Andrew Doyle (Wicklow, Fine Gael)
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I welcome Mr. Patrick Kent, president of the Irish Cattle and Sheep Farmers' Association, ICSA, Mr. Eddie Punch, general secretary, and Mr. Kieran O'Dowd, national president of Macra na Feirme, Mr. Sean Coughlan, chairman of the agricultural affairs committee, and Mr. Derrie Dillion, agricultural and rural affairs manager. I thank them for appearing before the committee to speak on the agri-taxation review. Just to explain, some members of the committee have had to go to the Seanad and hope to be back but I hope that a couple of others members will be here. We considered it important to invite the witness to make a presentation so that it will go on the record.

Before we begin, I remind witnesses that they are protected by absolute privilege in respect of their evidence to the committee. If witnesses are directed by the committee to cease giving evidence on a particular mater and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses 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 or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

I propose to take both presentations together, Mr. Patrick Kent following Mr. Kieran O'Dowd. Is that agreed? Agreed.

Mr. Patrick Kent:

I thank the committee for the opportunity to contribute to the agri-taxation review, announced in last year’s budget. The ICSA believes that a progressive agriculture sector requires a tax regime which incentivises hard work and entrepreneurial spirit; assists those who have invested in developing and expanding their farms; supports efficient farm transfer between the generations without punitive capital taxes; features VAT, excise duty and carbon tax that makes Irish agriculture more competitive; and encourages long-term land leasing, farm partnerships, land consolidation and installation of young farmers.

We need long-term views not short-term gains when it comes to agri-taxation. By that we mean that the right tax incentives which lead to better land mobility, encourage young farmers to take over and support better farming structures will ultimately lead to greater tax take in the long run. However, even the best taxation policy cannot solve all of the problems faced by the low income dry stock sectors and I would be failing in my responsibilities to cattle and sheep farmers if I did not point out that we need to tackle the income crisis in these sectors as a priority. For some farmers however, their choice will be to look at alternatives to continuing to lose money on current enterprises and for them, we must look at the tax implications of such decisions.

Before I outline some of the key points made in our submission on the agri-taxation review, I wish to clearly state that the ICSA is resolutely opposed to any talk of land taxes. Farmers, like everyone else in society, should be expected to pay tax in line with their earnings and their ability to pay. We know and understand that the overall taxation context is heavily influenced by external pressure to balance budgets and by the need to ensure we can borrow from international markets.

However, it is also important to appreciate that increased taxes are acting as a deterrent to hard work and investment. It is an article of faith that there can be no increase in the 12.5% corporation tax rate because any increase would cost jobs and threaten foreign investment. Yet there seems to be no problem with taxing sole traders or self-employed people who are not incorporated at 52% on marginal income above €32,800. This is particularly severe in the context of enterprises trying to pay down principal on borrowings out of after-tax income. Accelerated capital allowances have been phased out, for example, the three years for farm waste management scheme expenditure, and there are no allowances for land purchase. Farm income volatility is also a huge issue that is impacted by tax levels. As volatility increases, farmers who have profit in a good year should ideally set aside some of this for the almost inevitable downturn in future years. However, saving money to invest in the business should be regarded as prudent but instead it is actively discouraged by DIRT rates of 41% and, more importantly, by high tax levels on profits.

The ICSA submits that “rainy day” planning should be encouraged as an alternative to income averaging. This would be facilitated by allowing an unincorporated farmer to invest a proportion of profits in a good year tax free into a special account, which could be accessed in future years for one of three options: for living expenses in a bad year which would be subject to normal income taxation; for investment in land purchase or farm development; and to cover exceptional costs such as extra feed in an extreme weather event. The key objective here should be that young farmers taking over the family farm should not be burdened with a potentially crippling tax bill at a time when they need all the finance they can get to make a go of the business.

From 6 December 2012, the Group A parent-child tax-free threshold was reduced to €225,000, progressively down from €434,000 in 2009, while the capital gains tax, CGT, rate has been increased incrementally, from 20% to 33%. Both of these measures increased the risk of significant tax liabilities for farmers who take over the family farm, either by way of gift or inheritance. These changes mean that a young farmer taking over the farming business where land and other assets exceed €2.5 million is at risk of a substantial tax liability on the excess at a rate of 33%.

