Dairy Ireland has called for the introduction of agricultural bond similar which has been used in Australia to mitigate against the impact of price volatility on farmers.

It was among a number of proposals made by the organisation which represents farmer discussion groups in its submission to the Department of Finance public consultation on farm taxation.

In its submission it said: “The objective of tax incentives is to encourage a business to invest which, in the long run, will return additional revenue to the state. Agricultural incentives targeted at business growth and increased productivity will return additional revenue through increased employment, sustainable export earnings and the multiplier effect of additional economic activity in the local economy.”

Dairy Ireland stressed: “The dairy sector requires significant up front investment which puts an expanding business under intense cash flow pressure. The purpose of any incentive to the dairy industry is to ease this cash flow burden allowing investment to take place. This industry has proven over time to return sustainable capital growth and financial returns which in the long run will benefit the state through additional taxation revenues.”

One of the most interesting aspects of the Dairy Ireland proposals is its agricultural bond suggestion. This scheme allows farmers to make a pre-tax deposit of cash into a bonded bank account for a period of time. Tax is paid when the money exits from the account. The tax is therefore deferred and not lost. This allows farmers to put away cash in good years and creates a reserve of cash that could be used in times when milk price drops.This scheme incentivises farmers to manage volatility and allows farmers to build cash reserves which are taxable on exit.

Dairy Ireland says there are a number of advantages to this proposal including the fact the government would have full use of the money and it would reduce foolish farmer flush spending.

Below are some initiatives that Dairy Ireland believe will encourage investment by its members in their businesses:

1. Stock Relief:

100% stock relief for all farmers who are expanding stock numbers.
Deferred taxation on stock valuation growth.

2. Clarification on cow leasing:

The income from a cow lease of an active farmer should qualify as Case 1 income.
No VAT on leasing.
Stock relief within a lease agreement.

3. Incentive to encourage land mobility:

Maintain tax free status for long-term land rental.
Levy to be implemented on ‘conacre’ system.
Leasee to qualify for €5,000 tax free.
Double tax deduction on land improvements

4. Introduction of Agricultural Bond similar to Australia. (Future Farm Prices Volality Measure) See Notes 5. Maintain Income averaging. 6. Capital Reliefs:

Accelerated relief for investment on rented lands.
Double tax deductions on land improvements

Click below for explanatory notes: