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Joint Committee on Agriculture, Food and the Marine díospóireacht -
Thursday, 17 Jul 2014

Agri-Taxation Review: Discussion (Resumed)

Before we begin, I remind members and witnesses to turn off their phones. The purpose of this meeting is to hear presentations from the farm organisations regarding the agri-taxation review. I welcome from the Irish Farmers Association, IFA, Mr. Eddie Downey, president, Mr. Tom Doyle, farm business chairman, Mr. Pat Smith, general secretary and Ms Rowena Dwyer, economist. I welcome from the Irish Creamery Milk Suppliers Association, ICMSA, Mr. John Enright, general secretary, Mr. Lorcan McCabe, chairperson of the farm business committee and Ms Mary Buckley, policy officer. I thank them for appearing before the committee today and, before we begin, I must go through the usual formality of notifying the witnesses regarding privilege.

I draw witnesses' attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I invite Mr. Downey to make his opening statement.

Mr. Eddie Downey

I thank the Chairman and Members of the Oireachtas for giving the IFA the opportunity to make this presentation. The announcement by the Minister for Finance, Deputy Noonan, of a comprehensive review of farm taxation in last October’s budget presents an opportunity, for the first time in a generation, for all stakeholders to step back and assess how well or otherwise the tax system is working to support the farming sector in Ireland today. While fully integrated into the general taxation system, the structure and operating environment of farming remains unique to any other business sector. In developing its submission, the IFA emphasised that a comprehensive review of the taxation system for farming requires an understanding of the market environment facing Irish agriculture and the key characteristics of that sector. The key objectives for the IFA in the independent review of taxation are to ensure valuable tax reliefs, which are critical to the development and growth of the agrisector, are maintained; to secure new tax incentives that are necessary to drive structural improvements by incentivising land transfer, mobility and investment; to examine how the taxation system can better accommodate the extreme volatility in farm incomes; and to examine how tax returns can be simplified to drive down compliance costs.

Farming is continuing to contribute to the economic recovery that now is clearly evident, through continued growth in agrifood exports and employment. Agrifood exports reached a record high of almost €10 billion in 2013 and the value of our exports has increased by a further 11% in the first four months of this year. However, despite the contribution of the farming sector to national economic recovery, continued low levels of farm income, coupled with increasing income volatility, provide a threat to the viability of the Irish family farm and the sector’s growth prospects. Against this backdrop, the burden of taxation on farm families has, in common with other sectors, increased significantly in recent years. Marginal rates of tax are now at a very high level, which is removing resources required for investment in the farm enterprise. Increases in the rates of capital taxes and reductions in tax-free thresholds have added to the costs of investment and asset transfer.

Key characteristics which differentiate agriculture from other business sectors and which are critical in developing an appropriate taxation system are that farming is a capital-intensive industry with significant, recurring, investment requirements. Moreover, with a high level of owner-occupancy of farms, the minimisation of costs to facilitate lifetime intergenerational transfer is critical. In addition, the main business structure of family farms continues to be that of sole trader, with the result that farm incomes are subject to high tax rates, even at low profit levels and increasing exposure to international markets and competition is driving necessary structural reform, increasing scale and improved efficiency.

IFA's submission focused on the existing main tax reliefs relevant to farming, and whether they could be adapted to work more effectively, whilst also proposing a number of new measures to address particular issues.

IFA proposes two new and innovative taxation measures that, if implemented, would tackle two of the major challenges facing agriculture. These are the growing income volatility and the barriers to lifetime farm transfers.

We can clearly see the impact of volatility in the tillage sector, for example, which, in 2013, experienced a fall in incomes of 20% to less than €30,000 due to price collapse, and despite increased yields. Prices in this sector continue to fall through 2014.

The first of two proposals to manage income volatility and encourage lifetime transfer is an income-smoothing mechanism that would operate within the income tax system, in addition to income averaging. This would allow a farmer place on deposit a portion of his or her pre-tax income, in a designated commercial farming account - tax deposit account. This could then be drawn down by the farmer and used for the running of his business when required, and would be taxable in the year it was drawn down.

The second proposal is a phased transfer partnership, PTP. This is a progression model in which there would a defined, phased transfer of the family farm over a set time period. It would require an agreed transfer contract where both parent and child would work together in partnership over the period of the phased and progressive transfer of assets. As an incentive to the farm holder to enter into the contract, he or she would receive tax relief on a portion of their farm income, up to an agreed ceiling.

