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Key elements of national liquidity assistance linked to supply discipline have been established

On 2 November, the Federal Cabinet adopted the legal basis for further financial aid and tax relief. This has paved the way for the national programme based on the second EU dairy crisis support package.

The national liquidity assistance programme linked to supply discipline is part of the second EU dairy crisis support package totalling about € 500 million. It is aimed at agricultural enterprises that are suffering under the currently difficult situation on certain markets – especially the dairy market.

The legal changes adopted and the draft ordinance implementing special aid for certain milk producers (the so-called Milchsteigerungsvermeidungsbeihilfeverordnung) are the basis for

  • liquidity assistance linked to supply discipline amounting to € 116 million (€ 58 million from the EU,

    € 58 million from the federal government) to be paid to the farmers from 2017; and

  • individual smoothing of income tax rates through the smoothing of fluctuations in profits over a period of three years.

Total amount of assistance packages for German dairy farmers

(from the EU, the national government and the Länder)

  • 1st liquidity assistance programme amounting to € 69 million (from December 2015);
  • additional relief for agricultural accident insurance amounting to € 78 million (for the whole of 2016);
  • EU quantity reduction programme amounting to € 40 million (from September 2016);
  • additional relief for agricultural accident insurance amounting to € 78 million (for the whole of 2017);
  • 2nd liquidity assistance programme linked to discipline in respect of the volume of milk produced amounting to € 116 million (from January 2017);
  • guarantee programme amounting to € 150 million (from January 2017);
  • smoothing of tax rates and profit fluctuations amounting to € 50 million (annual effect) (from 2017)

= state aid in 2016 and 2017 totalling € 581 million.

This complements the measures already in effect such as the relief for agricultural accident insurance and the EU milk reduction programme totalling € 150 million. The federal government and the EU are thus providing considerable financial support to secure the existence of farms in Germany. Altogether, financial support for German farmers under the two dairy crisis support packages in 2016 and 2017 amounts to approx. € 581 million. "This is an impressive contribution to securing the existence of German farmers," said Federal Agriculture Minister Christian Schmidt.

Key elements of liquidity assistance linked to supply discipline

"The milk volume must remain constant and must not increase." Christian Schmidt

The draft ordinance implementing special aid for milk producers to prevent an increase in milk production (Milchsteigerungsvermeidungsbeihilfeverordnung) includes the following points:

  • Aid is provided if the applicant has not increased its supply of cow milk over a certain period of time (non-increase period) (probably February to April 2017) compared with the same period in 2016 (reference period).
  • The Federal Office for Agriculture and Food is responsible for the application and payment procedures.
  • Applications can only be filed by active milk producers who are still supplying milk in the last month of the non-increase period.
  • The aid amounts to 0.36 ct/kg of the annual milk supply between December 2015 and November 2016 (eligible quantity).
  • The applicant can apply for an advance payment of 0.18 ct/kg of the eligible quantity. This advance payment is to be granted by the end of the first month of the non-increase period at the latest.
  • The rate of aid can be increased if not all milk producers participate in the programme. The aim is to make the best use of EU and national funds.
  • With a view to avoiding disproportionate administrative costs, the draft ordinance provides for a de minimis threshold of 30,000 kg of the relevant annual milk volume.
  • It is also planned to adopt an arrangement for the transfer of farms (Section 4 (3) of the draft ordinance). Under this arrangement, the heir to the farm is also eligible for aid if he does not increase the milk volume in comparison with the reference period.
  • The present draft ordinance provides that the applications for aid and, if applicable, for advance payments must be filed by the end of the Monday of the third calendar week following the promulgation. The earliest deadline for application could be 16 January 2017 if the ordinance were to be promulgated in the last week of December. The € 116 million must have been spent by 30 September 2017 in the form of liquidity assistance linked to supply discipline.

The draft ordinance transposes into national law Delegated Regulation (EU) No 2016/1613 of 8 September 2016 providing for exceptional adjustment aid to milk producers and farmers in other livestock sectors. It is planned to discuss the draft ordinance together with the Act implementing special measures for the milk market during the Bundesrat session on 16 December 2016. As a prerequisite, the Common Market Organisations Implementation Act must be amended to include authorisations to issue ordinances implementing such measures in the milk sector. In addition, the Common Market Organisations Implementation Act itself must be amended.

Tax relief

It is planned to reduce taxes for agricultural and forestry holdings, as massive climate change-induced crop failures have increasingly led to fluctuations in profits and low profitability.

It is intended to amend the Income Tax Act (Section 34e of the Income Tax Act) in order to smooth natural or market-induced fluctuations in profits in agricultural and forestry holdings retrospectively for the past three years. This would lead to an individual smoothing of income tax rates. This smoothing scheme will be limited to nine years. In addition, there will be fixed smoothing periods.

Subsequent procedure

"My message to the sector is: Don't wait and hope for better days, restructure now." Christian Schmidt

The draft Act enacting and amending market organisation rules and amending the Income Tax Act (Milk Market Special Measures Act) will be submitted by the governing parties from the centre of the Bundestag. It is planned to adopt the Act on 16 December in the plenary session of the Bundesrat. In parallel, the draft ordinance implementing special aid for milk producers to prevent an increase in milk production is also to be discussed in the Bundesrat. It can, however, not be adopted until the Act has entered into force.

As of:
02.11.16

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