Agri-taxation review and Budget 2015
The Busin€ss of Dairy Farming Post 2015
Rowena Dwyer , IFA Chief Economist
21st October 2014
Budget 2015 Overview
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• Total budget package - transfer of €1.05b
– €420m in net tax reductions
– €630m net increase in Government expenditure
• Economic Growth (GDP:) Projected to be 4.7% in 2014, growth of 3.9% in
2015, and continuing at 3.4% in the following three years
• Budget Deficit: Projected to be €5.2b or 2.7% of GDP in 2015, continuing
to fall and leading to a slight surplus (0.3%) by 2018.
• Government Debt: GDP ratio: Falling from 110.5% of GDP in 2014 to below
100% by 2018.
• Unemployment rate: Projected to be 11.4% for 2014, falling to 8.1% by
2018.
Agriculture Budget –
Expenditure
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•
Agri-environment measures: Total funding of €150m for the agri-environment schemes
(REPS, AEOS, GLAS) in 2015. A reduction of €34m on the 2014 allocation.
•
Areas of Natural Constraint: Funding for the ANCs (formerly DAS) maintained at €195m.
•
Beef Genomics Scheme: Funding of €52m allocated for the Beef Genomics Scheme, with a
payment of €100/animal for the first 10 animals, remaining animals to receive a payment of
€80/animal.
•
Other Beef Programmes: Funding of €9m allocated for the Beef Data Programme (2014), €6m
for the Beef Quality Assurance Scheme
•
TAMS: Total funding allocation of €34m for TAMS in 2015, up from €17m in 2014.
•
Farm Safety Scheme: Funding of €12m for a once-off Farm Safety Scheme (TAMS 1) to
support farmers in upgrading safety arrangements on their farms.
•
Forestry: Funding allocation of €110m, for a planned afforestation programme of 7,000
hectares.
Agri-taxation review Background
• Announced in Budget 2014
• Purpose of review
– analyse the benefits of the various tax measures to the
agriculture sector and the wider economy versus the costs
– maximise the benefits of existing support and ensure tax policy
aligns with Food Harvest 2020 objectives
– Recommendations considered in context of Budget 2015
• Over 40 submissions received
• Consultation process during 2014 – Agri-taxation working group –
(Departments of Finance, Agriculture and Indecon Economic Consultants)
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Agri-taxation review report
- Overview
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• Analysis showed benefits of taxation measures to the economy outweigh
the overall costs (revenue foregone) of providing reliefs
• Recommended continued support for primary agriculture through taxation
measures, with some additions and amendments.
• Identified the following policy objectives:
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–
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Increase the mobility and productive use of land, in particular to rebalance the letting market in
favour of long-term leasing.
Assist succession and farm transfer, improving the age profile of Irish farming.
Complement wider agriculture policies and schemes, including supporting:
• Investment to enhance competitiveness, including assisting new entrants and young trained
farmers
• Environmental sustainability, including the improvement of farm efficiency
• Alternative farming models such as farm partnerships, and
• Responses to increasing income volatility.
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Agri-taxation review – Budget
2015 measures
•
Income Tax Exemption for Long Term Land Leasing:
– Increase of 50% in the amount of income exempt from tax for long term leases
– Introduction of fourth income tax free threshold of €40,000 for leases greater than 15
years
– Extension to scheme to include incorporated farm companies as a lessee and removal of
requirement for qualifying lessors to be aged over 40.
•
Income Averaging: Extended from 3 years to 5 years and to farmers with additional
self-employed income from on-farm diversification.
•
Capital Acquisitions Tax – Agricultural Relief: Retained at 90% for active farmers
and for individuals who are not active farmers but who lease out land long-term
•
CGT Relief for Farm Restructuring: Measure extended to end 2016, with rules be
amended to enable whole farm replacement to be eligible for the relief
Agri-taxation review – Budget
2015 measures
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•
CGT Retirement Relief – disposals within family: Land leased for up to 25 years (up
from current limit of 15 years) will qualify for CGT Retirement Relief upon disposal
•
CGT Retirement Relief – disposals outside family:
– Land currently let under conacre can be disposed of by end 2016 to qualify for
CGT Retirement relief.
– Alternatively, land can be leased out long term (min. 5 years) to qualify for the
relief.
•
Stamp Duty on Leases: Leases of > 5 years will now be exempt from Stamp Duty
•
Stamp Duty Consanguinity Relief:
– Relief which halves the rate of stamp duty for transfers between family
members (from 2-1% currently)
– Proposed extension to end 2017 where transferor is <65 years of age and
tranferee is active farmer
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Agri-taxation review – other
recommendations
• Recommended retention of following measures
– Agricultural Relief for Capital Acquisitions Tax
– Retirement Relief from Capital Gains Tax
– Stamp duty exemptions on transfers of land (e.g. Young Trained Farmer)
– Capital Allowances
– Stock Reliefs
– Tax exemption for profits or gains from the commercial occupation of
woodlands
– Taxation measures for farm partnerships-all registered farm partnerships
Agri-taxation review – other
recommendations
• Further taxation work
– Potential for broadening scope of SEAIs Accelerated Capital Allowances
scheme to sole-traders
– Potential for extending income averaging to forestry clear-felling profits
– Further examine feasibility of measures such as risk deposit scheme, Phased
Transfer Partnership, and barriers to female participation
• General recommendations
– Raise awareness among land owners of the current reliefs for long-term
leasing
– Better data collection on costs and benefits by Agri-Taxation Working Group
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Next steps
• Immediate
– Finance Bill – 23rd October - legislative enforcement of Budget
taxation measures
– Details of proposed changes important – definition of active farmer,
age limits, interaction of CGT retirement relief/Restructuring relief
• Longer-term
– Further consultation with agri-taxation working group
• Incentives for family lifetime transfer – ‘Phased Transfer Partnership’,
• Additional volatility measures,
• Investment in energy efficiency equipment etc.
– Awareness raising
– Budget 2016!
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Thank you for listening
Any Questions?