The increase in carbon tax of €7.50/t announced in the 2021 budget brings the total carbon tax penalty for Irish contractors to €33.50/t.

The Association of Farm & Forestry Contractors in Ireland (FCI) has said that this hike will cost contractors €13,455 per annum, based on a typical annual fuel consumption of 150,000l. The carbon tax now equates to 8.93c per litre of agricultural diesel.

FCI national chair John Hughes said that contractors, unlike farmers, do not have the benefit of the double taxation carbon tax relief or a rebate scheme like road haulage operators, despite the fact 90% of farm mechanisation work is carried out by contractors.

FCI had called on the Minister for Finance to seriously consider the option of offering zero VAT on all farm and forestry services or allowing a full VAT refund for non-VAT registered farmers.

This can then be offset by the creation of a ring-fenced fund, sourced by the millions of euro of unclaimed carbon tax credits, currently not being claimed by farmers under the carbon tax double taxation benefit.

“FCI believes that these funds are rightly due to the agricultural sector but because they are individually relatively small amounts per farm and are rarely refunded to individual farmers.”

FCI believes that the €36m carbon tax contribution of the farm and forestry contractor is funding schemes to encourage farmers to adopt low-emission machinery. This is a double-edged sword for Irish contractors.

“We cannot have a situation where the carbon tax contributions from the fuel bills of contractor are being used to grant aid farmers to buy machinery so as to put contractors out of business,” said Hughes.

No choice

He added that FCI members will have no choice but to increase existing charges by 14%.

The association says Irish contractors consume close to 350m litres of green diesel annually valued in excess of €262m.

“Over the period of the proposed increase in the carbon tax level from the previous base level of €20/t to €80/t by 2030, this will mean a substantial increase in fuel cost of close to €100m.

“Contractors will be forced to pass on this additional €100m cost to their 137,000 customers. These farmers cannot absorb this further increase at a time of tightening margins,” said the FCI.