Mr. Eddie Punch:

Income averaging is why we made the proposal for rainy day funding, which is similar to Macra na Feirme's bond idea. Income averaging is a little bit crude and inflexible in various cases, and it is not available to all farmers. It can be limited if there is off-farm income or if they are also involved in other businesses. In addition, once one gets into it one is stuck in for three years, which becomes a problem.

One only ever goes for income averaging when the problem arises, but that is not really what we would like to achieve here. We are saying that when years are good, people should be encouraged to have the possibility of putting some of their profits aside into a fund or a bond. That can be sheltered from taxation until they draw it down in the future. They will draw it down because at that point either they have an income crisis, in which case they will be paying a lower rate of tax when they draw it down anyway, or they may have an investment project they may wish to put it into. Alternatively, there may be a fodder crisis. By facilitating people in putting this money away each year where they have surplus profits over and above what they might need, one is encouraging planning.

It is not done on the basis of income averaging, when one suddenly has one year and one has locked oneself into a three-year period.

I may as well address the issue of conacre, long-term leasing and collaborative arrangements. We have made a proposal, and it is important to understand what we are saying. Of course we all agree that short-term conacre is not the best deal. Long-term leasing is preferable to that but collaborative farming in turn is preferable to long-term leasing. Long-term leasing is fine when a farmer has made a decision that he is finished with farming, that he is happy to retire, but that is not the case for many farmers. I think we are going about the issue the wrong way if we think we can encourage men to lease out the land for ten years and say "day-day" to farming. That lesson has been reinforced by the recent Common Agricultural Policy reform, where people who had got out of farming and leased out their farm for a long time are high and dry in terms of CAP reform. Obviously there is a lesson in that for people, which is not to lease out all the land or go for short-term arrangements. For all the reasons we have given, in addition to the people who are sick of being involved in businesses that are not profitable, people in cattle and sheep who are making no money year in and year out and are telling us they have to do something different but for whom retirement is not on the agenda, collaborative farming might be a possibility. I am not saying this is a flood, it is a trickle but the trickle must be encouraged. In that case, one is faced with a strange dilemma. Under the long-term leasing tax relief arrangements, one cannot lease to a company or to someone with whom one is in partnership. This is where the problem arises.

Somebody looking at a collaborative arrangement needs to be able to understand how he is going to get income out of this arrangement and how his new farming partner is going to get income out of it as well, a sufficient income for two families. One of the issues is that if one can manage to make profit, then one has taxation issues. On the other hand if one goes in for a long-term lease, one can get up to €20,000 tax free. The rule on long-term leasing is an active disincentive to go into a collaborative shared farming partnership type arrangement. It is almost certain that the smart thing to do from an income point of view is simply to lease out the land and take the €20,000 tax free. On the other hand that is not attractive unless one is absolutely convinced that one has finished with farming and is happy to retire. We have a logjam. The ten-year lease with €20,000 tax relief is not attractive and that is an obvious fact because the scheme is not being taken up. The short-term conacre is the worst possible arrangement for all. There is a general agreement that collaborative arrangements are what we need to look at, but we must ensure the taxation system is working favourably for collaborative arrangements and that it is at least matching the taxation treatment of long-term leasing.