In addition to these incentive measures, IFA has submitted a comprehensive set of proposals covering all aspects of farming business. In respect of income tax, the IFA has proposed the introduction of an optional system of increased capital allowances which would provide capital allowances of up to 50% for the first two years; extending the 100% trained farmers' stock relief to all farmers for a period of four years, up to 2020; the extension of income averaging to farm profits where the farmer or spouse has an additional source of self-employed income; and the introduction of an earned income tax credit to remove the discrimination in the income tax system between employees and the self-employed.

In the areas of farm transfer, succession and mobility, the IFA has proposed the retention and index-linking of the capital acquisitions tax tax-free exemption thresholds, and retention of 90% agricultural relief; improvement in the uptake of the land leasing tax exemption scheme through recognition of incorporated farm businesses as qualifying lessees, and removal of the 40 year age limit for qualifying lessors; reintroduction of indexation for capital gains tax, CGT, and retention of CGT retirement relief; and retention of young trained farmers stamp duty exemption and consanguinity reliefs for transfers between family members - it should be noted that consanguinity relief is due to be cease from 31 December 2014.

To encourage greater numbers of farm partnerships, there must be an extension of existing tax reliefs for milk production partnerships to all registered farm partnerships and reintroduction of CGT relief in the event of a farm partnership dissolution.

IFA has identified a number of sector-specific issues that require changes in the taxation system, and other general taxation issues of relevance to farm enterprises. These include compulsory purchase of supply licences - co-operative shares - must be treated as a qualifying business expenditure, and offset against income tax; introduction of a tax-relieved loan scheme open to farmers and non-farmers who wish to invest in the development of the dairy sector; exclusion of forestry-felling income from the high income earners restriction; retention of the existing pay-and-file deadline for self-assessed tax returns; and extension of a simplified system of farm income assessment for farmers with a non-complex farming system.

I wish to conclude with some comments on budget 2015, to which the outcomes of the agri-taxation review will be closely linked. On the expenditure side, funding for farm schemes underpins farm incomes and output. Under the new rural development programme, RDP, there is an overall allocation of €2.1 billion of EU funding and €1.9 billion of national funding for the period 2014-2020.

I wish to take this opportunity to acknowledge the Government's funding commitment earlier this year to the rural development programme for the next six years. Over €500 million of funding for RDP farm schemes must be provided in October's budget. This funding will deliver programmes of support for low-income farmers, the provision of environmental services, encourage young farmers, promote on-farm investment and support farming in marginal areas.

IFA's priorities for expenditure in October's budget are: commencement of contracts for the new green low-carbon agri-environment, GLAS, scheme in early 2015, with places for 30,000 farmers in the scheme in its first year and payments disbursed in 2015; allocation of €30 million for the targeted agricultural modernisation scheme, TAMS, in 2015 to fund on-farm investment programmes across all sectors; funding of €52 million for the beef data and genomic scheme to support the vulnerable suckler sector; and increased capital funding allocations for the horticulture, forestry and aquaculture sectors to achieve output targets and employment growth.

Farming is facing significant challenges at present, but the opportunities for continued growth are many. The achievement of Food Harvest 2020 growth targets will result in a significant return to the Exchequer through an increased tax take from additional economic activity, earnings and employment at farm, processing and industry services level. As an immediate priority, full funding of farm schemes that provide income support for vulnerable sectors and investment support across all sectors is critical in Budget 2015. On the taxation side, the agri-taxation review must result in a set of proposals supporting the long-term growth of the sector. These must be implemented, starting with this October's budget.

I thank Mr. Downey. I now invite Mr. Enright, or Mr. McCabe.

Mr. Lorcan McCabe

I will introduce Mr. Enright.

I thank the committee for the opportunity of getting a meeting here. Our president, Mr. John Comer, has been called away and could not get back here in time. We understand what has to be done. Mr. John Enright will take over from me now and go through it in detail.

Mr. John Enright

Our submission is based on two key issues: the Food Harvest 2020 targets and how farmers can contribute to that; and the issue of farm income volatility which, certainly over the past five or six years, has become much more sharply into focus. The dairy sector is a good example of the latter where, since 2007, dairy farmers have seen milk prices vary, from 20 cents a litre to 40 cents a litre. For a family farm structure, it is extremely difficult to deal with such volatility. The taxation system needs to look at this issue and needs to facilitate farmers to address the problem of volatility in the future.

