asked the Minister for Finance if he is aware that, as result of a recent decision in the courts, the income-tax liability of farmers will be increased if they devote a portion of their lands to the growth of garden vegetables or of fruit; that the imposition of this tax may cause hardship in such cases, that it may deter farmers from cultivating such crops and so check the development and progress of Irish agriculture; and whether he will state what he intends to do to remedy the position.
Written Answers. - Farmers and Income-Tax.
I presume the Deputy refers to the decision given by the Supreme Court in May last in the case of McGarry v. Spencer. The Supreme Court in this case confirmed the decision of the High Court that Rule 8 of Schedule B of the Income Tax Act, 1918, applied effectively in this country. The consequence is to place beyond doubt that persons occupying lands which are in fact nurseries or market gardens are taxable by reference to actual profits on the same lines as traders and not, as in the case of ordinary farmers, on the basis of the annual value of the lands.
To remove any misapprehension that may exist as to the broad results of the Supreme Court decision and how it will work in practice I may say first of all that it is not the intention of the Revenue Commissioners to review any assessments for past years made on nurserymen or market gardeners on the basis of the annual value of the occupied lands.
I should like also to emphasise that the ordinary farmer who is not definitely setting up a nursery or market garden business has nothing whatever to fear in the matter of the Supreme Court decision. What constitutes a market garden or a nursery for Rule 8 purposes will require to be determined in cases of doubt from the circumstances of each individual case. But while it is impracticable to lay down a definition which would precisely cover all border-line cases, I can say that Rule 8—that is the profits basis—cannot come into the picture at all unless certain conditions are present. The land on which the fruit or garden vegetables are grown must, whether it is actually fenced around or not, be a defined or self-contained area devoted to the growth of such crops year after year. It must, furthermore, be subject to the intensive treatment characteristic of horticulture, as distinct from agriculture. It follows that Rule 8 will not apply if an ordinary farmer merely grows fruit or vegetables on parts of his farm, scattered fields, varying from year to year and not on a definite portion of the land permanently devoted to the purpose. Even in the case where a definite part of the farm is permanently devoted to the intensive cultivation of fruit or garden crops, I am advised that Rule 8 will not be invoked if the evidence shows that the occupier has not ceased to be predominantly a farmer. I should like to draw attention to that test: the occupier so far as his use of the land is concerned must not have ceased to be predominantly a farmer. If he is still predominantly a farmer, even though he grows fruit and garden crops for sale, he will not come under Rule 8. It is recognised fully in this connection that much of the produce which was at one time confined to gardens may now be a part of the output of a farm. But if the principal purpose of the occupation is the intensive cultivation of fruit or garden vegetables and the ordinary farming operations are purely subservient to that principal purpose Rule 8 will apply to the entire area if the occupier's total income is big enough to justify an assessment.
The considerations governing the treatment of glass-houses used by farmers for the growing of tomatoes, etc., are necessarily different. Here the question whether the occupier is predominantly a farmer does not, from the nature of the operations, arise in the same degree. While every case must be dealt with on its own facts, the size of the glass-houses is, of course, a very important factor. In the case of an ordinary farmer, the Revenue Commissioners, I understand, will not regard land which is covered by glass-houses as constituting matter for a profits assessment under Rule 8 if the total area under glass is below one-twentieth of an acre. Accordingly, any farmer who is contemplating the erection on his farm of glass-houses not over one-twentieth of an acre in area need not be prevented by any vision of income-tax troubles from doing so.
In conclusion, I can assure the Deputy that I have examined this whole matter very carefully and I am satisfied that the ordinary farmer who wants to produce fruit or garden crops for sale as a supplement to his income from other crops and from stock can go ahead with complete confidence that he will not be assessed under Rule 8 instead of the valuation basis. It is only the farmer who is in fact a nurseryman or market gardener who will be assessed on the profits basis, and if his business is big enough to render him assessable for income-tax under Rule 8 it will be no deterrent to him in increasing his output and profits.