 US, pa, its hard to see where the money to buy your milk is coming from, and don't expect much demand from South Africa.

by Andrewj | 18th Dec 13, 7:44am 1387305872

Because they need more money, National party was always the party that believed that individuals can spend a $ better than the government. Now it's despiration.

I wouldn't worry about a CGT or any other new taxes. New taxes would suck too much money out of an already fragile economy. Our government needs more juice, its not going to find it easy to get, the middle and lower classes are going backwards and they won't want to upset their rich donors by taxing them. They could try and fiddle with WFF, but it would be political suicide. The easy money has all gone.