I will go down through some of the main aspects of our submission and set out what we feel needs to be addressed. First, on the issue of income volatility, income averaging has been an important relief for farmers over a number of years. It is an important relief. On income averaging, our concern would be that a farmer cannot earn €1 of off-farm income because if a farmer does so, he or she loses income averaging. If, for example, a farmer finds his product prices have collapsed, he or she is in a serious cash-flow situation and he or she decides to take on a part-time job in order to get through that period of time, be it three months, six months, 12 months or whatever, because the farmer takes that decision to improve his or her cash-flow and income situation, the current taxation system excludes him or her from income averaging. That is unfair. It does not make sense. That needs to be addressed in the farm income taxation review.

In terms of the issue of volatility, in Australia there is a farm management deposit scheme which is designed to address the issue of volatility. From an Irish perspective, if a farmer has a good year, in terms of product prices and income, there needs to be an opportunity for him or her to put some of that money away tax-efficiently so that in the event of a bad year he or she can draw down that money to get him through it. In that regard, there is precedent in Australia.

With quota abolition and all these free trade agreements - there are suggestions of a TTIP agreement and a Mercosur agreement, and an agreement has been brokered with Canada - we are moving into much more of a free trade scenario, which will lead to more volatility. We believe the taxation system needs to protect family farms in that scenario.

Certainly over the next two to three years and even at the moment, many farmers are looking at developing their farms. With the abolition of quotas, farmers are looking at expansion. If one decides to take on an additional cow, one does not just have to fund the cow; one must also fund the slurry storage, etc. There are a range of environmental regulations behind every additional animal one puts on one's farm. We certainly believe that the cattle allowance needs to be much more flexible in this regard. At the moment it is eight years, but we feel it should be from three to eight years and that it should have a floating allowance of 50% just to give farmers the opportunity to make these investments, given the uncertainty that is out there.

We have two issues regarding stock relief. In respect of herd expansion, there is a substantial cost from the taxation perspective, with only 25% stock relief. We certainly believe there should be 100% stock relief for additional expenditure of up to €100,000. A technical but important point concerns TB. The Department's policy on TB would be that it generally does not do full depopulations, but one could find a farmer losing 10%, 20%, 30%, 40% or even more of his herd. We feel that the taxation system needs to take that into account. At the moment, the stock relief requirement is there for depopulations. It needs to take account of the fact that a farmer could lose 20 or 30 cows, which is traumatic enough from a financial point of view, but if he gets penalised on the taxation side, it is extremely traumatic. Again, we feel that this needs to be addressed in the review.

In respect of land policy and taxation to support Irish agriculture, the key issue is that we have people who want to transfer their farms to the next generation and the tax system needs to facilitate those people so that they can do so in a tax-efficient manner. The tax system needs to support land mobility more than it does at the moment. There are a number of issues in respect of capital gains tax. Indexation was abolished when capital gains tax went down to 20%. It is now at 33%, and we feel that this needs to be looked at. The capital gains tax restructuring relief in respect of land consolidation is certainly a measure we welcome, as we think it is a very good measure, but, again, we feel it should be improved. If a farmer with two 30-acre blocks decides to buy an 80-acre block when it comes up for sale, he does not get the tax relief if he sells the two 30-acre blocks. We feel that if a farmer decides to consolidate by selling two smaller blocks to buy one block, the system should allow it. It has an advantage from his perspective, but those two blocks may be bought by two farmers, which will help their situation. We feel this needs to be looked at.

Our main point regarding capital acquisitions tax is that agricultural relief is hugely important in the transfer of farms from one generation to the next, and it is essential that this relief is maintained and improved. In respect of income tax and land leasing, one could find a member in his late fifties or early sixties whose son or daughter has just completed the green cert and wants to take over the farm. There was an early retirement scheme in the past that allowed that to take place where the older farmer had a level of income and the younger farmer could take over and develop the farm. With no early retirement scheme in place, we feel the issue of land leasing needs to be looked at again in that if a parent wants to lease the farm to his or her son or daughter for a period of time - and we would stress that it should be up to retirement age rather than continuous - the tax relief should be available in that scenario. We feel it is ridiculous that a parent can lease a farm to a stranger and qualify for tax relief but cannot lease it to his or her own son or daughter. In the context of improving land mobility, we feel this needs to be examined.

