Budgets have become a bit boring side over the past four or five years, with very few novel announcements, leaving the average Joe trundling along with fairly modest tax cuts.
It was only in the 2015 and 2016 budgets that an average PAYE worker, earning €35,000, saw any positive movement in their take home pay (the accompanying table shows how the tax system has remained relatively static for PAYE workers).
For the self-employed, there was recognition of the long-standing discrimination in the tax system when budget 2016 offered the first step along the road for correction of anomalies that left PAYE workers better off to the tune of €1,650 per year.
For year 2016, self-employed persons are benefiting for the first time from a self-employed credit of €550.
This credit won’t be taken into account when filing returns this October, but can in some cases be taken into account for the purposes of preliminary tax.
For farmers, there has been a good deal of tweaking in the tax system over recent years, mostly enhancing the incentives for long-term leasing and encouraging early transfer of family farms.
Other clever policy initiatives include capital gains tax relief for restructuring of farm holdings, in order to encourage consolidation of farms into fewer parcels.
A lot of the good work done in tweaking the tax system resulted from the Agri-Taxation Review in 2013.
One of the outcomes of that review was the call for further investigation of a risk deposit income management tool.
This year, ICMSA, ICOS, IFA, and Macra have all called for income volatility management tools of this kind in their pre-budget submissions to the Finance Minister.
The five-year income averaging already in place was possibly introduced at the worst possible time, because it leaves farmers paying an average tax bill in what has been a difficult year.
Hence the suggestion that income averaging may be augmented with a payment holiday — effectively allowing farmers to pay reduced income tax for a year in which profits are reduced.
But proponents of this solution are fundamentally misunderstanding aspects of the relationship of the self-employed with the tax system.
For example, the current income crisis affecting tillage and dairy farmers is not yet reflected in financial statements or tax returns for such farmers, with accounts ending within the calendar year 2015 due for filing within the next month or so.
What farmers need is the ability to reduce tax payments in the year of crisis, rather than waiting for that year’s returns to be filed.
Farmers have an income crisis rather than a tax crisis.
Yes, farmers faced with a hefty tax bill (especially those in averaging), will feel very much that they are facing a tax crisis, but the underlying position is a crisis of income.
An income management tool solves this problem, allowing farmers to better manage their cash-flow to even out the peaks and troughs of farming over longer term cycles.
ICMSA has called for such a scheme to be confined to farmers whose sole or principal income is from farming. The rationale for such a restriction is not defined.
Similarly, the ICOS 5-5-5 scheme which seeks to allow farmers to set aside 5% of income into a savings scheme ring-fenced from tax is suggested only for those who qualify for income averaging.
Restrictions on such reliefs often affect the more vulnerable, marginalised farmers.
They are in many cases farmers with small holdings who supplement their income with other trades such as milk recording, or AI, thus precluding them from availing of income averaging, and from proposed income volatility tools if they apply only to those in averaging.
ICMSA has come up with an innovative proposal to include inter-family leases in the income tax exemption which is generally available for third party leases. However, the model suggested is based principally on an overriding succession plan.
Apart from income volatility measures, my own wish list for Budget 2017 would see some work on restricting agricultural relief to normal, commercial scale farms; adding options for the self-employed to avail of higher social insurance cover; and introducing flexibility on the quantum of capital allowances that can be claimed per year, which is available to our UK neighbours.