IFA BUDGET REPORT October Budget 2018

Transcription

1 IFA BUDGET REPORT October 2017 Budget 2018

2 2 Table of contents 1. INTRODUCTION BACKGROUND TO BUDGET AGRICULTURE BUDGET... 4 OVERVIEW OF AGRICULTURE BUDGET FOR FARM SCHEMES & OTHER EXPENDITURE Agri-environment programmes Sheep Welfare Scheme Areas of Natural Constraint (formerly Disadvantaged Areas) Beef Data and Genomics Brexit Loan Schemes Forestry Farm investment grants TAMS Horticulture Food, safety, animal health and welfare State Agencies OTHER SPENDING MEASURES RELEVANT TO FARM FAMILIES... 7 SOCIAL PROTECTION & EMPLOYMENT Social welfare payments Rural Social Scheme State Pension Contributory and Non-Contributory Fuel Allowance Telephone Allowance Minimum Wage... 7 RURAL AND COMMUNITY DEVELOPMENT National Rural Development Schemes Town and Villages Regeneration LEADER... 7 HEALTH Prescription charges Fair Deal Home Care packages Primary Care Mental Health... 8 OTHER EXPENDITURE AREAS Office of Public Works Renewables Justice AGRICULTURAL TAXATION... 9 STAMP DUTY FARMING MEASURES... 9 FARM LAND UNDER SOLAR PANELS... 9 SEAI ACCELERATED CAPITAL ALLOWANCE SCHEME... 9 CAPITAL ACQUISITIONS TAX AGRICULTURAL RELIEF... 9

3 3 5. GENERAL TAXATION INCOME TAX Earned Income Tax Credit Income Tax Bands Other Income Tax changes UNIVERSAL SOCIAL CHARGE STAMP DUTY FOR COMMERCIAL PROPERTY CAPITAL GAINS TAX 7 YEAR CGT RELIEF SCHEME KEY EMPLOYEE ENGAGEMENT PROGRAMME (KEEP) EXCISE RATES SUGAR TAX EMPLOYER CONTRIBUTION TO NATIONAL TRAINING FUND LEVY - EMPLOYER PRSI ECONOMIC OUTLOOK AND THE PUBLIC FINANCES THE NATIONAL ECONOMY PUBLIC FINANCES Budget balance and debt sustainability... 13

4 4 1. Introduction background to Budget 2018 The economic outlook for Ireland for 2018 remains positive, with growth of 4.3% in the economy in 2017, and projected growth of 3.5% in In relation to its public finances, Ireland has made significant progress in recent years in restoring this to balance. As a result, it is no longer subject to the EU s rules applying to countries with large budget deficits ( Excessive Deficit Procedure ). However, it continues to operate under strict EU fiscal requirements, which are focused on achieving a balanced structural budget, that is, a balanced budget when one-off factors and the economic cycle are taken into account, and reducing the level of debt as a % of GDP. As the Government was committed to achieving a balanced budget in 2018, the scope for significant increases in spending or of tax reductions was quite limited. In its Summer Economic Statement, it was estimated that approximately 500m was available for the Government in the 2018 Budget, of which 180m was allocated for public service pay restoration. The Government delivered an increased budget allocation of 1.2b for the 2018 budget, comprising 898m of additional expenditure and 335m of tax reductions. In order to deliver this package, and to reach the target of balancing the government finances in 2018, revenue raising measures, or tax increases, of 830m were also introduced. 2. Agriculture Budget Overview of Agriculture Budget for 2018 Expenditure in the Department of Agriculture is set to increase by 65m, or 4% in 2018, from 1.47b to 1.53b. Programme expenditure under the Rural Development Programme will increase by 25m, from 601m in 2017 to 626m in A summary of expenditure for the Agriculture budget is provided in Table 2.1 below. Table 2.1 Summary of Expenditure for the Department of Agriculture ( m) (est.) DAFM ( m) 2018 (est) 2017 Change from 2017 ( m) % change from 2017 Gross expenditure 1,533 1, % Less Receipts % Net expenditure 1,250 1, %