The 2% stamp duty rate is hugely important and we hope it will be retained. The young farmer stamp duty rate is important as well. In the past, there was installation aid as an encouragement for people under 35. One has the single farm payment, but stamp duty relief is important as an incentive for the early transfer of farms. We certainly believe it is important to maintain that.

Another important issue relates to pay and file dates. It was proposed last year that these dates would be brought forward, which would be of huge concern to our members, particularly in light of the CAP. The CAP is putting payments back further in the year rather than bringing them forward. For many farmers, until they get the single farm payment and disadvantaged area payments, they cannot pay their bills. If the pay and file dates are brought forward, it would pose major challenges for farm families.

That is a short rundown through our submission. There are many challenges facing farmers and we feel that there are certain aspects of the tax system that need to be tweaked, particularly in the context of the volatility about which people are concerned.

I thank Mr. Enright and Mr. Downey for the comprehensive presentations they made. It is fair to say that both of them have quite a bit in common - volatility, 2020 targets, capital allowances, stamp duty, investment in co-operatives and so on. I will not go through them all because we would be here all day if we went into every issue. It seems that volatility is a major issue for the upper end of farming. Again, the idea that one puts the money aside and then averages it seems to make sense. I think that is a reasonable idea. It would be good if we could find common cause across farming organisations as to what the requirements are.

A total of 60% of farmers have an off-farm income. Off-farm income is a very valid issue and must be looked at in one form or another. It should depend on what percentage of one's income is off-farm, but the idea that if one is out if one has any off-farm income does not make any sense.

I hear what the witnesses are saying with regard to capital loans and stock relief. It will be a huge issue for the dairy sector if there is to be expansion, because 18,000 out of 120,000 farmers are engaged in dairying, which is about 15%. I will home in on a few points. In respect of the 120,000 farmers, do the witnesses have any data between them regarding how many of them have a taxable income? I am not talking about a farm income. We must take into account the fact that in most cases, people look at their family income and take the farm income. Some people in this country seem to be against people having mixed sources of income. It is fair to say that if we are going to keep rural populations in many areas of the country, a large proportion of the current farming population would not make a full living out of farming and never will. The number of farmers would fall very low if they were all to be full-time farmers. For many farmers, the other big advantage of having a mixture of farm income and possibly some other income - a lot of farming does not take 40 hours per week - is that it helps to deal with the volatility issue, because if one thing is up, the other thing might be down and vice versa. I certainly saw much better farming in my own area when people got employment, because they could invest in the farms, they knew they were going to stay and they could take a much longer view if they had a steady off-farm job. Therefore, I would be very interested if anybody had information on taxable incomes. What is the taxable income - zero to €30,000, €30,000 to €60,000, and so on? The second issue, which was raised by the IFA the other day, is the fact we must figure out how many of those farmers do not have a PAYE income. The reason I want to know is that we need to calculate how much it would cost to give earned income - self-employed income - what is now the employee tax-free allowance.

Compared to what it was in the past, the employee allowance is massive. At €1,650 of a tax credit, it is the same amount as the individual allowance. If we are to get some sense of the difference it would make and the number it would impact, we must remember that social welfare pensions and carer's allowance attract the PAYE tax credit. If someone is getting a contributory old age pension or an invalidity pension they get the PAYE allowance, but for some reason if they are on farm assist or disability allowance they do not get it because it is not taxable income. I would be interested to hear what the cost would be if we were to say it was earned income, as was the case previously, rather than unearned income.

I am particularly interested in that because I have long been a proponent of much higher compulsory PRSI for the self-employed in return for benefits, invalidity pension in particular, which Deputy Pringle said was coming down the track. I favour that because it will force people to protect themselves against a future event. Farmers are vulnerable to accidents and so on and to wind up with no income other than a means tested income as a result of an accident or becoming ill can be a huge hit. One way of compensating for that would be to try to deal with this issue for the purely self-employed. I would be interested to see the breakdown in that regard.

Regarding the pay and file dates, it appears to me that the pay date has to remain, and we have been getting vibes that it will remain, but would it cause a problem for self-employed people if the file date was brought forward, which they need because the budget was brought forward? I understand the argument from the official side is that the data need to be in by the end of August to ensure that when the budget is done in mid-October, they will know what the income for the year is, which allows them better guess the tax take, even if they do not get the cash until the end of October. Are they saying pay and file dates should remain or that the pay date should remain the same? Is one a red line issue or are they both red line issues? We should get some sense of that today. They would probably win on the pay; the file date appears to be a much greater challenge.

