The purpose of this Bill is to provide the legislative basis for the introduction of a new farm tax as announced in the national plan Building on Reality. The separate matter of the amendment of the income tax code, in so far as it affects farmers, will be dealt with by the Minister for Finance in the Finance Bill for 1986 but I should mention that the intention in that regard is that farmers with fewer than 80 adjusted acres will be exempted from income tax when the new farm tax is in operation in relation to them; those with 80 or more adjusted acres continue to be liable for income tax but will be allowed their farm tax payments as a credit against income tax.
This Bill provides for the calculation, levying and collection of the new farm tax. The main features are that the tax will be determined on the basis of the number of adjusted acres in each farm and that smaller farms — those below 20 adjusted acres — will be exempt from the tax. The rate of tax will be uniform for all local authority areas and the determination of the number of adjusted acres in each farm will also be done centrally by a body established specially for that purpose under the Bill. The Bill also provides that the tax will be levied and collected by the local authority in each area and that the proceeds of the tax will form part of the current revenue of the local authority in each case. I should mention, though, that it is envisaged that there will be adjustments in the amounts of the grants in relief of rates by reference to the revenue from the farm tax; these adjustments are outside the scope of this Bill and will be determined as part of the process for settlement of the amount of the rate relief grants for each year at the appropriate time. The Bill also contains provisions for appeals, enforcement of collection, dealing with hardship cases, etc., to which I will refer as I deal with the main provisions of the Bill in more detail.
The farm tax will be based on the adjusted acreage of farms. Section 2 defines an adjusted acre as the area of land having the equivalent productive potential of one acre of the best land in the country in ideal growing conditions. In adjusting the acreage of any farm, the factors which are to be taken into account are spelt out in some detail in the Bill and include the quality of the soil, the prevailing climate, aspect, shelter and so on. In adjusting acreages, land will be assumed to have a reasonable level of management, maintenance and investment applied to it.
The task of classifying land into adjusted acreages will fall to a new farm tax office under the control of a farm tax commissioner and the system will operate on lines similar to those of the Valuation Office in relation to rateable valuation of other property. The farm tax commissioner, whose appointment is provided for in section 14, will be appointed by the Minister for Finance under whose general oversight the classification process will be carried out. The appointment will be a temporary one for a period of five years but this period may be extended if required. It is the intention that the farm tax commissioner will continue in office until the classification of land is completed when the residual function of keeping the classification up to date will pass to the Commissioner of Valuation. A staff of about 200 will be available to assist the farm tax commissioner. About half will be officers of the Land Commission, the remaining number being recruited temporarily for the purpose. The recruitment process is well under way. The commissioner will have power under section 15 to delegate his functions under the Bill to any of his officers.
The commissioner's staff will have the right, under section 17 to enter on land and to receive a reasonable level of cooperation from the farmer for the purposes of classifying land or dealing with appeals. There are penalties of a fine of £1,000 and up to six months imprisonment for obstructing the classification process and the Bill also contains provisions designed to enable the classification process to overcome any obstruction.
The impression has been created in certain quarters that the farm tax commissioner will adjust acreages from Dublin without inspecting the land. I want to make it clear that this will not be the case. Land will be inspected by officers of the commissioner before the adjusted acreage is determined but, as I have already mentioned, provision is included to deal with the situation where farmers refuse entry on land should that arise. Section 4 has been amended specifically to clarify this point.
Section 3 enables interim thresholds to be specified by the Minister for Finance until the classification of all holdings down to the 20 adjusted acres to which I have already referred has been completed. This will enable the farm tax to be applied during the classification process by reference to the interim thresholds obtaining at a particular time and without waiting for the entire classification to be completed. The classification will start as soon as the Bill is enacted but it will take some years to complete. The process will start in each county with the bigger farms and work progressively downwards until all farms of 20 adjusted acreage or more have been classified.
The classification list for each local authority area will contain particulars of the owner, occupier and adjusted acreage of each farm. As the work progresses, the classification list will be made available to each local authority at the intervals specified in section 4 of the Bill until the list is completed. The first instalment of the list will be available before 1 October 1986 to enable the tax to commence in 1986. It is the intention to assign manpower to the classification process in such a way that it proceeds at an even pace throughout the country.
When they receive the classification lists the local authorities will be obliged to make them available for public inspection at their offices for a period of 21 days, and, to notify individually farmers whose land has been classified, so as to enable those farmers to consider lodging appeals.
The question of appeals is one to which I have paid considerable attention in the Bill. One of the reasons for the collapse of the valuation system on land was that there was no procedure for having land valuations reviewed in the light of changing circumstances. There are provisions in the Bill, which I will now briefly describe, which will ensure that adjusted acreages are kept fully up to date.
The farm tax commissioner will be the initial vehicle for dealing with revisions and appeals. Appeals to the commissioner will arise in two ways. Firstly, there will be an appeal open to the farmer and to the local authority against the initial classification decided by the commissioner's office. Secondly, once the initial classification has been finally determined and circumstances, such as land sales or arterial drainage, cause the classification to require revision, then the farmer or the local authority can request the commissioner to revise the initial classification. The commissioner's decisions on appeals and revisions can be appealed to a Farm Tax Tribunal, the special purpose body for which the Bill provides in section 8 and in the Schedule. There is further specific right of appeal to the High Court on a point of law against a determination of the Farm Tax Tribunal.
The tribunal is designed to provide a speedy and flexible system of dealing with appeals. The members of the tribunal will be appointed by the Minister for Finance and will hold office for a three year period. The tribunal's proceedings will be in private and they will be empowered to call witnesses and to award costs against unsuccessful applicants. While it will largely be a matter for the tribunal to regulate their own proceedings, the schedule to the Bill envisages the tribunal operating through three of the members being called together as necessary to hear appeals. This should ensure a flexible system whereby the tribunal can be scaled up or down depending on the volume of appeals arising. The tribunal will, unless there is good reason for not doing so, award costs against unsuccessful appellants. I must emphasise, however, that these costs should be modest by comparison with court costs.
