The government is investigating a new stock valuation system which it says could help it collect tens of millions more dollars come tax time.

Revenue Minister Peter Dunne says the government has been concerned for some time that farmers can switch too easily between the two livestock valuation systems to minimize their tax obligations.

"We’ve been concerned for a little while, at the two forms you’ve got. You’ve got the national standard values on the one hand and the current herd scheme on the other.

"And we’re just concerned while now there is too much scope for people switching between the two as their circumstances change. The net effect being that the tax payer potentially ends up the loser."

The Minister says the government needs to introduce a better system to ensure farmers pay their fair share of tax.

"If you go back to a good year like 2008 just work your way back from that, some of the estimates I’ve seen suggest we might have  got $100 million less revenue than we should have.

"I’m not saying people were manipulating the system unfairly I’m simply saying that the fact that the way system operated meant that we missed out on revenue we should have got."

Mr Dunne says he hopes to release public consultation documents released within six to eight weeks followed by a period of consultation and that a new system could be introduced as early as next year.

Federated Farmers dairy chairperson Lachlan McKenzie says it is not an easy task valuing capital stock on the farm for two reasons.

Firstly the capital stock on a farm repeatedly reproduces and also its market value is constantly changing. 

"The difficulty is that the livestock farming taxation system or the capital value of stock can fluctuate wildly on the marketplace, but it doesn’t actually reflect in the profit of a farm.

"So this is about taxing a capital asset on the farm and the fluctuations in that capital asset.

"So even if a farmer has the same number of cattle year on year on year the amount of tax that is paid can fluctuate wildly not but because of the amount of profit they make but because of the capital they own in that stock."

Mr McKenzie says he is looking forward to studying the government’s public consultation document for the finer details of any new system and hopes it will be a fair and equitable one.