The IFA representative mentioned a number of issues to do with the CAP. In terms of putting any reasonable capital programme in place, they will find it hard to spend it because by the time they get a scheme up and running, people apply and get the work done, and they are always much slower to do that than they anticipate, it will become a cash cow for the Department. That might be useful for the Department as a cash cow but we must consider that only 62% of the Leader money from the last CAP was spent, and we are in the last mile. It is vitally important to make the scheme available and have a nominal amount, but the actual cash drawdown in 2015, and I know this from endless schemes for which I had responsibility, will be relatively small.

I presume the €52 million for the beef data and genomic schemes will be provided. I understand from the Department that it will announce GLAS and it will then give farmers a certain amount of time to submit the applications, and in that respect we will have problems in commonage areas and so on. There will be a closing day and all the online applications will have to be in by that date. The Department will then have to process and validate the 30,000 applications. My understanding from the Department is that the 30,000 applicants will go to the starting line on the same day. We have an announcement date. People have to be given reasonable time to line up all the planners in all the farm circumstances, for example, where they get 50% agreement on the shareholdings, commonages and so on. They all get the line. They have to be approved, and then allowed proceed. My understanding is that if that were to happen on 1 September, which is an easy figure to work out, they will pay one third of a year's GLAS payment in December. If it happens on 1 October, they pay one quarter, a sixth on 1 November, and one twelfth on 1 December. Obviously, if they do it on 1 June they will get half their payment.

The timelines on this are critical. At this point we come to a conundrum because if my memory serves me right, in the AEOS 3, the farmers asked for more time because there was pressure on planners. In this case we are talking about five times the number in a group. What is the timeline on this? This goes back to what was said about income averaging and PAYE income. One of the big problems now is that people's incomes are collapsing. In terms of anyone dependent on REPS payment, their income is collapsing. When that is taken out of the net income, after all the expenses, it is greatly reducing. A fair number of these people are not able to collaborate because all of them have farm incomes. I would like to hear the witness's comments on that. My guess is that no matter what promises they get farmers will be screaming for extensions to allow them submit all their plans but if the system gets clogged up with planners and all the extra requirement in the plans, they might be the cause of their own delay. I can understand that if they are under pressure but we will wind up with a situation where the Department has to process all of that.

I do not see a huge amount of GLAS money coming forward next year and if that happens, does the Department have a plan B in that regard? Will we enhance the genomic scheme or do something for farmers next year to try to keep the cash flow? Otherwise, we will be facing a big problem. I could make many more comments but I will leave it at that.

I thank Mr. Enright and Mr. Downey for their presentations. There is a common theme in both presentations regarding volatility with regard to income and particularly how it affects the weaker sector within the industry. The necessity and importance of the part of Mr. Downey's proposal on the €500 million funding for the rural development programme farmers being provided in this October's budget must be emphasised.

On the proposals in general, Mr. Enright mentioned that small holding penalties can be detrimental to people in the low income sector. I refer to single farm payment penalties and so forth. I share that view.

Regarding land mobility, tax reliefs and land consolidation, it seems simple in theory and if there is the political will, that can be resolved very easily. All it will take is a basic understanding of how that can happen, and it should be facilitated to happen.

I refer to the extra environmental costs and investment, particularly as we move towards the 2020 target, and the importance of on-farm investment to ensure the country meets its potential in that regard. Incentives should be put in place to encourage producers to reach that target.

One of Mr. Downey's suggestions was a phased transfer partnership, which would require an agreed transfer contract where both parent and child would work together. There is no definition of the age of the child, which might help. I am sure they are not talking about a nine month old child. That needs to be explained.

I am also encouraged by the suggestion regarding a tax deposit account, given the volatility of the market, the volatility of income and the role played by weather.

I refer to the situation two years ago. Farmers could be having a reasonably good year this year and would have a nice fairly good return and then maybe at the end of the year - such as happened with the fodder crisis two years ago- the gains could be lost and any further investment could be inhibited. There is much positive information in the presentations. However, I am concerned about how the child is, so to speak.

This is a great opportunity to review the overall scheme after a lifetime. Much has happened since all these taxation issues were implemented many years ago. As has been pointed out, agriculture plays a key role in the economy, with exports worth €10 billion and growing. I refer to the targets under Food Harvest 2020. The key elements in the presentations are land transfer and income volatility. In my view the fact that we have more farmers in this country who are aged over 80 years than the number aged under 30 years will be a significant issue in the future. That statistic must be reversed in the time period between now and 2020, which may be ambitious but certainly it must happen in the very near future, in order for agriculture to be productive and viable. In the past, agriculture was not regarded as a business but it will need to be so regarded in the future and for that to happen we need to get more young farmers. The child of today to whom Deputy Ferris referred is the farmer of tomorrow and we need to get him or her into the system.