The Bill also provides for the levy and collection of the tax and for some residual arrangements. Section 9 provides for the levy annually of a farm tax at a flat rate per adjusted acre. The rate of tax will be prescribed by the Minister for the Environment, but I will come back to that later, and the local authorities will levy and collect the tax.
The tax is payable by the person who stands entered as the occupier of a farm in the list of adjusted acreages produced by the farm tax commissioner. The procedure for levy and collection of the tax resembles the procedure with rates. Local authorities are obliged to prepare details annually of each farmer's adjusted acreage and his tax liability. These details, to be known as the farm tax record, which are similar to those in the rate book, must be publicised and put on display in local authority offices.
There was some comment on the provisions in the Bill relating to the display of the classification list and the farm tax record in Garda stations. The view was expressed that this provision would not be acceptable to farmers and that it would in some way criminalise the farming community by making public their tax liability. This was not the intention. The view was that the classification list and the farm tax record should be available as widely as possible for the convenience of farmers who live some distance from the county town. However, in deference to the strength of the views expressed, all references in the Bill to display in Garda stations have been dropped.
Once the record has been publicly available for 21 days, local authorities are to send out farm tax bills and payment is due two weeks later. The Bill envisages payment being made in one lump sum. or alternatively, under regulations which I intend to make, in instalments. It is my intention to encourage local authorities to develop payment patterns that suit their own and farmers' requirements as far as possible. Where tax remains unpaid after two months of being due, interest at 1¼ per cent per month — the same as applies to other taxes — accrues on the outstanding amount.
The Bill provides that payment of the tax must be made where appeals have been entered. Senators will appreciate the reason for this provision, which mirrors existing rating law provisions and is somewhat similar to the income tax code. Clearly, it would put local authorities and the farm tax commissioner in an impossible position if the mere entry of an appeal was sufficient to halt the collection of the tax. This would encourage frivolous appeals and would disrupt the whole assessment process. The Bill, however, makes it clear that the outcome of appeals — whether they be in the farmer's favour or otherwise — will have retrospective effect. Where this results in a lower adjusted acreage, local authorities must make a refund to the farmer concerned.
We, of course, recognise that there will be circumstances where payment of the farm tax would cause undue hardship and the Bill provides that the local authority can agree in these circumstances to postpone action to collect the tax for a specified period. During any such period, interest will not accrue to the outstanding amount. I have to stress, however, that the tax remins due and will, indeed, be a charge on the land until it is paid. I believe that the provision in the Bill provides a flexible system which will adequately cater for the inevitable hardship cases while, at the same time, protecting local authorities from claims for relief which may not be well based. I might mention here that when the tax is implemented, I will be issuing guidelines to local authorities as to the circumstances in which to apply the hardship clause so as to ensure a reasonable degree of uniformity throughout the country.
Section 10 of the Bill is designed to ensure that farms just above the threshold of 20 adjusted acres will not have to pay the full farm tax. A farm of 20 adjusted acres but less than 21 adjusted acres will pay only one-fifth of the tax; 21 to 22 adjusted acres will pay two-fifths; 22 to 23 adjusted acres will pay three-fifths and so on until a farm of 25 adjusted acres will pay the full tax. The same form of marginal relief will apply to interim higher thresholds which will apply before the land classification is completed.
The Bill provides adequate powers of enforcement. First, the interest provision should act as an incentive to early payment of the tax. Second, local authorities may pursue defaulters through the courts. Third, in the event that a local authority owe a defaulter money, the farm tax can be set off against the money owing. Fourth, in common with the capital acquisitions tax, farm tax will automatically become a charge on the land until it is paid, but small sales of land will be exempt from this provision.
There has been much speculation about the rate of tax and how the rate will be adjusted in future years. Let me clarify the position. The rate of tax in the first year will be £10 per adjusted acre and I will be prescribing that amount for the first year under section 9 of the Bill, just as I have to prescribe the rate for each subsequent year. Indeed, the Bill, as amended now specifies that the rate of £10 is to apply in the first year. As regards those years after 1986, section 9 (4) (b) of the Bill as amended in the Dáil, provides that the rate of tax will be indexed to changes in farm income as measured by the Central Statistics Office. The farming community need have no fears, therefore, about dramatic increases in the rate of tax unless farm incomes rise in a similar manner.
The classification of land will take some years to complete and will, as I mentioned earlier, commence with the bigger farms and work downwards. The tax will commence in 1986 and will be levied on the larger farms initially. The Bill facilitates this. The effect will be that if, for example, by 1987 the classification has progressed down to say, 40 adjusted acres, the threshold for liability to the tax in that year will be prescribed by the Minister for Finance at 40 adjusted acres. Farms with adjusted acreages below the threshold will only become liable for tax as they are assessed in the following years. In these cases, the farm tax will not apply retrospectively. Income tax exemption for full time farmers with farms between 20 and 80 adjusted acres, to be provided for in the Finance Bill, 1986, will take effect as liability to the farm tax arises.
In conclusion, I might remind Senators that this legislation represents an attempt to improve the contribution of the farming sector to national taxation. Land is probably our most important national resource and its value as taxable property was recognised in the system of agricultural rates which farm tax will replace.
Since the abolition of agricultural rates, we have not had a satisfactory and easily administered system of taxation for farmers. I believe that the Bill will ensure a more realistic contribution from the farming community to the provision of local services and that this will be achieved in a manner which involves no disincentive to agricultural production. I look forward to a constructive debate on the Bill. I commend the Bill to the House.