This section relates to the extension of farmers' stock relief. When was that scheme reintroduced?
SECTION 16.
Question proposed: "That section 16 stand part of the Bill."
This section deals with new stock relief available to farmers which entitles them to a deduction from their trading profits of 25 per cent of the increase in the value of their stock in an accounting period. The relief was due to expire on 5 April this year but, as I announced in the budget, I will renew it for a further period. This section provides for a two-year renewal.
In what year was stock relief reintroduced? It existed in the 1980s and it was then abolished.
A new system was introduced in 1992.
Is it envisaged by the Revenue Commissioners that the relief will be again abolished?
The Deputy can take it that, like other categories, farmers will always be with us.
There was stock relief of 125 per cent at a time of high inflation and after a period — I think it was seven years — there was a clawback. Adjustments were then made to prevent a severe penalty being imposed on farmers. We overcame the problem by making the relief permanent.
I am informed that since 1992 the clawback has not existed. The relief is being renewed for a further two years.
Are all the stock relief provisions in the same section?
Yes.
That will assist practitioners in that it will make it easier to operate the system.
Does that mean the Deputy will reduce his accountancy fees?
As the Minister knows from experience, when improvements are made fees are doubled.
Question put and agreed to.
Section 17 agreed to.
SECTION 18.
Amendment 34 in the name of the Minister. Amendments Nos. 35 and 36 are related and it is suggested they be discussed together.
I move amendment No. 34:
In page 34, subsection (2), line 15, after "applies" to insert "has delivered to the Department of Agriculture, Food and Forestry a farm nutrient management plan to which subsection (1) relates,".
These are technical amendments providing for a scheme of improved capital allowances for farmers who incur expenditure on necessary pollution control measures.
I am sure the Minister has been lobbied, as I have, by the Irish Farmers' Association. The chairperson of the business and taxation division of that association, who is a friend and constituent of mine and a colleague in the accountancy profession, rang me on a number of occasions in recent weeks about this matter and, not through want of effort on his part but because of time constraints on mine, I have been unable to meet him. Whereas the Irish Farmers' Association and other farming organisations have welcomed the changes put forward, they suggested that the time for writing off fixed assets should be changed. Rather than having the capital allowance written down by the reducing balance method, perhaps the Minister will provide that it be written off by the straight line method. That method has become more prevalent in recent years in writing down capital allowances and I see no reason it should not be used here as it would involve only a small change in taxation.
Perhaps writing down all capital allowances will be favoured in future, with a small residual for control purposes. That is a technical matter that could be overcome. I am speaking as a practitioner rather than from a farming viewpoint. Such a change would cost very little and would certainly cost nothing in the first year. The submissions made in this regard by the Irish Farmers' Association and other farming organisations should be acceded to on this occasion.
I support my colleague, Deputy McCreevy. I welcome recognition of the problem for farmers in regard to pollution control measures. The Minister should ensure that people who carried out work in, say, February will qualify for this relief — it is effective only from the beginning of the tax year. I agree with Deputy McCreevy that the measure should apply in the scenario he outlined. It is my understanding the scheme will apply for three years. From my involvement in farm consultancy, I am aware that such schemes are of assistance in times of difficulty such as that in the beef sector. Sometimes the best thought-out plans for pollution control may have to be shelved because of unforeseen events and I hope the Department of Finance will consider favourably all justifiable cases and will not stick rigidly to the timeframe.
I welcome this provision. Any measure that helps in the control of farmyard pollution is important. I am, however, a little concerned about some of the conditions that apply. Under subsection (1)(b) a nutrient management plan must be produced, and that is reasonable. Farmers who are able to do so should be allowed produce the plan and there should be a self-compliance test thereafter. Given the amount of money spent on agricultural education, many farmers should be able to do that job without the necessity for outside consultants.
I congratulate the Minister on including this provision. Wearing another hat, I hope the control of farmyard pollution grants will be extended. There is no grant at present other than that provided for here. This measure will assist medium to large farmers, most of whom would be able to draw up draft plans without the assistance of REPS planners and so on. I am sure Department officials have experience of such schemes. This is a minor point compared to the overall importance of the measure, but perhaps the Minister will reconsider the issue with a view to providing a number of options in drawing up the nutrient management plan. For example, it could be drawn up professionally by REPS planners or engineers, or by farmers provided they are in a position to do so.
