Farm Ireland

Thursday 14 December 2017

New Government should take farmers out of the tax net and set them production targets

John Shirley

The new captains of the struggling ship Ireland need all the help and backing they can get. Given the right environment, farming can provide Enda and Eamon with a helping hand towards our country's economic recovery.

I have a suggestion. Take the shackles off Irish farming and allow it to grow into its potential.

How can this be achieved? In one bold move. Extend the 12.5pc company corporation tax rate to farming.

The reasoning is thus: the primary role of farming should be to create activity and jobs in rural Ireland. Farmers are wealth creators. Getting tax out of farmers is of secondary importance. If farmers have money, they will spend it. More activity on Irish farms leads to higher purchases and higher sales. More product coming off Irish farms leads to more jobs in transport, in food manufacture, etc.

Farming and food production is almost totally indigenous. It still accounts for one-quarter of the country's net foreign currency earnings.

Rural Ireland is about farming. Take away farming from rural Ireland and what have you got left?

Yet, in the past few years, what have we seen?

  • Less cereals, less potatoes, less vegetables and the total loss of the sugar industry.
  • A serious reduction in suckler cows.
  • A collapse of the sheep flock.
  • Fewer pigs.

Apart from dairying and forestry, all of the major enterprises are shrinking. Farming is an industry that seems to have turned in on itself rather than looking upwards and outwards. And this is happening at a time when there are signs that the world's food supply and demand balance is tipping towards global scarcity. It is happening at a time when energy prices are rocketing.

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Fair dues to the last administration in that they showed some vision with the publication of Food Harvest 2020.

This report is primarily about dairying and the target of a 50pc growth in milk out by 2020. This is a huge challenge and is full of merit. But dairying now accounts for less than 20pc of all farmers. What about the other 80pc? What contribution can they make to invigorating agriculture and the rural economy?

Putting farming on the same tax regime as manufacturing companies -- indeed all companies are now on the 12.5pc tax level -- would be just the radical imaginative signal that would snap the industry out of its slumber and deliver take-off.

We've been through the era of red tape, regulation and heavy inspections that are stifling growth and ambition.

The loose ends on pollution have been tidied up. The Green Party, with their penchant for interfering with farmers, have been removed.

For the country's sake, now is the time to allow farmers to do what they do best -- growing crops and tending livestock.

Let us simplify the tax regime. Indeed, there is an argument for taking farmers completely out of the tax net and instead set them production targets.

Some farmers are setting up companies to avail of the 12.5pc tax on profits. But setting up a company is a serious move and has a lot negative implications including the need for audited annual accounts. This may be create extra work for accountants and lawyers but it is not wealth creating.

Dairying is set to be the flagship for growth. The technology to produce milk profitably off grass is being refined all the time. The ending of the quota in 2015 should herald a new and exciting era for Ireland's dairy industry. Alongside the overall global increase in demand for milk, Irish processors Kerry and Glanbia have successfully developed new whey technology that will create wealth and jobs in Ireland. I have heard it argued that potato starch could be a substrate for a similar food ingredient based industry in Ireland.

In the CAP reform, the Irish government should recouple the Suckler Cow Premium. This is a proven mechanism for triggering expansion in the suckler herd and suckler cows are fundamental to the well-being of Ireland's huge beef business.

Cereals hardly got a mention in Food Harvest 2020. This was wrong. Given favourable prices, there is plenty of competence and capacity in this sector. At the recent Quinns of Baltinglass's 75th anniversary bash, R & H Hall grain trader John Bergin predicted that the current cereal price hike will be sustained much longer than the one in 2007.

There is also the growth in demand for energy crops and for forestry. At a time of unprecedented demand for sheepmeat, the Irish flock is less than half of the peak reached 20 years ago.

All the indicators suggest that Irish farming is ripe for a new era where it can cash in the growing global demand for food.

Shifting farming to the same tax system that is so cherished for the rest of industry and commerce is a logical move for Enda and Eamon.

It can trigger lift off.

Indo Farming