5 5 Farm Schemes & other expenditure Agri-environment programmes Funding for the Agri-Environment schemes (GLAS, AEOS Organics, Locally Led) is set at 238.8m for This is a reduction on the 2017 allocation of 245m mainly due to the fact that the number of farmers in AEOS is less, and less of a carryover from 2017 to The specific allocations are GLAS 211m; AEOS 6m; Organics 10.5m; and Locally Led 11.5m Sheep Welfare Scheme Funding of 20m has been allocated to the Sheep Welfare Scheme in Areas of Natural Constraint (formerly Disadvantaged Areas) An additional 25m has been allocated to the ANC scheme for 2018 to bring the total funding to 227m. Details as to how it applies will be decided in early Beef Data and Genomics The allocation for the BDGP is 50m Brexit Loan Schemes 25m is to be provided to support the development of low cost loans for farmers, fishermen and food businesses in The details of these loan products have yet to be worked out. IFA will be seeking funding for both working capital and on-farm investment measures. Separate to this, a 300m low-cost loan scheme is to be put in place for businesses impacted by Brexit (this includes food businesses but excludes primary agriculture and fishermen) Forestry The funding for Forestry is 106m, down from 111m in This is mainly due to planting targets not being met and farmers falling out of premium payment Farm investment grants TAMS A funding allocation of 70m has been announced for the TAMS on-farm investment programme. This is an increase of over 20m on the 2017 allocation of 50m Horticulture Funding for capital investment has been maintained at 5m Food, safety, animal health and welfare Total funding allocated is 87m under this heading, which includes 34m for TB and Brucellosis eradication and 4.2m for animal welfare State Agencies Funding for the state agencies has been increased from 241m in 2017 to 257.6m for This mainly reflects an increase in funding for Bord Bia and BIM to provide additional resources and support to the agri-food sector to deal with the potential fallout of Brexit. Changes to the funding of the main farm schemes are outlined in Table 2.2.

6 6 Programme Table 2.2 Main changes to programme expenditure 2017 ( m) allocation 2018 ( m) allocation 2018 vs 2017 Agri-Environment Schemes Beef Data and Genomic ANCs Sheep Welfare Scheme TAMS Knowledge Transfer Forestry & Bioenergy Horticulture Grant Aid TB and Brucellosis eradication

7 7 3. Other spending measures relevant to farm families Social Protection & Employment Social welfare payments Payment rates are to increase by 5 per week for all weekly social welfare payments including Farm Assist, Job-Seekers Allowance and Benefit, Disability Allowance and Carers Allowance. There will also be a 2 increase for each qualifying dependent child. These increases will take effect from the week beginning 26th March A Christmas Bonus of 85% will be paid to social welfare recipients in Rural Social Scheme 250 additional places will be allocated on the Rural Social Scheme bringing the total number of places to 3, State Pension Contributory and Non-Contributory There will be a 5 increase in all maximum weekly pension payments (contributory and non-contributory), to take effect from the week commencing March 26th Fuel Allowance The Fuel Allowance will be extended to 27 weeks Telephone Allowance A new Telephone Support Allowance of 2.50 per week is to be introduced for those in receipt of the Living Alone Allowance and Fuel Allowance Minimum Wage The National Minimum wage will increase by 30c to 9.55/hour in Rural and Community Development National Rural Development Schemes An additional allocation of 8m has been allocated to National Rural Development schemes including rural recreation (up 50%) and Rural Walks measures; the CLAR programme; and support for the rural plan for rural development (up 33%) Town and Villages Regeneration 3m has been allocated to the Town and Villages Regeneration Scheme LEADER An additional 5m has been allocated to LEADER, bringing the funding allocation to 45m.