Land transfer is the big issue and the leasing issue has to be addressed. I refer to the IFA proposal which I find interesting. I would welcome more discussion on the proposal to merge income volatility and to encourage lifetime transfer and the tax deposit account issue. I would like more information on that aspect because it is a good idea. No sector in agriculture - it could be beef today and tillage tomorrow or dairying in the year after - will be exempt from volatility. We need to have a system that applies across the board in that regard.

The other issue which needs to be monitored and addressed is the issue of the pay and file dates. Filing is one issue but payment is a serious issue. For example, a request for payment in August prior to the arrival of the single farm payment cheque, the harvest cheque or weanling sales would be a serious issue for income in all farms across the board and payment would not be possible. The issue of stamp duty also needs to be addressed significantly. I suggest the big issues are income volatility and associated matters and incentives for encouraging more younger farmers into the system.

I thank the witnesses for their submissions to the committee. A crucial stage has been reached and it is important to do everything possible to increase farm incomes. In particular, the beef and sheep sectors are going through a very difficult time at the minute. Beef has been very difficult over the past number of months and the sector will experience a significant drop in income. The incomes in the sheep sector are beginning to drop off although these would not have been as bad in earlier times. However, prices in the sheep sector are beginning to drop off as well now. We must all do whatever we can. The dairy sector looks to be that little bit better but I know that dairy farmers will be making significant investments in their operations prior to 2015. It is crucial to have the GLAS scheme up and running and putting money into farmers' pockets as early as possible in 2015. It is looking as if it will be in the last quarter of the year before that scheme will be in place. Quite a number of farmers have been out of REPS for the past two years and have suffered huge losses. REPS was the real driver while AEOS and the other schemes were that little bit smaller and did not put in the same amount of money into the farmers' pockets. Quite a number of farmers make investments in the farm using their off-farm income. It could be asked whether this is a wise choice but farmers will continue to do this. Lads working in jobs off the farm such as council workers or working in the forestry have in the past invested that money in their farm.

It is very important to encourage young farmers to take over because the percentage of the farming population in the older age group has been referred to. There are too many older farmers and we must encourage younger farmers to take over farming in their own right. There used to be a big gain for farmers who were leasing quota heretofore and were then forced to sell it. At least there was no capital gains tax on that process so that was a positive aspect. I thank the witnesses for their submissions. The committee will work with them to ensure that everything possible can be done for incomes.

I thank the delegations for their attendance. I will not repeat the points made by other members. Land mobility is a key issue. We need to encourage people to participate in land leasing. Capital acquisitions tax and agricultural relief are crucial to land mobility. For younger farmers to have the opportunity to access and to grow their enterprises, we must encourage more people to participate in land leasing. I refer to the changeover from the RDP when a very bad thing happened because those who had long-term leases were the ones who were penalised and ended up worse off than those who had been on conacre. Fianna Fáil wanted us to do a cost-benefit analysis on the €25 million that was set aside for that but in my view that money was very well spent because people could not be penalised for having entered into what we were encouraging them to do in the long term.

I take on board the points made about farm partnerships. I refer to the IFA policy on compulsory purchase. Is it an element of roll-over relief on the supply licences and co-op shares? The days of building roads through farms has gone. I ask Ms Rowena Dwyer to comment.

The role of this committee is to deal with all aspects of agriculture as opposed to finance but the finances are key. It is important to hear submissions from all the farming organisations and to engage with them well in advance of the budget so that we can work with a concerted voice in the autumn to ensure that the agriculture sector is well protected. This review of the taxation model provides a significant opportunity and we must ensure we get it right.

Not too many questions have been asked, apart from the definition of "the child".

Mr. Eddie Downey

I have a 20 year old child at home at the moment and he certainly would not describe himself as a child-----

Does he bring home the washing?

Mr. Eddie Downey

He has just finished his green certificate. We are talking here about young trained farmers qualifying for this and we want them to be incentivised by a phased transfer system. It makes absolute sense to go down that route. This is the first time anyone has challenged the whole farm succession issue. To provide a phased process, a period of time by which one gets into a contract and the transfer takes place, gives security both to parents and to young trained farmers during that process. It is a good proposal.

