Dáil Éireann Debate, Thursday - 27 October 2016
26. Deputy Martin Kenny asked the Minister for Agriculture, Food and the Marine the rationale behind allowing the same level of grant aid and tax relief on forestry-related activity to non-farmers and farmers; if his attention has been drawn to the effect this is having on land prices; and if he will make a statement on the matter. [32183/16]
View answerThe current afforestation scheme is governed by the European Union Guidelines for State aid in the agricultural and forestry sectors and in rural areas 2014 to 2020 which themselves must be consistent with the Rural Development Regulation 2014-2020. The current Rural Development Regulation does not provide for a reduced premium payment for non farmers, a condition which existed under the preceding regulation covering the period 2007-2013.
Under the previous afforestation scheme forest premium rates were significantly greater for farmers than non farmers, both in annual rates and in the duration of payments. Consequently the uptake of afforestation by non-farmers was relatively low, 4% in 2013 and 2014. At the time the Forestry Programme 2014-2020 was being drafted it was decided to introduce a single premium rate now that the EU rules had changed in this regard. The reason for introducing this change was to attract more landowners into the afforestation scheme and increase planting levels in line with the targets set in the forestry programme.
It should be borne in mind that farmers still enjoy a significant advantage over non-farmers in that farmers can draw down their Basic Payment and Forestry Premium on the same land at the same time.
With the introduction of the single rate the percentage of planting undertaken by non farmers has increased to 15% in 2015 and 34% so far in 2016. However, it remains the case that the vast majority of planting is still carried out by farmers.
The total area planted increased in 2015 over the previous year and the 2016 figures indicate an increase over the 2015 figure.
With regard to the equal treatment of farmers and non farmers with regard to tax relief, it is not entirely accurate to say that this is the case. Individuals are exempt from Capital Gains Tax (CGT) on standing timber while companies are not. Furthermore, the removal of forestry income from the 'High Earners Restriction' which was included in Budget 2016 concerns active foresters and farmers only. Section 140 of the Tax consolidation Act excludes from this exemption 'Distributions out of profits or gains from stallion fees, stud greyhound services fees and occupation of certain woodlands'. Institutional investment funds in forestry fall under Section 140 and therefore the removal of forestry from the 'High Earners Restriction' does not apply to this group.
The value of land is of course governed by the laws of supply and demand and for those selling land this is of course a positive development. There are many reasons why lands are put up for sale which can include such lands which are viewed as marginal for agriculture or indeed the restructuring of farm holdings following retirement, death or inheritance. Therefore the movements in all land prices cannot be attributed solely to changes in the rules of the afforestation scheme.
