Growing older to reduce taxation

Your Age and Irish Taxation

Some people are old at forty and some eighty year olds are as young as the grandchildren they babysit.

We all grow old it is the basis of life in the universe. From the time of the Big Bang forward the universe has been steadily aging, cooling, and converting its energy from ordered into unordered forms in order to eventually over billions of years to come to an end. If that didn’t depress you then the good news is that in Ireland your age can offer some tax benefits

(1)    Pension Contributions: the amount of money which qualifies for tax relief that you can invest in a pension as a percentage of your income increases as you get older:

Age	Amount which qualifies for tax relief
Under 30 years	15% of net relevant earnings
30 to 39 years	20%
40 to 49 years	25%
50 to 54 years:	30%
55 to 59 years	35%
60 and over	40%

This is subject to a limit of €115,000 of income which can be taken into account and the fund can only be €2 Million before any amount drawn from it is taxed at the high rate of tax (2016 Levels)

(2)    If you are over 65 then then the first €18000 of annual income is exempt from income tax and €36000 for a married couple (increased by 575 for first and second dependent child and 830 for each subsequent child) Perhaps when you are 65 it would be a good time for them to be leaving home but if they do stay then at least your tax is lower.

(3)    If you are over 65You get an extra tax credit called the Age allowance which is worth €245 if you are single or widowed and €490 if married or in a civil partnership.

(4)    Retirement Relief is available on the sale of your business once you reach 55 and over

(5)    You are exempt from DIRT if you are over 65 and your income is below the exemption limits above. (If you are over 65 and have been charged DIRT then get on to us and we can help you reclaim it.)

(6)    Young trained farmers, there are a number of tax breaks and stamp duty concessions available for young trained farmers. These are farmers who are under 35 and who have completed certain farm related qualifications.

Like everything in the tax code your treatment depends of very specific details. Taxation is based on detailed laws and regulations and not on fairness (even though it is meant to attempt to attain fairness which is hard to see in the current system with a 12.5% tax rates for the biggest of companies). It’s important not to miss out on any tax breaks you might have coming to you due to your age.

© Frank McGivney, Frank McGivney & Co. Chartered Management Accountants, 0469293891 27/04/2016

S.W.O.T Analysis of the Agrifood Business in Ireland

S.W.O.T Analysis of the Agrifood Business in Ireland

Written by Frank McGivney BA ACMA CGMA

Date 02 May 2013                               

Introduction: Ireland has been a country of farmers for centuries we have the strong natural resources to both sustain ourselves and to export the balance of our agricultural produce to the outside world. In a dynamic and changing world what is the future of Irish agriculture? Agrifood is the business of selling our agriculture produce both domestically and internationally. 

(1)   Strengths

Ireland is one of the largest beef and dairy exporters in Europe. We have a long established agrifood business which is based on the many strengths that Ireland has as a agricultural country. We have a very productive natural resource in the land and the climate that we experience. There can be adverse climate effects over the course of a number of years such as the current lack of growth in feed and grass due to the cold weather we have experienced. Ground temperatures have failed to reach the 6degrees necessary for growth and animals are dropping in the fields from a lack of fodder. However in general over the longer term we have a very productive natural resource.

We also have a very strong reputation in foreign markets. Ireland is seen as a country that supplies high quality produce and this helps the Irish agribusiness to get a foot hold in the supply chain abroad.

We also are known for having a regulatory framework which ensures the quality and consistency of the agriproducts we produce. It was Ireland and its monitoring environment which highlighted the presence of equine meat in the human food chain throughout Europe. We have a very strong TB testing regime and the department of agriculture and the use of herd numbers and paper trails based on animal tagging ensures the traceability of all animal stock in the country.

We also have strong human skills and experience which are world class. We have been farming and involved at a high level in the agribusiness for many years. These skills are the foundation of the future growth and prosperity of the Irish agribusiness. After all you can have the greatest resources in the world but they are no good to you if you don’t know how to use them productively and efficiently in a manner that meets market demands.

(2)   Weakness

We also have some significant weaknesses which hinder our potential progress unless they are addressed properly.

We have an inherent constraint on our production capacity due to the size of the country. There is after all only so much land available to us. There is nothing we can really do about this however what we can do is operate the land we have available to us in the most efficient, effective and productive manner possible. One of the hindrances to this is the traditional ownership model in Ireland. The average farm size is 33 hectares owned by individual farmers on an owner occupier model. This model does not lend itself to efficient methods of production. Larger farm sizes if run properly could lead to significant economies of scale and marked increases in production and output. Of course this is a purely economic analysis and does not take account of the socio economic consequences of a complete divergence from traditional farm structures. Although listening to the recent outcry about the fodder shortages I feel a change may be no harm when the sadness, isolation and loneliness of a generation of bachelor men living on farms was brought to light.

Our existing model of agribusiness is based on selling our produce as a commodity or as a food ingredient. We do not sell to a large extent to the final consumer. The problem with this is that the margins on commodity sales are a lot lower than the margins on end user sales. Therefore although the volume of sales is high the profit margin can be low. It certainly isn’t optimized by ignoring our potential to sell directly to the final consumer either through ourselves or in partnerships. Any move up the supply chain may offer greater profit margins.

