Budget 2023 - Agriculture

This past week has seen the welcome return of the National Ploughing championship, with an estimate of 300,000 people to attend the event. That is a stark reminder to the Government, in advance of Budget 2023 next Tuesday, of the importance of the agricultural sector to the Irish economy.

The agriculture sector represents a fundamental driver of economic activity and employment in rural Ireland. It is the oldest and largest exporting sector in Ireland. The Department of Agriculture Food & Marine reported in their 2021 Annual Review & Outlook that the sector employed 163,600 people or 7.1% of total employment in 2020. Agriculture also accounted for 9% of all exports from the State. These figures were reported in the face of a global pandemic and demonstrated the agricultural sector’s resilience, with exports and employment in the sector supporting a balanced regional economy. In addition the sector plays a key part in indirectly supporting local communities and economies.

Brexit continues to impact the agricultural sector with travel disruption, tariffs, regulatory changes, and reduced access to raw materials. Supply chain disruptions are causing difficulty also, with stock management costs rising substantially due to some farmers holding larger inventories as lead times from UK suppliers lengthen. The agri-food sector is still very heavily reliant on the UK market. Whilst the UK accounts for 11% of Ireland’s export of goods it accounts for 38% of agri-food exports. Securing an agreement on the NI protocol is vitally important to the sector. Identifying new opportunities in the EU is also critical for the sector.

The cost of agricultural inputs has been significantly increased by the worsening energy crisis, and the escalation of events in Ukraine has only compounded an already difficult trading environment. The Central Statistics Office (CSO) has in recent days released Agricultural Price Indices for July 2022. These statistics show that input price increases can be seen in fertiliser prices which are up 133.8%, energy prices which rose by 51.3% and in feed prices which are up 34.2% in the last 12 months. These price rises are eroding already low margins for many.

Additionally, the agricultural sector must adapt to climate uncertainty and reduce emissions of greenhouse gas. However, depleted margins caused by extraordinary price hikes will make it increasingly difficult for many farmers to engage with initiatives to tackle climate change.

There is no sector of society that is immune from the effects of spiralling inflation, and many businesses are expected to struggle with price hikes as they prepare their winter budgets, in particular those operating in the agricultural sector. Budget 2023 will provide an opportunity to introduce tangible measures to support the agricultural sector. We consider a number of factors below and how the Government can address these in the Budget.

Farm Schemes

There is a need to adjust existing schemes in order to tackle the increased cost of production and spiralling inflation.

The Fodder Support Scheme was introduced to incentivise and support farmers to grow sufficient grass and conserve sufficient fodder for the 2022 winter. This was to reduce the risk of animal welfare issues in the coming winter as a result of the Russian invasion of Ukraine and the impact this has had on input costs. Only farmers with grassland were eligible to apply, and no support was provided to dairy farmers. Payments were limited to a maximum of €100 per hectare, on up to a maximum of 10 hectares. The payment ceiling must be revisited in order to recognise farms with larger stocking levels and payments should be made in full for all hectares claimed. The scheme should also be extended to dairy farmers who are also experiencing increased input costs. Additionally, farmers who may not have land suitable to grow and save fodder, but have livestock over the winter should be eligible for support under the scheme.

The Targeted Agriculture Modernisation Schemes (TAMS) provide grants to farmers to build and/or improve a specified range of farm buildings and equipment on their holding. There is an ongoing investment requirement across all sectors, to improve efficiency and meet higher environmental and animal welfare standards. The Irish Farmers’ Association has stated that due to TAMS reference costs being out of line with the unprecedented rise in inflation and in particular the rising costs of materials, the number of farmers applying for TAMS support has declined significantly over the last year. There is a pressing need for this to be addressed by Government to ensure that reference costs are reflective of the real level of costs involved in investments on farms.


It is clear that Brexit has had a significant adverse impact on the Irish agriculture sector to date. The Brexit Adjustment Reserve (BAR) fund aims to provide financial support to the Member States, regions and sectors most affected by Brexit to deal with the adverse economic, social, territorial and, where appropriate, environmental consequences. Ireland, as the Member State most affected, has received a significant allocation of over €1 billion. A large element of this fund has yet to be allocated. The allocation to the Irish agricultural sector from the fund must reflect the obvious importance of the UK market to Irish agrifood producers and to safeguard them from the impact of Brexit.

