Investment in farming will drive rural recovery

The IFA’s pre-budget message to the Government was clear and concise: Back agriculture and the rural economy will prosper.

We had identified a number of tax measures and funding areas that should be part of the budget package. In the main, Government listened and responded to what we put forward.

The income tax credit of €550 marks the beginning of the removal of discrimination against self-employed in the tax code.

We expect to see more progress on this in the budgets ahead. IFA has campaigned for a long time for this issue to be addressed and finally we have made headway.

It has been a sore point for farmers and was particularly punitive on low-income farmers who found themselves paying five times the amount of tax compared to a counterpart on PAYE.

Bringing fresh blood into farming was a priority of ours in the run-up to the budget. We put a comprehensive proposal to the Department of Finance to allow a phased partnership operate on farms that would assist the orderly transfer of the business from one generation to the next.

In effect, it would recognise the rights of both parents and the young farmer as they build up the business together.

The Government has run with this and introduced a €5,000 tax credit each year for five years. This will provide an incentive to farm families to sit down and put a serious plan together about how the farm business will operate into the future.

The benefits are obvious: Extra productivity at farm level generates more output and activity in the rural economy and ultimately greater food exports.

The threshold for capital acquisition tax has increased from €225,000 to €280,000. This takes into account the fact that asset values have risen in recent years. Again, the thresholds will have to be revisited next year.

The decision to rollover over the various tax reliefs for three years will also give certainty to farmers who are making planning and investment decisions for their farms.

The change to the taxation for farm forestry was welcome and a necessary measure to assist in the efficient harvesting and re-planting of farm forestry.

Expenditure by the Department of Agriculture is set to increase in 2016 by 9%, from €1.242bn to €1.351bn. This is due largely to a significant increase in EU funding through the Rural Development Programme.

The allocation for the agri-environment schemes GLAS, AEOS, and the few remaining REPS payments is €203m in 2016.

This will be paid to AEOS 1, 2, and 3 farmers, as well as payments due under the REPS 4 scheme from the end of 2015 and the small number of farmers whose contracts expire in 2016.

The increased allocation for GLAS will allow another 13,000 farmers to join the scheme when it opens shortly, with five-year contracts beginning from January 1, 2016. This will bring to 40,000 the total farmers that will receive a full payment in GLAS in 2016 (the 27,000 who joined in the first phase, plus the 13,000 who will shortly join).

The minister will have to move as soon as possible to bring the number of applicants closer to the 50,000 projected. This should happen by early next year at the latest.

The decision to exclude sheep fencing from TAMS II was a mistake. It has been rectified for the tranche opening next week. Grain farmers, who are in a very difficult income situation, will also be included for storage facilities.

The general changes to the income tax and USC and the increase in social payments, especially for older people and young families, will all help improve living standards after some difficult years of spending cuts.

However, employers in some agricultural sectors will have difficulty in finding the extra resources to meet the new minimum wage.

There is simply no capacity for farmers and small food processors to carry this extra cost.

Retailers and other purchasers of food will have to reflect this in the return to their suppliers.

The move to reduce the cost of licence registration for hauliers was a necessary step. This is a vital sector that is essential to moving the goods we produce off the island.

The recovery of the economy is welcome. Farmers are playing their part, but the upturn has to be seen across the country.

A balanced recovery has to be the aim of the Government. Ongoing investment in agriculture will achieve this.


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