On the other side, on capital gains tax retirement relief, budget 2012 provided for the introduction at the end of 2013 of a new upper limit of €3 million where the person transferring is aged over 66. While it is desirable to encourage early transfer of land, it is not always possible or desirable to do so. A potential CGT hit for those farmers over 66 years could have the perverse effect of encouraging holding on to the land until death.

In general, ICSA is concerned that the trend in recent budgets has been to expose more farms to greater risk of capital taxes on transfer, which we regard as harmful to the overall objective of a young farming population. ICSA has welcomed the general reduction in stamp duty to 2%. There is a special rate of 1% for transfers between blood relatives and 0% for young trained farmers. However, these rates are temporary and we would like to see them established on a more permanent basis.

Stock relief is vital for farms, which are expanding. We would like to see stock relief rules in place on a more permanent basis. We welcomed the introduction of farm restructuring relief. However, there are two problems here. First, the relief is only available until 31 December 2015 – this needs to be extended indefinitely. There is no reason for a short-term incentive; farms can only be restructured when the opportunity arises and when it coincides with the financial wherewithal. Second, the relief does not provide for sale and purchase of entire farms. However, it is clear that in many cases this will be the most efficient route to consolidating a farm holding. ICSA, therefore, submits that such transactions should also be facilitated.

The exemption of certain income from long-term leasing of agricultural land applies a number of restrictions on qualifying lessees. ICSA submits that this is unduly restrictive and is hindering stated Government policy on land mobility and the facilitation of partnerships and collaborative arrangements. Specifically, it is not possible to avail of the relief on income up to €12,000 in the case of five-to-seven year leases, €15,000 on leases of seven to ten years and €20,000 on leases greater than ten years where the lessee is a company or where the lessee is "a person with whom the lessor is in partnership". The uptake of the tax relief has been low suggesting that it is not achieving its purpose. A key reason is that many farmers are very reluctant to commit to the total loss of control over their land for an extended period.

ICSA submits that it is highly desirable to encourage older farmers to consider entering into partnerships with young qualified farmers. This is a more desirable option for some farmers who do not wish to retire totally and where a partnership could potentially bring much greater benefits in terms of developing a farm, and facilitating the involvement of young farmers on a collaborative or partnership arrangement.

In cases of genuine registered partnerships, there is a need to ensure both partners can achieve a reasonable economic outcome. It is also necessary to ensure that the relief for long-term leasing does not conspire to undermine the option of partnership. However, at present, the rules mean that land cannot be leased to a partner and therefore the older farmer is faced with rejecting the partnership option in favour of long-term leasing to a third party, with whom there is no collaboration. In turn, the older farmer may see that as undesirable as there is no involvement in sharing experience, keeping some control over the management of the farm or participating in the development of a business that will be more efficient under a partnership model and potentially more likely to facilitate new trained entrants compared with simply leasing out to the highest bidder.

ICSA submits that there is an urgent need to support more land mobility and that the preferred route should be through partnership. Accordingly, the long-term leasing tax incentive should also allow that qualifying lessees would no longer exclude a person who is in a registered farm partnership with the lessor and a company which has been set up for the purposes of a farming partnership arrangement and where there is a registered farm partnership in place involving a second partner who is not a family relation of the lessor.

ICSA also submits that the long-term leasing incentives need to be pushed more. We suggest that the highest level of leasing income exemption of €20,000 which currently applies to leases in excess of ten years should be allowed for leases of five to seven years for a once-off period of three years with a view to encouraging older farmers to move away from conacre. We believe that the current ten-year requirement for this is too daunting.

The increase in carbon tax in recent budgets has not helped the viability of farms and agricultural contractors. Excise duties are also damaging. The double tax refund available against the carbon tax is extremely cumbersome and not well understood. It is manifestly preferable to simply reduce carbon tax and excise duties on agricultural fuel.

