IFA eyes rural development funds
The IFA submission opened with a reminder of the tough year put down by farmers in 2012, with most enterprises badly affected by the unfavourable weather conditions that prevailed for much of the year and left some farmers experiencing a knock-on fodder shortage into 2013.
The submission is entitled Investing in Agriculture for Economic Growth, and duly noted how agriculture is playing its part in Ireland’s economic recovery, with an increase in employment in agriculture and an increase in the value of Ireland’s agri-exports, topping over €9bn in 2012, with a strong start to 2013.
Some EU funding requires like-for-like funding from national governments, and in previous years, potential EU funding was lost to Irish farmers when Irish budgetary decisions were made not to support various schemes at national level.
Now that the outcomes of the Common Agricultural Policy (CAP) negotiations have given Ireland the chance to secure extra EU funding for rural development, the submission requests that the government make sure Ireland’s farmers get access to this funding, with IFA saying the cost to the Irish government of supporting these schemes will be more than repaid by funding from the EU.
The submission recognises recent pro-active measures such as farm restructuring relief to encourage land mobility. IFA goes on to make a number of further suggestions in this field, including the need for a continuation of existing tax rules for gifts and inheritances (more correctly known as Capital Acquisitions Tax) to encourage “the inter-generational transfer of farms”. To support young farmers, the submission suggests than installation Aid is reintroduced at a level of €15,000 per new entrant, IFA’s costings suggesting this measure would cost €7m when fully implemented in 2015. The existing land leasing scheme should be expanded, allowing for Capital Gains Tax relief on land occupied by a farmer to be fully available, rather than currently partially available, to a farmer who has leased out their land.
Meanwhile, the partial exemption from income tax for farmers who have leased out their land should be available, whether they lease their land to a sole trader or whether they lease their land to a company. Some old nuggets are cropping up in the submission, including the request for an equivalent tax credit for the self-employed as is available to PAYE workers. The report highlights this as a discrepancy in the tax system which leaves a self-employed worker on €20,000 a year with a tax bill of €3,870, compared to a PAYE worker earning €20,000 with a tax bill of €2,220.
On expansion, a number of proposals are made.
A significant number of dairy farmers looking to expand will need to “share up” as part of their co-op’s post-quota arrangements. For the most part, the share-up involves farmers investing in their co-ops through the purchase of shares, such that the co-op has the resources to fund additional milk processing capacity. Under existing rules, the purchase of the shares would not be allowable against a farmer’s income tax, and this is where the submission requests that the purchase of the shares should either be regarded under the same principles as our existing milk quota regime and qualify for capital allowances; or the investment should be seen as straight income-tax deductible expenditure, being effectively the purchase of a licence to supply milk.
The increase in milk production when quotas go in 2015 will require an increase in dairy cattle. Under normal tax rules, any increase in these stock is essentially funded from after-tax income (because an increase in stock is not normally treated as a tax-deductible expense). Farmers can currently avail of a partial deduction for increasing stock, calculated at 25% of the increase. With a once-off increase in dairy stock needed in the run-up to 2015, the submission looks for an 50% stock relief to encourage expansion.
On farm schemes, the submission highlights the tail-off in REPS funding, and in the Disadvantaged Area Scheme and the Suckler Cow scheme. Some farmers operating in marginal areas have suffered cuts under all three headings, and unless alternate schemes are introduced, this vulnerable sector will become non-viable, warns IFA.
