Risk that more farms will permanently opt-out of the income averaging system - report
There is a risk that more farms will permanently opt-out of the income averaging system in the years following the abolition of the milk quota system, a new report addressing the issue of income volatility on Irish dairy farms has found.
The report by economists from Teagasc, Cork Institute of Technology and University College Cork concludes that dairy farmers in Ireland may require multiple risk management tools to address income volatility.
Under the income averaging system, the report concluded that participating farms are vulnerable in a situation where the farm income in a particular year falls well below the preceding four years.
The Budget 2017 reforms have sought to address this anomaly by introducing the opportunity for a temporary opt-out.
However, the report highlighted that a temporary opt-out from income averaging is only a temporary suspension of the tax liabilities and the outstanding amounts must be paid in instalments over the following four years.
It said that there is a risk that more farms will permanently opt-out of the income averaging system in the years following the abolition of the milk quota system.
Further it said that the income averaging system has limited appeal as a risk management tool and added that scheme eligibility rules relating to whether farm household have off-farm employment income mean that approximately 55pc of all specialist dairy farms in Ireland are automatically excluded from participation due to the presence of non-farm employment income.
The report, entitled ‘An evaluation of suitable tools to manage price/income volatility at dairy farm level in Ireland’, funded by Dairy Research Ireland, assesses the different forms of risk faced by Irish dairy farmers, including, output and input price, production, weather and animal disease risks.