We are very concerned that the Climate Change Response Bill 2010, if enacted, would impose a significant unnecessary burden and restriction on economic and other activity in Ireland over and above what was legally required of Ireland under EU and international agreements.
Let me first of all emphasise, ICMSA and farmers generally are fully committed to a low carbon footprint sector and indeed the records show that agriculture has reduced it emissions from 20.9 MT (million tonnes) in 1995 to 18.4 MT in 2008. However, there is a limit to what our sector can do in terms of further reductions and indeed the realisation of the Food Harvest targets for increased output in the agri-food sector, particularly in the dairy sector by up to 50 percent must be taken into account. Unfortunately the target set in the current Bill takes no account of these critical and important national economic matters.
While there are currently EU legally binding obligations on Ireland with respect to emission figures for 2020, further negotiations are imminent post the Cancun Accord on Climate Change. This is almost certain to involve negotiation about the distribution among Member States of the increased reduction burden which the EU has now apparently taken on board. These negotiations will be of vital national importance.
Unfortunately, the targets in the Bill not alone fail to address these matters, but the Bill, as currently proposed, could actually limit or totally undermine the negotiating position of Ireland to obtain a favourable burden sharing arrangement of EU commitments. It will be recalled that with regard to the current 2020 binding commitments for the non trading emissions (non-ETS) Ireland, with some other Member States, had to take on a 20 percent reduction relative to the 2005 figure, while some other countries have lower reductions placed on them to achieve the overall EU reduction commitment.
During the course of the discussions and negotiations, Ireland rightly advanced the argument that our emissions profile was quiet unique giving the dominance of farming in Ireland's emissions compilation. Agriculture currently accounts for 39 percent of non-ETS emissions in Ireland. Significantly, normal farming activity (i.e. enteric fermentation or bovine digestion and regular husbandry activity) accounts for 95 percent of the total emissions attributable to agriculture. Fossil fuel combustion including diesel accounts for just 5% of emissions. Ireland must renew this argument with respect to our unique emission profile with greater vigour at EU level given that a new binding reduction of 30 percent is set to be adopted by the EU.
The imputed emissions profile of the agricultural sector is due in large part to natural processes rather than a heavy reliance on fossil fuels. It is against this background that the Climate Change Response Bill must be seen as a hindrance and a significant danger to our negotiating stance. Given the current position and particularly in advance of further probable negotiations with our EU partners, Ireland should not incorporate any target in legislation at this time. There is nothing to be gained from this at this stage other than undermining Ireland's negotiating position.
The targets set out in the Bill go beyond what is required and would require a significant reduction in economic activity and or a recurring annual cost in the form of an increased requirement to purchase carbon emission credits. Ireland, given its present precarious economic position must be resolute on this matter. Rather than taking on an increased burden, the focus must be on insuring that any increased obligations at European level do not lead to an increased obligation on Ireland. This Bill is not alone of no value in this regard, it is patently detrimental.
In conclusion, it is our considered view that the Bill in its present form should not be proceeded with or that in any event there should be no target figures incorporated in the legislation.
For Further information:
Ciaran Dolan 061 314677 or 087 2322010
The ICMSA Taxation Committee
simple guide to Budget 2011 for farming families
1. No Change in Payment Level for Main Agriculture Schemes.
The key schemes in relation to agriculture have seen no reduction in their rates. This means that for 2011, farmers participating in the Disadvantaged Area Scheme, REPS 4, AEOS and the Suckler Cow Welfare Scheme will receive the same rate of payments as 2010. While this may be taken as a positive, it should be noted that payment rates under these schemes have seen substantial cuts already and farmers are getting lower rates than they did in 2008.
2. New Agri-Environment Options Scheme.
With many farmers leaving REPS 3 in 2010, it is hugely important that a replacement scheme for REPS 3 is available to farmers. ICMSA lobbied for a replacement scheme and welcomes the decision to re-introduce an AEOS scheme for 2011. However, ICMSA is disappointed that the scheme has a payment limit of €5,000 and a maximum of 10,000 farmers. ICMSA is insisting that the scheme will be opened in early 2011 and that the options available to farmers within the scheme will be extended so that the scheme will become more relevant and available to active farmers.
3. Farm Waste Management Scheme Payments.
The Minister for Agriculture has confirmed that up to €100 million of the final installment of the Farm Waste Management Scheme which was due to be paid early next year, is now being brought forward to this month. This means that about 14,500 farmers out of a total of 17,600 will receive their payment in December rather than January. The remainder of the farmers will receive their payment in January and in addition, all farmers will receive the ex-gratia interest payment in early 2011 agreed when the payment was staggered over three years.
4. Suckler Cow Welfare Scheme.
In Budget 2009, the decision was taken not to pay the 2009 payment until 2010 and this continued for the 2010 payment. The Minister has now decided to change the policy with the result that the farmer will now receive payment for both 2010 and 2011 in 2011.
5. Additional Funding for On-Farm Investment Schemes including Dairy Investment Scheme.
The Department has allocated €19 million for the Department's Targeted Agricultural Measures, which includes a new scheme for dairy farmers to adjust to expanding dairy opportunities; aid for sheep fencing and handling facilities; and animal welfare grants for pig and poultry producers. The decision on how much funds will be allocated to each scheme has yet to be taken but ICMSA will be lobbying for a substantial portion for the dairy scheme. It is expected that a decision on how much funding will be allocated to each scheme will be taken in early 2011.