A series of targeted financial & support measures are required to protect Irish farm operations into the future. Some supports, as outlined in the IFA Submission to Government regarding the allocation of BAR funds for the agricultural sector, may include:

  • Direct, targeted financial aid, in the form of De Minimis aid, to compensate for lost income incurred as a result of the weakening of sterling; atypical seasonal demand and/or other direct Brexit related reasons;
  • Measures, including direct-aid to support improved performance, efficiency and/or sustainability of the agricultural holding and therein support improved income resilience;
  • Measures to promote On-Farm Diversification.

Climate Action

Climate change is a challenge for Irish agriculture, both in the context of greenhouse gas emissions, and the need to adapt farm practices to be more resilient to the effects of climate change.

The Environmental Protection Agency (EPA) recently found that in Ireland the Agriculture sector was directly responsible for 37.5% of national Greenhouse Gases (GHGs) emissions in 2021, mainly methane from livestock, and nitrous oxide due to the use of nitrogen fertiliser and manure management. As such, the agricultural sector must be a key player in leading Ireland’s climate action strategy.

The EPA highlighted two technologies which are available to reduce emissions going forward; Low Emission Slurry Spreading (LESS) and “Stabilised Urea” Fertilisers. There are a number of measures that, if introduced, could assist Irish farmers in incorporating these technologies into their farming practices:

  • Consideration should be given to removing any VAT on the purchase of LESS equipment to encourage further uptake of these spreading technologies.
  • Agricultural contractors should be allowed to avail of TAMS funding in order to invest in LESS equipment. It’s important to note that not all farmers will have the ability to afford such equipment.
  • Farm equipment which contributes to increased emission efficiency, such as LESS equipment, should qualify for accelerated capital allowances.
  • Farm input suppliers should be encouraged to stock “Stabilised Urea” fertilisers and farmers in turn must be incentivised to use it instead of nitrogen based fertilisers, possibly by way of the introduction of a tax credit system.

Greater emphasis should be placed on encouraging farmers to invest in renewable energy technologies. This could be achieved by way of a VAT reduction on all renewable energy products, which should include a reduced VAT rate on repairs and spare parts for renewable technologies. Consideration should be given to whether additional supports should be provided to encourage farmers to embrace the green energy agenda, such as wind and solar. The Ukraine war has demonstrated the importance of energy security and there must be opportunities for the agricultural sector

Energy Supports

The Government is finalising a range of supports for businesses to be announced in the Budget. It is vitally important that these supports are available for the agricultural sector. In this regard the commitment by the Tánaiste at the National Ploughing Championship that the agri-food sector will be included in any Government schemes relating to energy costs is welcome.

Capital Taxes

The Report of the Commission on Taxation & Welfare last week created significant controversy with the Commission recommending reducing the Group A (parent-child) CAT threshold. The Government quickly distanced itself from this provision, at least for Budget 2023. In addition the report recommended the reduction in the level of agricultural relief for CAT. The commission has clearly set its sights on capital taxes and the passing of assets from one generation to the next. This is quite concerning and certainly in the context of family farms, could be extremely emotive. Often farms will have been in families for numerous generations and there is a deep desire to retain the farm within the family. It is important that the taxation policy and those responsible for drafting the legislation fully understand the dynamics within which the policy is being set. Certainly many of those who attended the National Ploughing Championship understand the importance of the agricultural sector to Ireland.

Contact Us:

To discuss supports available to the agricultural sector, contact John Doherty, Assistant Tax Manager on (090) 6480600.

RBK Budget Briefing

RBK will be holding its annual Breakfast Budget Briefing as a hybrid event in person at the Sheraton Athlone Hotel and streaming live online on 28 September. Patrick Fannon, Tax Director, RBK will be analysing the tax measures announced in Budget 2023 and Oliver Mangan, Chief Economist AIB will look at the economic outlook. In the lead up to the Budget over the next number of weeks RBK’s Business and Tax advisors will look at potential tax measures that the Government could consider and areas of concerns that are facing our clients.