From the point of view of the Exchequer, it could be a benefit, even though there could be a tax incentive within it, in that there would be two active farmers working on a farm plus a young active farmer coming into it to drive it forward. There is a benefit in that for the Exchequer in the long term.

Land leasing continues to be a major issue for us and we need to take the road blocks out of that process. Deputy Heydon spoke about the tax relief secured on land leasing. If farmers did not get such tax relief, it would be the death-knell for land leasing. If there is to be a future for agriculture, we must have land mobility and stability within that system whereby a farmer can lease land for a period and actively farm it for that period, knowing that he will have access to it next year, the year after and year after that. That is the only system that will work. It was welcome to get the provision of such tax relief and it is essential that we drive forward the land leasing issue.

Co-operatives want farmers to compulsory share-up in their co-operatives, in other words, to buy shares in them to build their sustainability. Farmers should be able to write off such investment against income tax because it is an investment they have to make in their industry. When such shares are sold, they are taxable at that stage. That is a reasonable measure. It means there is a tax incentive for farmers to buy shares in their co-operatives and the co-operatives will get the money they need to advance and drive forward their businesses. That measure would involve a minimal cost to the Exchequer.

Most members referred to the tax deposit scheme. It would operate on the basis of having a special tax deposit account. One option open to a farmer is to invest a pension which would mean the money would be taken out of the system, pushed to one side and no longer available to farmer and the tax would be foregone on it. That would be a negative from the point of view of the Exchequer. Another option is that a farmer could invest in a company and pay 12.5% tax on all of his income. By placing the money in a deposit account, it means the tax will be foregone for that year but when the money comes back into the business, and it will have to come back in it within a five-year period, the tax will have to be paid on it at that stage. It will come back into the business when it will be of more advantage to the farmer in a low income year and it will help to keep the cashflow steady on that farm over that period. It should be possible for the farmer to secure a loan against 50% of its value, because tax on it would be paid at the rate of 50%, and therefore, it would not affect the cashflow on the farm, and the farmer could continue to grow the farm. There will be a particular period of high investment over the next period and a number of measures in our proposal deal with achieving what is set out in Food Harvest 2020 where there will no longer be milk quotas next year, when farmers will have make considerable investment, particularly in the area of incentives for stock relief for those first four years.

It is essential that the €500 million for the rural development programme is in place in this year's budget. Schemes under it must be got up and running. A number of members asked questions about the timeline around GLAS. The rules and regulations around it should be available by next year and applications for it should be in place early next year. The idea that all applicants must have their applications in before there is an opportunity for the planners to put in the full plans for it is a non-runner. This scheme must be brought in on a phased basis over the year. Those who submit their applications will get them in early and the scheme can be got up and running as quickly as possible. On the issue of the planners being involved, we should let them worry about that, we should get the scheme up and running and get the money in place to make sure that happens. As was clearly laid out, no scheme was available last year. A number of farmers have not participated in a scheme for the past two or even three years. They are ready and willing to get up and running as quickly as possible with a new scheme.

On the issue of the pay and file date, it is essential that the pay date is held. We would prefer to leave the file date as it is. There would have to be a period of readjustment within that and it creates complications for the accountants and the professional system but it is essential that the pay date is held.

Deputy Ó Cuív asked a question on the tax credits. We estimate there is a €170 million paid by self-employed people in extra tax that is not paid people within the PAYE system. To break that down, a single farmer on an income of €20,00 pays 20% tax whereas an employee in the PAYE system on an equivalent amount would pay about 10% tax. There are 135,000 individuals who pay at that level and some 90,000 of them probably earn more than €17,000, therefore, we are looking at a figure of €170 million. That is an amount foregone. This is what the lack of an allowance costs the self-employed and we consider that to be an anomaly in the system. We are well aware of the state of the public finances but we flag this as a major issue and it is something that should be addressed in due course.

Does Mr. Smith wish to add a further comment?

Mr. Pat Smith

There was a suggestion that the PRSI rates for the self-employed should increase. We need to be very wary of that because the availability of cash is the problem on most farms and having the ability to pay the bills on a day-to-day basis. If there is any suggestion of an increase it will have to be optional and we would insist on that. In the context of capital expenditure, we are not so pessimistic. Already this year we have met the banks in the context of the difficulties experienced by livestock and tillage farmers and they have told us that this year farmers have plans to spend approximately €300 million to €450 million. There represents a good deal of expenditure on farms. Payments under the targeted agricultural modernisation scheme, TAMS, need to be put in place early to give farmers the confidence to proceed with investments. I have no doubt if the experience of the farm waste management scheme is anything to go by, that all of that TAMS money will be spent in the context of keeping jobs in rural Ireland.

