Wednesday, 10 February 2010
Finance Bill 2010: Second Stage (Resumed)
Seán Sherlock (Cork East, Labour)
In furtherance of the last point made by Deputy Rabbitte, the fact this is a windfall tax on landowners whose sons or daughters may seek to build a house near the family home in a rural area, based on a genuine housing need, is an issue that needs to be re-examined.
I wish to speak specifically to the issue of the carbon tax and the permutations of that tax for the agricultural sector. Speaking as a Deputy of the Labour Party, a party with no apparent natural ties with the agricultural sector, it could be argued that anything we may say on this subject will not always be taken seriously by those who operate within the rural economy. I want to put on record that what is vital to the recovery of this economy is how the rural economy will thrive.
The imposition of the carbon tax, for example, particularly as it pertains to marked gas oil or agricultural diesel, will have a severe impact in terms of the cost inputs for those who operate within the agricultural sector. Be they primary producers or agricultural contractors, the very fact a tax of this nature is being levied at 8.7% when road diesel is at 4.4% will cause an undue cost impact for those who are operating within this sector, and it needs to be revised. There is an irony to the situation. For the multiples such as Tesco, their lorries on the road are subject to a tax of 4.4% whereas the primary producers such as the farmers who are producing for the multiples are being levied at 8.7%, which will put a further squeeze on those primary producers in terms of their ability to supply goods into the market. This is an issue that needs to be taken on board, particularly by the Green wing of the Government, who have heralded this carbon tax as the dawn of a new age.
In principle, we are all in favour of the tax, but it has to be on the basis that it is levied with some degree of equity and fairness. I do not believe a proper analysis was undertaken of this measure before it was decided upon. It should be revised and revisited because it has not been costed and it will have a negative impact on the very recovery that is necessary for this economy, particularly in terms of how the rural economy weighs into that recovery. I would like a response from the Minister on this issue when he is replying to the debate.
I wish to refer the Chair to an e-mail I received from a farmer who is directly impacted as a result of this proposal. He stated:
I too have no problem with CT [carbon tax] but only if it is dealt out in fair way. To me it seems that this tax at nearly double the road % is a tax on production. ... Another concern I would have is that seeing new engines in tractors are going to cost on average between 20%-50% more than now, this tax would be a barrier to cleaner and newer emission targeted machines being used in agriculture, as people will just make do [that is to say, make do with existing machinery]. It is a fact that these newer tractors burn more fuel due to the nature of the emission recycling that goes on. ... By hook or crook everyone in agriculture will be affected by the rise, any contractor will just have to pass it on to customers, and they are finding it hard enough to get paid as it is.
We need to take a more lateral view as to how the carbon tax will be implemented. From an agricultural perspective, it is proven that agricultural incomes were down significantly in 2009 - the figures are there for everybody to see. If one is operating a large-scale farm unit, the chances are one will be able to absorb the extra costs because one has the economies of scale to be able to do so. However, in the case of a small farmer, such as a hillside farmer or sheep farmer on a small margin, any increase in costs of this nature could have the potential to put that farmer out of business. We need to revise this mechanism on that basis alone.
I keep coming back to the idea that if the agricultural sector is to form a part of our economic recovery, what we must not do is place an undue burden on the costs of production. The costs of production, if one considers the overall economy, have to be the same for agriculture as they are for the lorries that supply Tesco and the other multiples, which take their primary products from those same primary producers. We need equity in this regard.
I also refer the Chair to the proposal by the Irish Farmers' Association, which stated:
Farm diesel has excise duty charged at a lower rate than road diesel or petrol. Furthermore, the rate of VAT applying is the low rate of 13.5% as compared with 21% for normal automotive fuels. The low rate of excise duty also applies to farm diesel in other EU countries. This demonstrates recognition by Government and at EU level that a lower rate of taxation is appropriate for farm diesel, which is exclusively used in agricultural production, than is applied to other motor fuels.
Again, we need to take cognisance of the fact that agricultural diesel, by its very nature, is used on-farm and primarily for agricultural related purposes - or it should be - and, therefore, if its cost to the farmer is increased, many farmers will be wiped out, particularly those in marginal areas. I ask the Government to revise this provision.