I welcome this section which deals with allowances for capital expenditure on the construction of farm buildings for the control of pollution. I know from experience that the majority of farmers with milk quotas of 40,000 gallons have a taxable income of £16,000-£17,000, on average, and have insufficient funds to reinvest. I ask the Minister to look at the question of capital allowances; I did not favour their reduction to 15 per cent, especially for those involved in farming. While 10 per cent of farmers are making big money, the remainder are eking out a living, although they have had good years. They find it difficult to invest in up-to-date equipment and machinery such as tractors. With the changes in leasing arrangements, I fear that farmers will begin to hold on to machinery longer than they should to the point where it becomes dangerous. I ask the Minister, therefore, to reconsider the question of depreciation allowances for machinery.
This section, which deals with capital allowances, gives legislative effect to the commitment contained in Partnership 2000 to introduce targeted and monitored measures to support farmers in pollution control. In year one, 50 per cent of the outlay may be written off, the balance to be spread over seven years in the conventional way — 15 per cent in years one to six and 10 per cent in year seven. This is the model used since 1992 — Deputy Penrose and others will be more familiar with this than I — in an attempt to standardise a complicated regime of capital allowances and reliefs for various commodities.
Farm nutrient management plans must be drawn up by an agency or a planner approved by the Department of Agriculture, Food and Forestry in accordance with guidelines published by the Department on 21 March or with a plan drawn up under the rural environment protection scheme or the Erne catchment nutrient management scheme. Under the amendment, farmers will be required to lodge a copy of their plan in the Department. This is common sense. The related amendments are self-explanatory.
I have received representations from the Irish Farmers' Association which suggested that the section should be amended by deleting the reference in line 33 to an approved planner and including a reference to the applicant. This would be a minor change. Can it be done?
I am strongly against relaxing these requirements. This is serious business, we are talking about pollution control. We cannot have farmers drawing up plans on the back of beer mats and saying they are complying with their environmental responsibilities. In seeking planning permission to build a house, an applicant is required to submit drainage scheme plans and so on. A farmer who will receive capital assistance from the State has to take the matter seriously. The notion that they can submit their own farm nutrient management plan is not on.
Everybody accepts there has to be proper planning. It is an insult to suggest, however, that there are farmers who are not qualified to draw up their own farm nutrient management plan. Some are highly trained. I appreciate there are certain standards below which one should not fall but we are creating a new cost factor when it is unnecessary to do so. The standards set will have to be high. If farmers are in a position to meet them, I see no reason they should not be able to submit their own plan. If an engineer is building a house does he have to avail of the services of another engineer in drawing up plans?
An engineer can do his or her own drawings. If one of the persons qualified to conduct a nutrients survey happens to own a farm, he or she can do likewise. This is a serious matter. I cite Lough Sheelin as an example. If a farmer is to receive State money, the job will have to be done professionally. If the IDA states that a person has to produce an audited account before he or she can receive grant assistance, no one will say that people who are long in the tooth and experienced should be able to draw up their own accounts.
There is a reference to an approved planner. By whom will plans be approved? Will the Department of Agriculture, Food and Forestry draw up a list? Will plans be approved by agricultural advisers such as those who work for ACOT?
This is essentially about standards. Without any disrespect to Deputy Connaughton, we are talking here about approximately £50 million of taxpayers' money in tax foregone by way of capital allowances. There is a serious agricultural pollution problem caused by the enrichment of water systems as a result of eutrophication and so on. Farming is a professional business and minimum standards are required. If the farmer in question is an approved planner, he or she may draw up his or her own plan. Failing that, it is an essential cost. If a farmer is prepared to spend £50,000-£60,000 in effecting farm improvements, he or she should be prepared to pay professional fees of £1,500-£2,000.
Having listened to Deputies McDowell and Ahern as well as the Minister, I am convinced they are right. This is a serious matter and plans should have to be approved.
There is an approval mechanism in the Department of Agriculture, Food and Forestry.
Essentially the same methodology is being applied.
There were mobile power-driven and other types of machinery and different rates for everything. At least some rationale and common sense has been brought to bear over the past decade or more. I would hate to move away from that because at least now one can follow it. The case that has been made by the farming associations is that tax allowances on tractors should be on 20 per cent straight-line — they are now on 20 per cent of a reducing balance. Has consideration been given to tractors and other items that are taxed on a straight-line basis rather than on a reducing balance? It is something that could be considered by the Revenue Commissioners in time for next year.
I agree with the Minister about straightening up the allowances. However, I raised the point because, while some farmers are making a lot of money, many are not, and they are having great difficulty in raising the necessary finances to reinvest.
I note what both Deputies have said. I have to say, in all honesty, that there is no proposal to revisit that area and to open up or improve the category. I would have to bring it to the attention of the Committee that, on income tax receipts alone, total receipts from farmers are £78 million. Capital allowances amount to approximately £46 million.
