Mr. Eddie Punch:

Taxation is a major issue and the ICSA urges the Government to proceed with caution in the forthcoming budget. The trend has been to introduce all sorts of increases - not, I accept, in headline income tax rates but rather in many other areas. Capital taxation has been targeted in this regard. In recent budgets, all capital taxes were brought up to 30%. In our view, we are approaching the maximum here. There is no room for any further increases in capital acquisitions tax, particularly in view of the increase in the rate of and the lowering of the threshold relating to this tax in budget 2012. We believe that to apply any further increases to this tax would be counterproductive for the wider economy in the context of long-term export targets because such increases would basically undermine farm development and viability in circumstances in which a property is being passed from one generation to the next. To put this in real terms, the changes in last year's budget meant that a young farmer taking over a business whose land and other assets exceeded €2.5 million in value - which is not a huge sum in the context of farmland, stock, etc. - is at risk of a substantial tax liability on the excess at a rate of 30%. That is not a good incentive when one is only starting out.

We are calling for the reversal of the measures introduced in last year's budget which led to an upper limit of €3 million being placed on capital gains tax retirement relief in cases in which the farmer handing over the land and assets is aged over 66. In the first instance, such a farmer receives no benefit when he or she transfers the assets to the next generation. The idea in this regard was to try to encourage people to hand over their farms before they reach 66 years of age. The reality is that while early transfer is desirable, it is not always possible for a variety of reasons. These include age, the circumstances of the successor, etc. This is just a nasty tax.

It goes without saying that income tax is also a major issue. Despite the Government's stated policy to place more emphasis on expenditure reduction rather than tax increases, the reality is that this objective is hindered by the measures contained in the Croke Park agreement. The cumulative impact of all of the budgets introduced since 2007 is that income tax, combined with PRSI and the universal social charge, is at a level which is really damaging the incentive to work. In addition, it is extremely onerous for unincorporated sole traders such as farmers. The ICSA submits that there is a serious need to review this increase in the effective tax rate - where there is profitability - to 52%. When we say this, we are mindful that if a farmer buys a parcel of land adjacent to his property, he is obliged to pay for this out of after-tax income. It is continually stated that 12.5% is the maximum rate of tax we can afford to impose on companies. For many reasons, farmers do not want to go down the road of incorporating their businesses and they are being taxed at a much higher level as a result. Self-employed people and workers who help farmers, such as veterinarians and silage contractors, are all being affected by that to which I refer.

We are also concerned about the fact that the taxes on fuel are damaging to the sector. These have had a huge impact in the context of escalating silage costs, which, in turn, undermines the viability of cattle enterprises. It is also leading to increased purchasing of fuel outside the jurisdiction. I do not refer here to green diesel relating to silage but rather to live exports of cattle. All of these extra carbon costs are adding to farmers' overall costs. We call on the Government to suspend the carbon tax to alleviate pressure on businesses, including those of farmers. With the tax standing at over 6 cent per litre on green diesel - or €20 per tonne, up from €15 per tonne before 1 May 2012 - it is adding costs to the farming process and is definitely hindering farmers' ability to produce and export at competitive prices. The current rate of €20 per tonne is costing farmers €32 million per year. A double offset in respect of carbon tax and income tax was introduced last year but this is extremely difficult to administer.

It varies depending on which rate of income tax one is on, and the double offset applies on the carbon tax which came in after 1 May this year. It is limited because of the huge complications. It is just not working well.

Finally, on the issue of taxation, we propose that stock relief at a rate of 50% be made available to all farmers. The 50% rate was introduced last year for partnerships, which is a positive development, but in every sense of the word stock relief makes common sense for the Exchequer because it is an encouragement to people to expand their farms, which means that in the long run we are increasing exports and increasing our potential tax take, because as farms expand their stock numbers they will hopefully become more profitable. To our mind it should be available to all farmers, not just those in partnerships.

We are quite concerned about the environment for private pensions. For farmers and other self-employed people, pension planning is a huge challenge and the Government needs to tread much more carefully to avoid making it impossible. At a minimum we are calling for the removal of the 0.6% pension levy and also that the universal social charge and PRSI be fully offset against pension contributions, along with PAYE at whatever rate.