To Mr. horse
You are being a little disingenuous in accusing me of 'forestry spin'. Re, my recent The Age article, I submitted a 1300-word article which without my knowledge or input was trimmed to 800 words. Much of what was omitted was important.

However, even what was published acknowledged the problems of integrating conservative technical forestry into an aggressive business model, that the expected benefits often haven't been optimised, and that there have been both winners and losers from MIS forestry. Far from 'spin', I think this was quite fair and objective.

I am simply making the point that however we may have arrived at this point, when considered in perspective, is it such a bad thing to have rapidly established a large area of plantation? There are clearly many environmental and socio-economic arguements that support the 'no' case.

It would be interesting to compare your own analysis of the effects of MIS on country towns against the formal academic analyses by Jacquie Schirmer which reportedly doesn't paint such a dire picture.

Most foresters would prefer it if tree cover could be expanded through farm forestry plantings integrated with existing agricultural use. However, after years involved in farm forestry it is clear that it would take more than a century to establish what MIS achieved in 10 - 15 years.

Unfortunately, direct government funding of tree planting could never happen to any great extent given the far more immediate social priorities to which government budgets must respond.

You have referred to foregone tax revenue, but isn't it really delayed tax revenue given that tax will eventually be paid on the income generated from the plantation harvest?

History is instructive, I have no doubt that Judith Ajani would have been violently opposed to the expansion of pine plantations in the past. She has a very different view now. I suspect the legacy of MIS forestry may be also be viewed more favourably in the future.

Mr MWPOYNTER

A couple of things. As we currently stand name me one clear winner from this disaster accept for the likes of John Young. How much has he ripped out from the investors? stunning.

With regards to Jacquie Schimer, as a trained economist who majored in econometrics, I would love the opportunity to compare assessments. I think the use of ABS stats as they did at such a Marco level it is very difficult to assess the localised effects on small country towns. I would also suggest you take a tour of the Casterton area to see reduction in economic activity. Futher who funded that study I wonder?

With regards to the tax revenue paid you have missed the point and it is THE critical point. Any tax paid at the end, and again this is questionable given the poor performance of the schemes so far, the tax cost is born by the investor. What the table tries to show is that the benefit of the tax deduction is past by the investor to the promoter. So you are right the investor will pay for the promoter to get a tax subsidy as shown. I can also show that if you add the time cost of money and based on a 15 MAI, even if you take everything into account, it is anything but tax natural.

Mr Poynter you seem to suggest the end justifies the means. Morally I cannot agree. We could have incorpoated forestry into agriculture and hopefully out of this mess we will develop Government polices that deliver this. The UK dealt with this issue very well by removing the upfront tax deduction on cost and making income generated on forestry tax free if held for a certain time. This way anyone can be involved and you don’t need to feed this huge inefficient MIS industry. In this way you encourage a forestry industry based on maximising value rather than minimising tax.

To 'horse'
I'm not sure that I believe the end justifies the means as much as I just accept what has happened. I've never been a great MIS fan, but I don't see much point in being morally outraged that some businessmen may have made a packet out of it. That's how business works doesn't it - but on the upside there is now a resource in the ground which will employ people and produce essential materials, particularly once the cycle of harvest and replant gets into full swing.

Not all of this resource will endure due to unsuitable sites and a shakeout of these with perhaps some replanting of other marginal sites to hardier species that can generate solid wood products, will be a good thing.

Much as it would be better for trees to be integrated into the agricultural landscape rather than be a replacement land use - there are difficulties with such an approach.

In Victoria, it is well documented that government farm forestry subsidies became a form of middle - upper class welfare mostly taken up by wealthy hobby farmers often with little intention to grow a timber resource as distinct from revegetating their land. Even where there is an original intention to grow timber, something like 50% of rural properties change hands every 10 years and in most cases the new owners are attracted by the aesthetic quality of the trees rather than their timber value.

Getting larger traditional farmers to plant trees was required but was never achieved to any great degree. They are agricultural producers mostly unwilling to forego their productive land and its annual income stream on a venture that costs upfront, gives no guaranteed return, and no return for decades. Most won't partake at all or to any significant extent on anything other than their poorest land. It is doubtful that any alternate tinkering of tax deductions and rebates, such as the UK model could have overcome these problems.

To Horse

1) It is interesting you chose to ignore the results of a government inquiry into the tax advantage issue which although biased in favour of finding a tax advantage clearly failed to find a large advantage. You should read the "independant" outcome before just dismissing it and continuing with your own spin.

2) As for your table and conclusions you seem out of date on a lot of the numbers. I would propose the following changes based on the Gunns forestry projects which represent the benchmark in the industry.
Gunns cost per hectare including GST $7480 (2009 project price increased)

Tax deduction to a 46.5% top MRT payer $3,162 less 5% comm = $3000

Project costs (as per your numbers about 4000. I leave out land lease cost as I assume ownership of the land by the RE).

Promoters profit in year 1 $6600 - $4000 = $2600 (I have assumed ongoing management costs roughly equal harvest fees)

Cost of land purchased by RE about $4000/hectare. Annual capital cost at 7% per annum = $280 and over 13 year life = $3640.

The bottom line is that the promoter will make a loss on this business if there is no land inflation. In essence this is what the promoter gets out of the business. It gets a forestry land bank that hopefully appreciate in value over time otherwise his returns from this business will be less than zero.

So the taxpayer funds MIS to the tune of about $3000 per hectare. The government as you say could have used that money to pay the farmer $1900 per hectare to plant. But the farmer would also have to incur about $100/hectare per annum in upkeep costs which would amount to about $1300 over the life of the project which pretty much makes the 2 equivalent. There is also the question of whether the farmer would ever attempt such as exercise because he does not have the experience of a Gunns and would not get the same yield. There is no tax advantage and confirmed by government.

lordolean

The government inquiry into tax advantage in MIS was into NON-FORESTRY MIS. Suggest you at least read the intro. It had nothing to do with Forestry MIS. As you know the tax advantage by the ability to bring forward costs over the life of the project up to 11 years is signifiantly bigger than for nonforestry where it has to be within the same 12 month period

GOOD TRY But mate show me the proof that Gunns is doing any better job than Timbercorp,Great Southern and lets not forget Envirovest wasnt that a cracker. Given the total lack of transparency in the invest performance. The investor doesn’t know until its to late.

Have a good day guys!

Horse

The outcome is essentially the same whether its forestry or non forestry. Yes the inquiry was specifically about non forestry but the submissions and conclusions were equally applicable to forestry. Note also that this discussion disregards all of the other tax benefits and subsidies that are provided to farmers anyway which tip the advantage well in their favour anyway!!

As I have pointed out the ongoing costs of forestry are small relative to all of the costs that are incurred upfront. I am sure you are aware as you provided the costs breakdown yourself. Remember the $1900 for site prep etc. And at any rate these ongoing costs are paid for by the manager taking a return of about 10% at harvest so they are not as you say brought forward to the upfront payment.

So your answer merely swerves around the issue. No-one is getting any special favours. This argument really all comes from the fact that farmers dont like competition. In this case competition for land and they are happy to try and kill it off with any argument they can muster. Farmers are the most protected and heavily subsidised species on the planet so I always laugh when I see them crying poor.....

As for Gunns results you are right no projects have been harvested so you cannot tell. But as opposed to TIM and GTP and in line with FEA their initial thinnings are ahead of prospectus. But I agree you have to wait and see.

At any rate TIM and GTP have essentially killed it for everyone else so farmers are not really going to have to worry much about MIS in the future, so at least you can be happy about that.