8 8 Health Funding for Health was increased by 685m, or 5%, to bring total funding to almost 15.3b in Prescription charges Prescription charges for all medical card holders under 70 will reduce from 2.50 per item to 2 per item, with a reduction in the monthly cap from 25 to 20, while the threshold for the Drugs Payment Scheme will reduce from 144 to Fair Deal The Nursing Home Support Scheme will receive a budget of 949.7m in Home Care packages An extra 37 million for Home Care packages and Transitional Care beds was announced in the budget Primary Care A new primary care fund of 25 million to support development of GP services, expand community intervention teams and hire more Occupational Therapists has been announced Mental Health Funding for mental health services will increase by 35m in 2018, to reach total funding of 885m (this represents an increase of over 25% in funding for mental health since 2011). Other Expenditure areas Office of Public Works 432m has been allocated to various flood relief projects Renewables 17m will be allocated for the rollout of the Renewable Heat Incentive and to incentivise the uptake of electric vehicles Justice 800 additional Gardai and 500 civilians will be recruited during 2018.

9 9 4. Agricultural Taxation The Budget contained a number of changes to existing taxation and the introduction of a number of new taxation measures. The following are the main agri-taxation and general taxation changes announced in the 2018 budget. Stamp Duty farming measures Stamp duty relief for inter-family farm transfers (Consanguinity Relief), which was due to expire at end December 2017, is to be retained at 1% for a further 3 years. The exemption from stamp duty for young trained farmers is to be continued. Farm land under solar panels Agricultural land under solar panels is to be classified as qualifying agricultural land for the purposes of Capital Acquisition Tax and Capital Gains Tax reliefs. This will only apply if the panels cover no more than 50% of the farm holding. SEAI accelerated capital allowance scheme This scheme, which supports investment in energy efficient equipment, and which includes expenditure undertaken by farming enterprises, is being extended for a further 3 years to end Capital Acquisitions Tax Agricultural Relief Agricultural Relief continues to apply at a rate of 90% on agricultural property. There was no change in the Group A (parent to child) CAT threshold of 310,000, which means that the value of a farm that can be transferred from parent to child remains the same - up to a maximum lifetime amount of 3.1m.

10 10 5. General taxation Income tax Earned Income Tax Credit For self-employed tax payers, including farmers, who do not receive the PAYE Tax Credit, an Earned Income Tax Credit of 550 was introduced in 2016 and increased by a further 400 to 950 in For 2018, there is a further increase of 200 to 1,150. This change also means that the income threshold for self-employed people entering the tax net is increased from 13,000 to 14, Income Tax Bands The 20% income tax band is increased by 750 from 33,800 to 34,550 per single taxpayers, and from 42,800 to 43,550 for married one-earner couples Other Income Tax changes The Home Carer tax credit is being increased by 100 to 1,200. This applies to single income married couples with children or who care for an elderly or incapacitated relative. Universal Social Charge Incomes of up to 13,000 are exempt. For persons with incomes over 13,000 the rates of USC for 2018 are as follows: - The lowest rate of 0.5% which applies to the first 12,012 of income is unchanged. - The 2.5% rate is to be reduced to 2.0%; this applies on income from 12,013 to the increased threshold of 19, The 5.0% rate is to fall to 4.75%; this applies to income between 19,773 up to 70, There is no change to the rate applying over 70,044 i.e. 8%. Self-employed earnings over 100,000 pay a 3% surcharge. People earning over 70,044 per year will not get any benefit on the portion of their income above 70,044, but will benefit on the portion of their income below that figure. Stamp Duty for Commercial Property Stamp duty on commercial property, which was reduced to 2% in 2011, is being increased to 6% from midnight on 10 th October This applies to non-residential property, including farmland. In relation to commercial land purchased for development of housing, a stamp duty refund scheme will be introduced (the details will be contained in the Finance Bill). Capital Gains Tax 7 year CGT relief scheme Qualifying assets purchased under the 7 year CGT Relief Scheme (i.e. those purchased between 7 December 2011 and ending on 31 December 2013) can now be sold between the fourth and seventh anniversaries of their acquisition and will still enjoy a full relief from CGT on any chargeable gains.

