The Annual Review and Outlook for Agriculture, Food and the Marine 2014/2015 Report published by the Department of Agriculture, Food and the Marine outlines strong growth in the economy in 2014, after a number of very economically challenging years.
GDP grew by 4.87% in 2014, with the domestic economy indicating good growth and recovery with a growth in GNP of 5%.
Export of goods and services increased 2.4% with the foods and drinks sector delivering a 4% rise.
The agri-food sector has played a key part in Ireland’s recovery in recent years.
It is estimated that the agri-food sector accounted for about 7.7% of gross value-added at factor cost in 2013, with primary agriculture, fisheries and forestry sectors together accounting for about 2.4% gross value-added.
It is vital not only for rural Ireland and farm families but also the macro economy that Budget 2016 takes account of the full economic benefit of farming.
The Government has ambitious plans for agriculture, with reports projecting exports to increase to €19bn, plus the creation of 23,000 jobs by 2025.
The ICMSA believes agriculture is presented with an opportunity to reach its full potential despite the current difficulties of income volatility in a post-quota environment coupled with the challenges of self-funding of farm development.
Budget 2016 must provide for the necessary adjustments to current taxation policy and provision of adequate funding for farm schemes to support and incentivise land mobility and farm development which will ensure the continued growth and development of the most important indigenous sector in the economy.
Income averaging is an effective mechanism for farmers to manage income volatility and the extension of income averaging from three to five years in Budget 2015 is a welcome initiative.
However, it is quite evident that income volatility is and will continue to be an intrinsic feature of Irish agricultural production as farmers experience increased exposure to world market prices for commodities coupled with reduced EU supports.
In addition, the ICMSA believes income volatility and its management varies considerably across individual sectors and in many instances farmers would benefit from having the option of choosing between three or five year averaging.
In this context, the ICMSA proposes that income averaging be retained within the tax code in Budget 2016, coupled with the introduction of a supplementary measure whereby individual farmers could opt for three or five year averaging to allow them to more effectively manage income volatility for their farming enterprise.
The ICMSA has previously referred to the need for the introduction of what is referred to in Australia as a farm management deposits scheme which has a positive farm-financing component and a built-in mechanism to smooth out income over the years.
This would allow a farmer to claim a tax deduction for farm management deposits in the income year in which they are made, the appropriate amount of the deduction is included in the tax assessable income in the income year the deposit is repaid to the farmer.
The Australian scheme is a risk-management tool to help farmers deal with unpredictable income, caused by natural disasters, weather, and market changes. The deposits scheme complements other risk-management strategies open to farmers such as income averaging.
The rules place a maximum threshold for off-farm income of a person availing of this tax measure and there is an overall ceiling on the amount that can be deposited in the deposit scheme.
It has many merits and should be considered for incorporating into the income tax code for farmers.
Against the backdrop of increasing economic, environmental and policy pressures, farmers are forced to evolve into larger and more efficient businesses.
However, despite the abolition of milk quotas many are still unable to seize the opportunity to increase herd size, invest in new infrastructure and the purchase of additional land due to significant farm income volatility.
The scheme will help resolve this problem and it, or a variant of it, must be considered.
Despite adjustments to the higher tax rate and rate bands in Budget 2015, the burden of income tax continues to impact on farm families which are subject to very high tax rates at low profit levels.
The ICMSA believes Budget 2016 must focus on specific anomalies within the tax code for the self-employed, including farmers.
The ICMSA believes that farm fragmentation continues to be a key feature on many farm holdings, in particular on dairy farms where access to land in close proximity to the milking facilities is a key requirement.
The structural problems within the farming sector must be addressed in the context of achieving Food Harvest 2020 targets coupled with the expansion required in a post-quota era.
The EU Commission coupled with the minister for agriculture, food and the marine has placed emphasis on Young Farmers in framing the new CAP for 2014-2020 and the ICMSA believes a taxation system is immediately required which will act as a catalyst to encourage the change required.
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