1. Tax bands.
Tax bands will be decreased by 10% across the board. The top rate of 41% will now apply on all income above €32,800 (€36,400 in 2010) in the case of a single person. For married couples with one income the 41% rate will apply at €41,800 (€45,400 in 2010).
2. Tax Credits.
Personal tax credits have also been reduced by 10% across the board. The personal tax credit for a single person will be cut to €1,650 from €1,830. The tax credit for a married couple will be reduced to €3,300 from €3,660.
3. Universal Social Charge (USC).
The Health Levy and the Income levy will be abolished and replaced by a new USC at the rates and thresholds shown in the Table below:
|USC payable on annual income||Rate|
|€0 – €10,036||2%|
|€10,037 – €16,016||4%|
The USC will apply on a similar basis to the Income levy with no special exemptions other than a lower rate being applied to income earners over 70.
There will be an important exemption from the USC for “genuine” capital allowances used in business.
The ICMSA has received confirmation on this matter and all farm related capital allowances are deductible from this charge.
The impact of this change is illustrated below by the example of a farmer with an income of €50,000 who has €10,000 of normal capital allowances and €15,000 of accelerated capital allowances available for both 2010 and 2011. In this example, the farmer is €631 better off as a result of the change.
|Universal Social Charge||€1,069|
Please note that even where accelerated/pollution related capital expenditure does not apply – all normal capital allowances will apply to the new USC. In contrast, normal capital allowances do not apply to the income base used to calculate the Income Levy.
The Self-Employed rate of PRSI is increased from 3% to 4%. As a result of this increase, a farmer earning €40,000 will pay an additional €400 in PRSI per year.
5. Stock Relief.
The existing 25% stock relief for farmers and the special incentive stock relief of 100% for certain young trained farmers are being extended from 1 January 2011 for a further two years
6. Stamp Duty.
The rates charged on the transfers of residential property have been reduced to 1% for properties valued at up to €1 million with 2% applying to residential properties valued in excess of this. These rates will apply to residential property only and will not apply to agricultural land. The existing rates of Stamp Duty apply to agricultural land.
However, this has an adverse effect in relation to transfers of a site to a child, which is currently exempt, but will now incur the 1% rate. There is no change applying to the rates applying to agricultural land where the top rate is 6%. ICMSA has sought changes to Stamp Duty on agricultural land transfers particularly in relation to consolidation.
7. Capital Acquisitions Tax.
The current tax-free thresholds are being reduced by 20 percent. This reduction applies in respect of gifts or inheritances taken from midnight on 7 December 2010. The changes in the tax free thresholds are as follows:
|Category||Current Rate||Rate from 8 December 2010|
|Husband or Wife||All tax free||All tax free|
|Brother/Sister or child of brother/sister.||€41,481||€33,185|
|Any other person||€20,740||€16,592|
The Minister proposed no other change either in the rate or the level of agricultural relief in the budget. However, it is important to realise that the National Recovery Plan, of which the 2011 budget in effect forms part of, states that in addition to the broadening of the base for CAT and Capital Gains Tax – the level of relief and exemptions applying to these taxes will be reduced. This will probably not take effect before 2012.
This is an area where a person or a family contemplating a transfer of property should take professional advice in anticipation of a less favourable CAT system. There is some indication of possible changes (I stress indication not decisions), arising from the Commission on Taxation Report, that agricultural relief could be reduced. Agricultural relief is the formula to reduce market value to taxable value. It currently stands at 90%.
Any reduction in agricultural relief, combined with the recent (over 40%) reduction in the thresholds could very well bring medium sized farms into a CAT liability for parent to child transfers. This is more so in the case of transfers other than from a parent to a child. Finally the rate of tax to the taxable amount (market value less all deductions and reliefs) was recently increased from 20% to 25%. ICMSA are watching this particular tax as it evolves very closely. Our aim is simply to ensure we do not get the effective reintroduction of death duties on normal farm transfers.
9. Capital Gains Tax
While no reference is made to Capital Gains Tax (CGT) in the budget speech, again major but unspecified changes are flagged for CGT in the National Recovery Plan, which may give rise to restrictions of reliefs and exemptions and an introduction of an increased rate of CGT above the current rate of 25%
10. Accelerated Capital Allowances for Pollution Control Investment.
The Minister for Finance has not renewed the scheme of accelerated capital allowances for farmers who incur capital expenditure on farm buildings and structures for use in the control of pollution with effect from 31 December 2010. The consequences of this is that such investments post 2010 in farm pollution control will have to written off over seven years compared to three under the accelerated allowance scheme.
Social Welfare Measures
1. Farm Assist.
The cuts in the social welfare budget will result in a reduction in the Personal Rate of Farm Assist from €196 to €188 and a cut in the Qualified Adult Allowance from €130.10 to €124.10.
There has been no change to the old age contributory or non-contributory pension.
Tax changes to self funded pensions: There are tax changes to the funding of self funded pensions and individual farmers should get professional advice as necessary.