There is also a lack of resources allocated to investment in research and development of products and product innovations. Consumer demand is rapidly evolving and it is vital that any business recognizes the need for constant innovation in order to remain appealing to the final consumer

(3)   Opportunities

I feel that with all the talk of recession and gloom and doom that people can forget that there is always opportunities for business. It is just necessary to discover where the opportunities lie. If you are a plasterer and think you can continue to make money hand over fist by subcontracting into the construction business on housing estates then really you are only fooling yourself. If however you are a plasterer and you research consumer demand and discover a way of using your skills to offer premium services to the final consumer (such as for example restoration work) then you have the potential to develop a successful business. The same is true for the agri business.  The potential is two fold first of all investing in innovative products which meet the demands of the consumer and secondly moving into the markets which have the greatest potential for growth.

The agribusiness has to offer products that are demanded. In order to access the high margin levels of the supply chain we need to offer innovative products. This may be just a case of marketing existing products in a different manner or accessing the retailer directly or even entering the retail market ourselves.

Traditionally the Irish agribusiness has concentrated on existing markets which are largely developed countries. However it has started to make inroads to newer markets such as the BRIC countries of Brazil, Russia, India and China which are all considered to be at around the same level of development. Also the VISTA countries of Vietnam, Indonesia, South Africa, Turkey and Argentina are under going significant development and growth. It is these types of countries where we can differentiate the Irish agribusiness and avail of the opportunities that they offer. We can’t really produce the volume to feed the poorer countries food demands and we may not want to try. The high volume sales that poorer countries offer are usually at very low profit margins. Ireland however has a limited supply of agricultural produce so we need to maximize out profitability on this limited supply and this is achievable by targeting the growing middle classes in developing countries.

The opportunity is there to go to these countries and perform the due diligence and research needed to generate a market for Irish agrifood. We could foster partnerships both within our own economy in order to achieve economies of scale and to reduce costs such as marketing and transportation. We could also establish partnerships with retailers or producers in the developing countries to reach higher levels of the supply chain and sell high volume output at high margins.

Another major opportunity is to sell our skills set. We have some major agrifood businesses which have developed into world leaders. We can sell the skills we have obtained to other countries. Many countries may have great natural resources or machinery but they lack the people necessary to optimize these resources. By sending our talented people to these countries we can make a lot of money and help develop markets that we can then sell our products into.

(4) Threats

The world economy is currently in a major recession and this is a barrier and threat to the Irish agri business. The banking sector is very hesitant to give finance to business and this may prevent the necessary investment needed to access global markets. The recession has also resulted in weak demand through the world economies as unemployment levels rise and the disposable income of people falls dramatically.

The common agricultural policy is been renegotiated and this can be seen as a potential threat if the negotiations do not promote the growth of the agri business sector.

There are factors outside the control of the agribusness such as ever increasing energy costs and weak exchange rates for the euro. These have to be worked with and managed by the industry.

The biggest threat is the consumer itself. The consumer is constantly changing its behavior and demand patterns. People no longer are influenced so much by huge advertising campaigns. Increased access to the internet makes people aware of the full range of foods available and also allows them to judge the quality and source of the food they are buying. It is the objective of any agribusiness to keep up with the demand patterns and behaviors of consumers and to offer products which meet this demand.

In conclusion the agri business has potential to avail of the huge forecasted growth in global demand for food products. We just have to be aware of this potential and focus our efforts on the areas which will offer the greatest returns for the resources we have available to us.

Reaction to property tax

I've been listening to the reactions of peoples to the property tax letters on the radio. To me the reactions are the initial proof that the Irish government has made a huge mistake trying to impose a high property tax on the people of Ireland.
One set of people are ringing in complaining that their property isnt valued high enough and another set are ringing in saying that the property is not valued low enough. The people ringing in are pure irrate at the revenue for not getting thier property values right and are saying that Daft.ie is more accurate then the revenue estimates.
Like I was saying in previous articles, people in Ireland are used to getting their net income and been told how much tax they owe especially if they are PAYE workers. But with the property tax you have to look at your own circumstances and calulate the tax yourself. This is a huge change for people.
Its the reason people are been so angry with the revenue and in a way they are right. If you develop a culture of not having to claculate your own tax then trying to impose such a fundamental change then it is bound to be met with resisitence
Anyone who has dealt with the revenue knows that they always use estimates. The estimates are just a way of establishing a debt which they can enforce. However they will always come back looking for the correct figure. There are millions of houses in Ireland so there is no way they can independently value each house. So they produce estimates which will on average over the size of the population give a mean value which will be apporximatley correct. Remember the revenue is unlike most government agencies and is in fact run quite cost effectively (okay not in all circumstances but certainly better than most government bodies). As a result the benefits of incurring the costs of valuing each individual house would not be justified so instead they work with estimates and risk analysis and reporting by exception.
It is up to each individual tax payer to put in a correct return as best they can. After all no matter what figure you come up with its only an estimate on your part as well. Because who knows how much any particular house would sell for in a depressed housing market.
The revenues work is based on risk analysis. So they will look at all the returns in total and determine which ones are the most likely to be wrong and then they investigate them. So fr a basic example if everyone in your street values their house in and around 200,000 to just say 300,000 (covering two value bands) and your house is valued at 50000 then you may expect to come up as someone to look into. If you can explain the reason for the difference then they will accept it generally.
In all likely hood the returns they will follow up are ones selected from a random sample and ones of a high value where the individual tax is likely to be high enough to justify chasing up any tax under paid.
My point really is that the Irish government have opened up a mine field for the revenue commissioners to step into.
Author Frank McGivney 13 March 2013 All rights retained by author