An overhaul of the tax system to assist the country’s 130,000 farmers during tough financial years could be on the cards as part of the upcoming budget.
Farmers who face yet another winter of severe fodder shortages are calling for significant changes in the tax system to allow them to deposit funds in profitable years which could then be accessed in tougher years.
Both the Irish Farmers’ Association (IFA) and the Irish Creamery Milk Suppliers Association (ICMSA) have put forward a farm management deposits model to ease income volatility.
In Budget 2018, Finance Minister Paschal Donohoe ordered officials from his department and the Department of Agriculture to meet to assess progress on implementation of the Agri-Taxation Review and especially to consider the issue of potential taxation measures to assist income stabilisation.
A spokesman for Agriculture Minister Michael Creed confirmed that this review is ongoing in advance of this year’s budget, with various options being considered.
The ICSMA scheme would allow farmers to deposit part of their income into an account when profits are made. This would not be deemed as tax-assessable income in that income year and instead would be assessed in a future year when the farmer opts to utilise the deposit for income or investment purposes.
The new approach would complement other risk management strategies available to farmers, such as income averaging.
The ICMSA proposal would place limits on the total amount that could be deposited in a given year and the aggregate amount at any time, and suggest a maximum deposit per annum of 30% of farm profit or a maximum of €10,000. Funds could remain in the farm management deposit account for a maximum of five years.
The IFA, which is due to publish its pre-budget submission this week, is putting forward a model that would allow all farmers to put aside 5% of their gross receipts, whether into their co-op or a specially assigned bank account.
This money would be available for drawdown within five years, and the tax due would be paid on the year of withdrawal.
The IFA also believes the current income averaging system should be broadened to allow for a ‘step out’ more than once in the five-year period. This would provide greater flexibility to the scheme, while providing a strong incentive to farmers for early repayment of the deferred amount.
ICMSA president Pat McCormack said his organisation is quietly optimistic that the “pressing need” for a farm management deposit scheme has been made clear to Government.
“The country’s farming and agri-food sector can only move forward sustainably on the basis of policies that deal with the kind of ruinous price and income volatility that has proved so destructive in recent years,” he said.