An important job of work we have to do with regard to GLAS payments is to make sure that the money to provide for them is in the budget. I see no reason the scheme cannot be open and paid from 1 January next year. Such cashflow concerns are seriously damaging confidence, particularly in low income sectors and vulnerable regions. It is important that significant payments are made under GLAS in 2015.

Does Mr. Enright or Mr. McCabe wish to add a further comment?

Mr. John Enright

I will start off and then hand over to Ms Mary Buckley. It is crucial for farmers to have access to land. Mr. Eddie Downey covered much of the land leasing issue. An elderly farmer can lease land to a stranger and tax relief on land leasing can be secured, but that farmer cannot lease land to his son, daughter or nephew. It is important to get that issue addressed.

Another important issue is land mobility, the transferring of land to the younger generation. It is heart-breaking for a young farmer, or a middle aged farmer like myself, to be looking out across the field at land that is not farmed to its maximum or anywhere near it, while other farmers are farming their land to its potential. We must encourage a greater level of land leasing. We must also get an extension of stamp duty relief for young farmers in terms of land mobility. Facing a bill of €10,000 or €15,000 when young farmers are starting off knocks them back straight away. In terms of land mobility, if farmers do not have the land, they do not have anything. Another important issue is land consolidation. If one has 40 acres, one can sell that land and buy a home, but one cannot sell two bits of land and move to a better place that would help everybody environmentally in terms of the carbon footprint

On the pay and file date issue, as Mr. Eddie Downey said, farmers cannot pay before the pay date. Towards the end of the year dairy farmers have paid off all their bills. From talking to accountants, they say it will be legitimately impossible to have it ready any sooner. They are battling as it is and if we try to move back the date, bearing in mind that we are approaching the traditional two-week holiday period, accountants who have, say, 200 clients, might have to drop 10% of them to be able to logistically get the books right.

There are a few other points that Ms Mary Buckley wishes to address.

Ms Mary Buckley

It has been stated that agriculture is the backbone of our economy and an important aspect is stimulating economic activity in rural areas and helping businesses become viable. Regarding capital allowances in particular, farmers have had to deal with Food Harvest 2020, the abolition of quotas referred to earlier, and the investment required on farms, particularly on dairy farms. If the capital allowances can be accelerated for farmers who have to invest a good deal of money in building, they will have more money available and they will spend it.

In terms of getting money front-loaded for the targeted agricultural modernisation scheme, TAMS, particularly the dairy equipment scheme, we will need that in the period starting 2015. Come 2019, most of the expansions on farms will have taken place in terms of post-quota and achieving the targets set out in Food Harvest 2020. In terms of the rural development programme, we need to get the TAMS in particular front-loaded, and also GLAS. There is stimulation and investment in activity in rural areas as an off-shoot from GLAS. There is dual benefit in that regard both for the farmer and the economy in general.

I thank all the witnesses. Representatives of two other farm organisations were before the committee some weeks ago and the witnesses will be glad to hear that the similarities among all the organisations are apparent in terms of land mobility, price volatility, land transfer, access for young trained professionals, and the need for a tax code. Those of us who started more years ago than we care to remember knew that was needed then, and it has been needed ever since. Mr. Doyle in particular knows that. We have to ensure we get it right so we must reflect on the potential in terms of a tax code.

Are the members agreeable that the transcripts of the debates today and the previous day will be forwarded to the Minister and the Department of Agriculture, Food and the Marine? Agreed. We will take extracts from it when we are writing our report but it would be valuable for the transcripts of both sessions to be forwarded.

It was not a waste of the witnesses' time coming before the committee. We have the benefit of their views now and we will try to condense all the contributions into a report. Some key points were made, including one as practical as the pay date to reflect cash flow. Regardless of the enterprise, there is a dynamic in terms of the timing of the single farm payment. Unless the payment of that is brought forward, the pay date cannot be brought forward. We will suspend the meeting to allow the witnesses for the next session to come in. Again, I thank the witnesses.

Sitting suspended at 10.53 a.m. and resumed at 10.56 a.m.
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