While taxation policy is primarily the responsibility of the Minister for Finance, I have on-going contact with him to ensure that taxation policy reflects the Government’s commitment to agriculture and, in particular, to the policy objectives set out in the Agri-taxation Review and Food Wise 2025.
Income averaging for farmers is an important agri-taxation measure and it assists in addressing income volatility. I negotiated a change in the system in 2016, whereby a farmer can opt out of the system following a year of reduced income, resulting in improved cash flow. However I realise that the income averaging system is not suitable for all farmers and that it can only partially contribute to addressing income volatility. I have received a number of proposals modelled on income deferral schemes operated elsewhere and have been engaged with the Minister for Finance and various farm & industry organisations in this regard.
There are significant issues with these proposals, especially around EU State Aid rules and cost. Also there is no CAP direct payment equivalent in the countries in which this particular type of scheme currently operates and direct payments in themselves mitigate the effects of income volatility.
Nevertheless my concerns regarding income volatility and ongoing consultations with the Minister for Finance in this regard led to his announcement in the last Budget of a review of progress on the Agri-taxation Review, with a particular focus on the issue of income stabilisation. Our Departments have begun this process with a view to reporting later this year.