Farm­ers should wel­come talk of bud­get­ing for rainy days

Irish Examiner - Farming - - FARM FINANCE -

Sum­mer Eco­nomic State­ment was pub­lished a cou­ple of weeks back, set­ting out the broad fi­nan­cial frame­work within which the Gov­ern­ment will work in the com­ing years, a so­called multi-an­nual frame­work. This year’s state­ment was launched by Min­is­ter for Fi­nance and Pub­lic Ex­pen­di­ture and Re­form, Paschal Dono­hoe, TD, hav­ing re­cently taken over the po­si­tion of Min­is­ter for Fi­nance from Michael Noonan. Al­though he is in the job only a wet week, he nev­er­the­less was ea­ger to put his own stamp on the doc­u­ment.

Six pil­lars un­der­pin­ning the over­all fi­nan­cial strat­egy of the Gov­ern­ment are set down as fol­lows:

En­sur­ing sound and sus­tain­able pub­lic fi­nances. Man­ag­ing pub­lic ex­pen­di­ture to en­sure max­i­mum re­turn for tax­pay­ers’ re­sources. Tar­geted in­creases in pub­lic in­vest­ment. Re­form­ing the tax sys­tem to en­sure it is growth-friendly. En­sur­ing in­clu­sive growth. Fa­cil­i­tat­ing ac­cess to fi­nance, es­pe­cially for SMEs.

Of course. each of these makes quite a lot of sense and is hard to re­fute, but the re­al­ity is that a whole va­ri­ety of in­ter­est groups are lin­ing up with de­mands, from in­creased pub­lic ser­vices to cuts in taxes, and wage in­crease de­mands from the pub­lic sec­tor, just to name a few. The re­al­ity is that the Gov­ern­ment is op­er­at­ing within rel­a­tively fixed pa­ram­e­ters as a func­tion of the amount of money the gov­ern­ment can col­lect in taxes.

The Gov­ern­ment can choose to bor­row, or choose to re­pay na­tional debt, from year to year. But the amount that the Gov­ern­ment can bor­row, at least at some­what af­ford­able rates, is linked to the ca­pac­ity to gener- Char­tered tax ad­viser Kieran Cough­lan, Bel­go­oly, Co Cork. (086) 8678296 ate tax re­ceipts.

The so-called “fis­cal space” for next year is es­ti­mated at €1.2 bil­lion, while ‘bal­anc­ing the books’. This means the Gov­ern­ment has choices on how it will cut taxes or in­crease pub­lic spend­ing to the tune of €1.2bn. Al­ready, €700m of that fis­cal space is com­mit­ted to mea­sures al­ready an­nounced. Min­is­ter Dono­hoe high­lighted the im­por­tance of look­ing at the to­tal­ity of Gov­ern­ment spend­ing rather than the in­cre­men­tal changes each year. This im­plies that the en­tirety of spend­ing and of col­lec­tion are up for re­align­ment.

In that con­text, we can only hope that the new Min­is­ter will in­tro­duce clever re­form into the gen­eral tax­a­tion sys­tem. From a farm­ing per­spec­tive, the rel­a­tively re­cent Agri-Tax­a­tion Re­view com­pleted in 2013 took a long and hard look at the tax mea­sures specif­i­cally aimed at farm­ers.

Over suc­ces­sive bud­gets, in­cre­men­tal shifts have been made in line with the rec­om­men­da­tions in that Agri-Tax­a­tion Re­view.

Farm­ers may take some com­fort from the fact that the re­view rub­ber stamped the ma­jor­ity of ex­ist­ing re­liefs, and that Min­is­ter Noonon took on board many of the rec­om­men­da­tions, mean­ing that the new Min­is­ter is un­likely to call agriThe tax­a­tion mea­sures in for re­view. One of the in­ter­est­ing com­ments by Min­is­ter Dono­hoe at the launch of the Sum­mer Eco­nomic State­ment was as fol­lows: “We live in an in­creas­ingly un­cer­tain world, and must plan ac­cord­ingly.

To this end, the Gov­ern­ment will main­tain a rainy day fund, while at the same time in­creas­ing pub­lic in­vest­ment. We will con­tinue to re­duce pub­lic debt in or­der to build up fis­cal buf­fers.

“It is also im­por­tant to make the tax­a­tion sys­tem more growth-friendly and the Gov­ern­ment will con­tinue to work in this area.”

As farm­ers, per­haps more than any other sec­tor, we are ex­posed to a host of volatil­ity in the form of mar­ket prices, in­put prices, weather, dis­ease, cur­rency move­ments, and most re­cently, the Brexit ram­i­fi­ca­tions. Last year, many farm­ers were dis­ap­pointed that the in­come volatil­ity mea­sures ex­plored in the Agri-Tax­a­tion Re­view were not bet­ter em­ployed within the Ir­ish tax sys­tem.

In par­tic­u­lar, the prospect of farm­ers cre­at­ing their own rainy day fund in the form of a farm de­posit scheme or in­come equal­i­sa­tion scheme was some­thing which was brought home to many farm­ers last year, when milk prices were on the floor and tillage farm­ers faced an in­come cri­sis due to harvest weather dif­fi­cul­ties. In­stead, the in­ad­e­qua­cies of our in­come av­er­ag­ing sys­tem were of such a de­gree that Min­is­ter Noonan in­tro­duced a carve-out for 2016 to help dis­tressed farm­ers caught within the in­come av­er­ag­ing trap. With a new Min­is­ter at the helm, mak­ing all the right noises about man­ag­ing volatil­ity, per­haps this is the time for farm or­gan­i­sa­tions to push for this most needed change.

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