I move: "That the Bill be now read a Second Time."
The national plan Building on Reality envisaged measures for reform of farmer taxation including the introduction of a new farm tax. The present Bill is designed to provide the statutory basis for the farm tax. The separate matter of the amendment of the income tax code in so far as it affects farmer taxation will fall to be dealt with by the Minister for Finance in due course through appropriate provision in the Finance Bill for 1986. The intention in that respect is that occupiers of farms above 80 adjusted acres would continue to be liable to income as well as farm tax when the latter is in operation but that they would be given a credit against income tax for farm tax paid.
Taxation is a necessary, if unpopular, support of all organised societies. One of the great achievements of Ireland's economic and social history has been the transfer of our land resources from large landlord holdings to the rural people of Ireland. This transfer, won over a protracted period of time has meant that much of the country's real or capital wealth is and will remain vested in the farming community.
From this position within the Irish economy, farmers obviously owe a contribution in taxation to the common good, and this should not now be disputed by anyone. The new farm tax is designed to achieve this simply and in a manner appropriate to a key economic feature of farming, the tenure of productive agricultural land. Taxation proposals strikingly similar to those in the present Bill were in fact advanced in 1979 by the current president of the IFA.
Much of the criticism which has been made of the new farm tax amounts to the complaint that it is not an income tax. There are a number of comments to be made about this argument. The first is that the Irish income tax system is already bearing a disproportionately large burden of overall taxation effort and that, like other progressive administrations, we should be trying to develop a better balanced spread of taxes.
The second is that the farm tax will represent a much simpler system than income tax, not just for collection purposes but for the benefit also of farmers, a large number of whom will be spared the time-consuming onus of keeping detailed accounts for tax purposes. Most fundamentally, however, a tax based on the productive capacity of a farmer's principal asset is a fair one, particularly given the linkages with the income tax code and the provisions for hardship which I will detail later on. As I have said, it was independently advocated by the present president of the IFA in 1979.
The present Bill provides for the calculation, levying and collection of the new farm tax. The main features of the tax as provided for in the Bill are that it will be determined on the basis of the number of adjusted acres in each farm. 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 tax will be levied and collected by the local rating authority in each area.
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, which will operate on lines somewhat parallel 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 of the Bill, 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 Government's intention that the farm tax commissioner will continue in office until the classification of land is completed. After that, the commissioner's residual function of keeping the classification up to date will pass to the Commissioner of Valuation. It is anticipated that 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. I might mention that the recruitment process is well under way. The commissioner will have power under section 15 of the Bill to delegate his functions under the Bill to any of his officers.
The commissioner's staff will have the right, under section 17 of the Bill, to enter on land and to receive a reasonable level of co-operation 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 one year's imprisonment for obstructing the classification process and the Bill also contains provisions designed to enable the classification process to overcome any obstruction.
I might mention while on the subject of penalties that there has been a certain amount of misunderstanding, if not misrepresentation, about the nature of these provisions. Let me clarify the position on this. Under existing tax legislation — specifically section 94 of the Finance Act, 1983 — there is a list of offences which apply to a wide variety of taxes from income tax to capital acquisitions tax. These offences include failing to make returns and obstructing the officers of the Revenue Commissioner in the performance of their duties. The offences are punishable on summary conviction by fines of up to £1,000 and imprisonment of up to one year. Where the conviction is on indictment, the penalties are considerably stiffer. These provisions apply at present to farmers' income tax. The provisions in this Bill are no more severe than in other tax legislation and I make no apology for including them in the Bill.
The impression has also 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.
The classification will start as soon as possible after the Bill is enacted and will take some years to complete. It 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. Section 3 of the Bill enables interim thresholds to be specified by the Minister for Finance until the classification of all holdings down to the 20 adjusted acres 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.
There will be a classification list prepared for each local authority area which will contain particulars of the owner, occupier and adjusted acreage of each farm. The classification list will be made available to each local authority at intervals specified in section 4 of the Bill until the list will be available before 1 Octoof 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.
Upon receipt of the classification lists, the local authorities are obliged to publicise and make available the list for public inspection 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.
I should mention that the question of appeals is one to which I have paid considerable attention in the Bill. As Deputies will be aware, 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. The appeals provisions which I have included, and which I will now briefly describe, are designed to ensure that adjusted acreages are kept fully up to date.
The farm tax commissioner will be the initial vehicle for dealing with appeals. Appeals to the commissioner will arise in two ways. Firstly, there will be an appeal open to either the farmer or 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 are appealable 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 it 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 its own proceedings, the Schedule to the Bill envisages the tribunal operating through three of its 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.
In my comments so far I have been outlining how the base for the farm tax is to be set. 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 and the local authorities will levy and collect the tax and, as I already mentioned, the proceeds will form part of the income of local authorities to be spent locally by them.
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 and specified Garda stations. There has been comment on this aspect of the Bill.
Let me clarify the position. The purposes of the record are two-fold. Firstly, it allows farmers to inspect the record and to report any last minute inaccuracies to the local authority before the bills are sent out. Secondly, it is the formal record of tax liability which may be required as evidence in court cases. The purpose of the record is not, as has been suggested, to criminalise the farming community. It follows the procedure for publicising and displaying the rate book except that, for the convenience of farmers who live some distance from the county town, the Bill provides that the record may be inspected in Garda stations. In relation to the question of display in Garda stations, I will, of course, take account of any views expressed by the House on this matter.
Once the record has been put on display 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. Deputies 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 recognise, of course, 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 remains 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.
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. Firstly, the interest provision should act as an incentive to early payment of the tax. Secondly, local authorities may pursue defaulters through the courts. Thirdly, in the event that a local authority owes a defaulter money, the farm tax can be set off against the moneys owing. Fourthly, 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, if it is the view of this House that it would be more desirable that the rate of £10 per adjusted acre for 1986 should be specifically mentioned in the Bill, this can be done by an amendment on Committee Stage and I would be prepared to put down such an amendment. As regards those years after 1986, section 9 (4) (b) of the Bill sets out the parameters within which I must work in fairly specific terms. The rate of tax must be set having regard to the change in family farm incomes and taxes generally. This provision will ensure that changes will be in line with farm income changes and changes in the burden of taxation the rest of the community is asked to bear.
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.
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.
Finally, I wish to advise the House that I will be bringing forward some amendments of a technical nature on Committee Stage. I commend the Bill to the House.