Income levy will hit key farm payments
Forestry, REPS and SFP monies among schemes facing reductions
Cash-strapped farmers stand to lose millions after confirmation that key premium payments, including forestry premiums, will be subject to the new income levy which was introduced as part of the recent emergency budget.
A Department of Finance spokesperson said that premium payments to farmers in 2009, together with all other support payments from the State -- excluding social welfare payments -- are liable for the new income levy.
The levy will be applied at the individual farmer's marginal rate of between 2pc and 5pc of gross receipts.
In the front line are payments to farmers under REPS and the Single Farm Payment (SFP).
It has also been suggested that forestry premium payments will be hit by the levy, even though the scheme is marketed as being tax free.
A Department of Finance spokesperson outlined that all income replacement schemes will be subject to the levy.
However, payments made under capital grant schemes, such as the Farm Waste Management Scheme (FWMS), are exempt.
The levy will take between 2pc and 5pc of the gross premium money from individual farmers, with bigger operators being hit the hardest.
Although the exclusion of the FWMS monies will be welcomed by farmers, its application to forestry premium payments is likely to spark fury in the embattled sector.
The forestry industry is already reeling from Department of Agriculture proposals to slash between 8pc and 10pc off forestry premiums as part of overall reductions in farm spending which were announced following the recent emergency budget.
Although the Department has indicated that it is willing to reassess the proposed forestry premium cuts, it is likely that recipients will remain liable for the income levy on these monies.
Questions have been raised regarding the legality of the proposed reduction in the premium payments. The IFA has claimed that the payments can only be cut if the plantations are not maintained or if the required funds are not available.
It is understood that savings in the capital expenditure element of the overall forestry budget, rather than reductions in premium payments, will be considered by the Department's forestry liaison group, which is scheduled to meet this week.
Overall spending on forestry has been cut by €7.5m, with total funding falling from €125.5m to €118m.
Farm organisations have warned that the introduction of the income levy will exacerbate cash-flow difficulties at farm level and will put further financial pressure on farmers at a time when they are already struggling to survive.
The decision to impose the levy on gross farmer incomes, without capital allowances being taken into consideration, has been widely criticised by farmer bodies.
- Martin Ryan
