A group representing water users claims the introduction of a water tax would affect all Kiwis, and result in higher power and food prices.
The Tax Working Party has recommended the Government consider introducing a water tax on all types of water use including hydro-generation, household use and commercial water use.
However IrrigationNZ said there needs to be more discussion.
"This would result in higher power and food prices for households and businesses and higher rates bills to pay for the irrigation of parks and reserves as well as a direct water tax on household and business water use," said IrrigationNZ Chair, Nicky Hyslop.
The working party has proposed that the water tax could be used to fund the restoration of waterways.
"While we all want to see cleaner rivers, often the solutions to improving rivers require people to change their existing practices both on farm and to prevent urban wastewater discharges into rivers. Just allocating money will not be the most effective solution," she said.
She said thought needs to be given about whether a water tax is equitable as water use varies hugely across regions based on rainfall.
"For example a Christchurch resident uses an average of 146,700 litres of water per year, while the average for a New Zealander is 82,800.
Someone living in Christchurch would pay nearly twice as much in a water tax as someone living elsewhere and would also pay more in rates because in a dryer climate the Council will use more water to irrigate their local parks."
"Is taxing lower rainfall regions such as Canterbury, Otago, Hawke's Bay and Marlborough more heavily through a water tax a fair way to fund river restoration nationwide?"
Mrs Hyslop said there were similar equity issues for farmers and growers.
"Some regions receive a significant amount of rainfall and farmers don't need to use irrigation. Central Otago receives less than half the rainfall of Auckland, so farmers and growers rely on irrigation to grow stone fruit, wine and for pastoral farming to provide feed for animals. Only 7 percent of farmers use irrigation nationwide why are those farmers being targeted to pay a tax which 93 percent of farmers won't pay when there are many regions which have very poor waterways but little use of irrigation?"
Mrs Hyslop says that a water tax on hydro-electric power generation would also add to power bills for households and businesses and this tax doesn't make sense at a time when the government wants to encourage the use of renewable energy to meet climate change targets.
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