The increased carbon tax and additional wage costs announced in the budget last week will force agricultural and forestry contractors to increase their rates in 2026, according to the Association of Farm & Forestry Contractors in Ireland (FCI).

FCI has said that it is very disappointed with the outcome of Budget 2026 for the agricultural and forestry contracting sector, which turns over in excess of €1bn annually.

The FCI said: “This comes at a time of low contracting margins, [and] labour shortage challenges, all of which have been perpetuated by a lack of Government support, to the point that the sector is obviously considered non-existent or at best invisible from within the Department of Agriculture, Food, and the Marine.”

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Carbon tax

This budget brings further new challenges for contractors, with rising green diesel prices due to further carbon tax increases to take effect in May 2026. This will bring the carbon tax on green diesel to 17.1c/l by May. “While FCI welcomes the use of some carbon tax ring-fenced funds to support the tillage sector, we are disappointed that despite pre-election promises and the fact that agricultural and forestry contractors are the frontline payers of the carbon tax, more than any other sector of agriculture, our sector has not received any ring-fenced funds from the huge annual contributions from our sector,” said Ann Gleeson Hanrahan, managing director of FCI.

Wages

Last week’s budget has added additional wage costs due to minimum wage increases and the extra sector costs to be incurred from January 2026, as a result of the new pension regulations. Employers’ PRSI contributions have also increased in the budget from 11.25% to 11.40%.

No VAT reduction

This budget allowed for the funding of a VAT reduction in the hospitality sector while calls for a similar reduction for agricultural contractor services were totally ignored, the association said.

“The special VAT rate reduction scheme for farmers will be reduced from 5.1% to 4.5%. This is designed to compensate eligible farmers who are not VAT registered. This will make agricultural contractor services more expensive to those farmers by lowering value of their available refunds,” the FCI said.

The FCI added that its call for a mini-jobs scheme, similar to one available in Germany which supports workers to take on additional farm-type work with a fixed tax rate, was ignored. The FCI said that this lack of progressive taxation solutions already proven to work in other countries, is continuing to make the employment of part-time machine operators in agricultural contracting businesses very costly, at a time when it is impossible to pass on these costs to their farmer clients.