Farmers should welcome talk of budgeting for rainy days
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.