Only two budgets left for measures to boost renewables
While no radical overall of farming taxation is expected in Budget 2018, there are likely to be some tax changes which will ease the tax burden on farmers, .
The earned income credit was introduced, effective from January 1, 2016, set initially at €550, which is one third of the PAYE tax credit of €1,650.
It was expected that the earned income credit would be fully phased in over three successive budgets in equal measure, so that the disparity in the tax system between the self-employed and the employed would be equalised by 2018.
But last year’s budget offering fell short of this expectation, promising farmers and other self-employed persons a tax credit of €950 per year from 2017 onwards, rather than the €1,100 tax credit which was expected.
Nonetheless, the tax credit is welcome, and well justified too, given that SMEs employ 68% of the workforce of the economy.
Farmers and other self- employed persons can expect that the tax credit will be increased incrementally towards the €1,850 mark in Budget 2018 in October, but perhaps not all in one go.
It is speculated that the lower rate of USC (currently just 0.5%) will be abolished.
This approach would fit neatly within the commitments signed up as part of the Programme for a Partnership Government, “to phase out the USC as part of a medium-term income tax reform plan”.
On PRSI, there is little expectation that the PRSI rate for individuals will increase.
However, as we move towards full employment, there may be more pressure on to increase the rate applicable to employers.
The government’s commitments to reaching renewable energy and greenhouse gas emission targets have come into focus over recent months.
Ireland has commitments under the EU Renewable Energy Directive to meet 16% of total final consumption from renewables, and a 40% renewables’ contribution to gross electricity consumption, by 2020.
Renewables (biofuels and the renewable portion of electricity) are to contribute 10% of transport energy by 2020.
Our target for the renewable contribution to heating and cooling is 12% by 2020.
Already, the tax system has built-in incentives to encourage efficiency, such as the
accelerated capital allowance scheme for certain energy-efficient equipment (100% deduction in year one), this accelerated capital allowance scheme was extended to self-employed persons in last year’s budget.
Given that the government effectively has only two budgets left to create consumer incentives or disincentives , it is likely that there will be some movement within tax policy.
Disincentives may come in the form of a modified VRT regime, ratcheting up the VRT rates on cars, and possibly on commercial vehicles which are not emission friendly.
An increase in carbon tax across both solid fuels and oils may shore up exchequer funds to pay for a variety of incentives such as additional support toward electric vehicles.
Farmers, under the existing tax regime, can receive a double deduction for the carbon tax element of their agri-fuel costs, and therefore, an increase in carbon tax on agri-diesel would not expose farmers to the full effects of the change.
Currently, employees who use a work vehicle can be liable to Benefit in Kind at up to 30% of the original market value of the car.
A reduced rate of Benefit in Kind may be phased in, to convert company cars to electric vehicles.
Meanwhile, the top ten tax reliefs have been highlighted, as part of the assessment of tax expenditures.
From a farming perspective, Agricultural Relief, the relief which grants a 90% reduction in the taxable value of gifts and inheritances of agricultural property, will come into focus as part of this review, standing as it does seventh in the cost league, costing an estimated €210m per annum.
CAT Agricultural Relief was recently overhauled as part of Budget 2016, and was tailored to favour active farmers, or those beneficiaries who would go on to lease their lands under a long term lease for at least six years.
There may be some justification for extending the lease term to a minimum period of ten years, to prevent abuse of Agricultural Relief.
But we have to wait until Budget day in mid-October, to see what exactly is in store for us all!
