Michael Moynihan (Cork North West, Fianna Fail)
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78. To ask the Minister for Finance the average effective tax rate on the income of farmers based in the south west; if he will provide an update on the impact on the average farmer of the Revenue Commissioners' treatment of patronage shares as income, assuming they sell the shares and pay capital gain tax at 33%; and if he will make a statement on the matter. [1739/17]

Michael Noonan (Limerick City, Fine Gael)
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A taxpayer's average effective rate of income tax is the average rate of tax they pay on their income as a whole in any tax year.  Due to the nature of the Irish tax system, incorporating tax credits and standard rate bands, this effective rate varies from person to person depending on both their income and their personal circumstances.  For example, low income individuals can have a zero or very low effective tax rate where their income is largely sheltered from tax by personal tax credits, whereas individuals with higher incomes paying tax at the higher rate would have higher average effective rates of tax.

What may be of more relevance is the marginal rate of tax, which is the rate of tax paid on any additional income received by a taxpayer in a given tax year.  Again, this would vary from person to person, based on their individual circumstances.

In the most recent analysis conducted by Revenue in relation to the farming sector, published in July 2016, there was no specific analysis of the average effective rate of tax.  However the analysis did provide a breakdown of the average farming income by county.  For the counties of Cork, Kerry and Limerick the average farm income, being the net farming profit subject to income tax, was respectively €32,398, €20,851 and €27,268.  This report is available on Revenue's website, at the link set out at the end of this response.

I have been informed by Revenue that the average value received by farmers in respect of patronage shares in the years 2011 to 2013 was between €3,510 and €4,860.  Based on these figures and the average farm incomes listed above, it is possible that the marginal rate of tax on this additional income may be the standard rate of tax for many farmers.  Farmers whose other income in the relevant year has already exceeded their Standard Rate Band would be liable to income tax at the higher rate of tax.

Deputy Moynihan's question would appear to suggest that Revenue should conduct a tax yield analysis and use this to decide the tax treatment which should apply to a given transaction.  As I have already stated, this is neither possible nor, I am sure the Deputies would agree, desirable.  Revenue's role is to collect the taxes lawfully owing to the Exchequer, and they do so in accordance with the legislation enacted by these Houses. See www.revenue.ie/en/about/publications/farming-profile-2016.pdf