The Chairperson of the ICMSA’s Farm Business Committee, Mr. Lorcan Mc Cabe, has stated that unfortunately farmers are once again trying to manage their business and plan for the future in the midst of ongoing milk and beef price volatility.
Mr. Mc Cabe stated that since 2009, we have seen many peaks and troughs in farm returns for all sectors and subsequently family farm income. The agricultural industry faces continuously changing markets with many internal and external forces impacting on the return farmers receive for their produce. Unfortunately, farm returns in our main beef and dairy sectors are currently experiencing a considerable downturn. He went on to say that “ICMSA has serious concerns in relation to income volatility and the need for self-funding of farm development which will be of particular importance in the context of quota abolition in 2015 coupled with the challenge of achieving the targets set out in Food Harvest 2020”.
The Farm Business Chairperson stated that ICMSA have addressed the issue of income volatility and the need for a mechanism to facilitate management of such peaks and troughs in order to allow farmers plan for investment in and development of their business in the ICMSA Agri-Taxation Review Submission and the 2015 ICMSA Pre-Budget Submission. He stated that ICMSA have proposed the introduction of what is referred to in Australia as a Farm Management Deposits Scheme (FMDS) which has both a positive farm financing component and a built in mechanism to smooth out income over the years.
In recommending a similar scheme to the FMDS, ICMSA believe the existing income averaging scheme in Ireland should be maintained. Mr. Mc Cabe stated that ICMSA believe the FMDS has many merits and most definitely should be considered for incorporating into the Irish income tax code for farmers. However, he stated that ICMSA have suggested a number of modifications to take account of Irish conditions.
Mr. Mc Cabe stated that an increasing number of Irish farmers are incorporating in order to avail of the reduced 12.5 percent Corporation Tax rate. In this context, ICMSA believe that in order to provide some of the advantages of incorporation from the point of view of providing self-funding for investment and capital loan repayment, ICMSA have recommended that the 12.5 percent tax should apply on a once off basis for the amounts deposited in the farm management account. Farmers would then be able to avail of these funds in the farm management deposit account for farm investment purposes as the farm business required. No further tax would be paid on such funds taken from the deposit account where they are invested in the farm. In addition, where funds are taken from the farm deposit account in the form of income then the normal rate of tax would apply to these withdrawals less a credit for the 12.5 percent tax which was originally paid on the funds when deposited in the farm deposit account in the first instance. These arrangements would give all the advantages of incorporation without the necessary cost of compliance associated with farm companies in addition to providing a mechanism to level out income volatility.
Mr. Mc Cabe concluded by stating that provision of a mechanism to manage farm income volatility and ensuring the availability of adequate after tax income for investment in the farm business are crucial issues which must be addressed in Budget 2015.
ENDS. 21 August 2014
Lorcan McCabe is at (086) 3979804.