11 11 Key Employee Engagement Programme (KEEP) A share-based remuneration initiative is being introduced to support share-based remuneration by SME companies to attract key employees. Gains arising to employees on the exercise of these share options, will be liable to CGT on disposal, rather than being liable to income tax, USC and PRSI. This will be available for share options granted between 1 January 2018 and 31 December Excise rates Excise duty on 20 cigarettes is increased by 50 cents. Sugar tax A tax on sugar sweetened drinks is being introduced on 1 st April next. The rate of tax is linked to the sugar content of the drink. Employer contribution to National Training Fund levy - Employer PRSI From 1st January 2018 there will be a 0.1% increase in the National Training Fund Levy payable by employers with respect of employees in Class A and Class H employments. In effect, this means that the 10.75% rate of employer PRSI will rise to 10.85% in January 2018

12 12 6. Economic outlook and the public finances The national economy The outlook for the economy for the next three years, , remains positive; however future growth projections have been revised downwards, driven largely by the uncertainties of the international economy, in particular the impact of Brexit on the UK, EU and Irish economies. With over 40% of exports currently going to the UK market, the Irish agri-food sector will be particularly affected by the outcome of the Brexit vote, both the short term economic impact of currency fluctuations and unpredictable consumer sentiment, and the longer-term trade and EU budgetary positions. It is expected that the Irish economy will continue to grow next year, with a predicted growth of 3.5% of GDP in The unemployment rate continued to fall in 2017, and is now close to 6% and is expected to fall further. Table 6.1 outlines the projected changes in the main economic indicators over the next three years. Table 6.1: Economic Outlook (% Volume Changes) Gross Domestic Product (GDP): Gross National Product (GNP): Personal consumption: Public consumption: Fixed investment: Exports: Imports: Inflation (HICP) Employment growth (%) Unemployment rate (%) Public finances Under the terms of the Fiscal Treaty, Ireland is required to keep its budget deficit to below 3% of GDP, with its debt:gdp ratio moving towards 60%. Table 6.2 outlines the expected changes in Government expenditure and revenue over the next three years and the impact of these changes on the budget deficit. The Government intends to have a balanced budget in 2018 (deficit of 0.2% of GDP). Table 6.2.: Budgetary Projections ( m) Heading Expenditure Net Current Expenditure 51,255 53,070 54,080 55,240 Net Capital Expenditure 5,365 6,120 7,405 8,005 Total Expenditure 56,620 59,230 61,485 63,245 Revenue Tax Revenue 50,620 53,660 56,380 59,095 Non-Tax Revenue 2,800 2,345 1,925 1,633 Capital Resources 4, ,

13 13 Total Revenue 58,090 51,950 59,515 61,663 Contingency Reserve General Government Balance As a % of GDP Structural balance as % of GDP Budget balance and debt sustainability The General Government Deficit for 2017 is 0.3% of GDP and is estimated at 0.2% of GNP in The Minster stated that as well as maintaining broadly balanced budgets, the Government will establish a contingency or rainy day fund in 2018 by transferring at least 1.5 billion to it from the Ireland Strategic Investment Fund. From 2019 there will be annual contributions of 500m to the rainy day fund. As a key measure of the sustainability of the public finances, the debt:gdp ratio of 69% of GNP indicates a positive movement towards the target of 60%. It should be noted that this figure peaked at 120% of GDP during the recent crisis. Debt servicing costs have continued to reduce in the last number of years. The reduction in the debt:gdp ratio reflects (i) the reduced deficits (ii) the significant growth of the overall economy, and (iii) the exceptional upward adjustment to the GDP growth in 2015 and subsequent years. Table 6.3 Government Debt Projections Year Govt Debt ( b) Govt Debt as a % of GDP