It is a loss to the Exchequer to give capital allowances of £46 million.
One might as well just send them the cheques direct.
I am sure if one applied the same rates to the other schedule D taxpayers this would work out at the same ratio.
The total capital allowances amount to £855 million. That is just to put it in context. It is preferable that we have a simplified standard straightforward system. If one were to concede, and I have no intention of conceding, the 25 per cent for farmers, why should the people who are supplying farmers in the various towns in north Kildare not get similar capital relief, because they are part of agribusiness industry as well? If farmers are getting 25 per cent capital relief in the first year, why should their suppliers and the infrastructure that is part of the agribusiness sector not get similar reliefs, and if they get it why should the rest of us not get it?
If farmers do not make the money, they will not have the money to pay the suppliers and they will go out of business.
Amendment agreed to.
I move amendment No. 35:
In page 34, lines 40 to 43, to delete subsection (4) and substitute the following:
"(4) Paragraph 1 of the First Schedule to the Corporation Tax Act, 1976, shall have effect for the interpretation of this section and ‘basis period' has the meaning assigned to it by section 297 of the Income Tax Act, 1967.".
Amendment agreed to.
I move amendment No. 36:
In page 35, between lines 48 and 49, to insert the following subsection:
(14) Section 29 of the Finance Act, 1975, shall have effect as if subsection (1) of that section included a reference to this section.".
Amendment agreed to.
Section 18, as amended, agreed to.
NEW SECTIONS.
I move amendment No. 37:
In page 35, before section 19, to insert the following new section:
"19.—The 100% stock relief available for young trainee farmers between 6th April. 1997 and 5th April, 1999 shall be available until 5th April, 2001.".
This is in response to representations from the IFA. I appreciate that it is a limited life relief that is involved, but the views expressed to me by the IFA were that it would be opportune to extend it by another two years to double its life.
The farmers signed off in Partnership 2000 for the two year extension. They are having a second bite at the cherry by coming to that well known defender of rural Ireland, Deputy Michael McDowell.
As I have said on many occasions, agriculture has been wiped out in my constituency. There is not a single farm left, and there were five when I started. There is not even a piggery left.
There are a few allotments, and that is the height of it. The section increases from £14,000 to £15,000 the capital value used in determining the capital allowances and deduction for running expenses. It is being extended for two years. I am not disposed to accept the amendment for the reasons stated. That has already been accepted by the IFA in the context of Partnership 2000, and I do not see the benefit of extending it for four years.
If it has any value over two years, it must have some value over four years.
The practice in the past has been that the amendments have been for two years at a time. I do not see the benefit of going for four years.
I will not press the amendment. I may introduce it again on Report Stage with a less flint-hearted Minister.
Amendment, by leave withdrawn.
Mr. McDowell
I move amendment No. 38:
In page 35, before section 19, to insert the following new section:
"19.—Where a farmer liable to tax incurs capital expenditure on buildings or structures situate on his holding under an investment programme approved by Bord Fáilte for the purposes of agri-tourism, such expenditure will be the subject of capital allowances of not more than 15% of its net value for each of the six years next following the expenditure.".
This is a proposal in relation to capital expenditure by farmers on agri-tourism projects on their land. It has been represented to me that where Bord Fáilte approved expenditure on buildings or structures on a holding by a farmer that it would make sense to set out accelerated capital allowances on such expenditure for a period of six years at the rate of 15 per cent in order to give a stimulus to agri-tourism structures on farms.
I am familiar with the background to this because I have had discussions with the Minister for Agriculture, Food and Forestry, the Minister of State with responsibility for agri-tourism and the Minister of State at the Department of Tourism and Trade, Deputy Toddy O'Sullivan. The Deputies may be aware that under the operational programme for agriculture £10 million is available for agri-tourism. Approximately £4 million of that was released early in 1995 and a second tranche of £4 million was released earlier this month. It is for grants for precisely the kind of activity to which Deputy McDowell refers. What we will now be doing is giving grants and tax relief, one or the other. The grant system available through the European Union Structural Funds Operational Programme makes more sense.
We have changed the rules and the regulations within the operation of this scheme in response to various observations that have been made, and there is a higher grant now where old farm buildings or houses are being converted for self-catering accommodation. There is financial provision courtesy of the Structural Funds. I do not propose to add to it by way of tax relief. If there were no grant system there would be some merit in the Deputy's proposal.
I will withdraw the amendment and revisit it on Report Stage.
Amendment, by leave, withdrawn.