ICSA believes that the employee tax credit discriminates against the self-employed, including full-time farmers. There is no longer any justification for this discrimination which potentially costs an individual full-time farmer €1,650 in extra tax, assuming a tax liability. ICSA believes that the employee tax credit should be replaced with an earned tax credit, in line with the Commission on Taxation, although it should be phased in quickly rather than over time.

Mr. Kieran O'Dowd:

We, in Macra na Feirme, are delighted to have the opportunity to address the committee. It is unfortunate that there are such a small number in attendance today. We have met the members who are here on a number of occasions and know that they are supportive of young farmers.

From our own point of view, we have made a submission as well and I will read it into the record. At the start, we set the context: the need for food and agribusiness, the need for active farmers and the need for access to land.

Ireland, as a farming community, is delivering food security. It has the capacity to feed in excess of 30 million people, which is significantly greater than the population of this country. As a result, our key emphasis is on delivering top-quality safe food for the export market as well as for our own market. Also, in this country, we employing 150,000 directly, and many more indirectly, in the sector. We export 85% of our food to over 160 countries. It is a significant market and agriculture is a significant part of the Irish economy.

The need for active farmers is where Macra na Feirme wants to step up to the plate. At present, 7% of farmers are under the age of 35 and 45% are over 55. In 2000, 13% of farmers were under 35. The percentage under 35 has almost halved in 14 years. If that trend is to continue, the future would be bleak for young farmers. In order to grow the sector further, we believe measures need to be taken to ensure that young farmers are encouraged into the sector, and this agri-tax review will provide the forum for that.

On the need for access to land, from our point of view there are a number of structural issues which need to be dealt with, particularly around land use in the area of leasing and disincentivisation of conacre. As the Chairman will be aware, we completed a national land mobility study. The study found that 45% of farmers over the age of 55 do not have anyone to take over the farm after them. They may have children but they have no identified farming successor. As a result, we established a land mobility service headed up by the Mr. Austin Finn, who is a chartered accountant and farmer with a BSc (Ag). Mr. Finn has found in his work carried out since November that short-term land rental is a key issue and the conacre system is a major structural barrier. Many farmers are afraid to rent on a long-term basis and no matter what work farm organisations such as ours do, we still need support from the Government and further incentivisation of the longer-term leases and disincentivisation of conacre.

Outside of the family farm, there is little opportunity for a young person to get established in farming. In our opinion, the tax code should favour the active use of land. There is not as great a need for the tax code to favour inactive or non-farming land ownership.

We need to farm the land to its full potential, whether through dairy, beef, suckler or forestry. The majority of Irish farms are family farms which need to pass from one generation to the next over time. This should not wait until the younger farmer has reached his or her late 50s because it is more difficult to make changes to the farm at that stage. The capital taxation code has by and large been favourable to facilitating this without an excessive taxation burden. That policy needs to continue. Taxation measures favouring on farm investment, such as stock relief and accelerated capital allowances, have yielded a significant economic return to the Exchequer through increased output and productivity, as well as greater environmental protection. Young farmer measures are important to facilitating the next generation of farmers to establish sustainable and viable farming enterprises. The European Council of Young Farmers, CEJA, has determined that farmers who are younger than 35 tend to show 40% more economic potential and utilise 37% more hectares of agricultural area. This highlights the importance of ensuring the early transfer of farms to young farmers to help achieve Food Harvest 2020 and future growth.
With approximately 6,250 leases currently claiming the tax relief on long-term leasing of land, the tax relief is not by itself resulting in a significant increase in long-term leasing because conacre is still more attractive to landowners. Auctioneers tend to encourage people to continue with conacre because it suits them to get the annual fees. Legal professionals prefer the status quobecause they may not be familiar with the various incentives available. This is why we believe the reliefs need to be publicised more widely. Generally farmers are au faitwith agri-taxation measures and are well served by agricultural advisers, whether from Teagasc or private consultants. However, it is hard to get over the line with auctioneers and legal people. We have heard anecdotal evidence this year of a mother who transferred land to her sons. Both parties to such contracts are now required to get legal advice. When the mother consulted her solicitor, the latter practically talked her out of the arrangement because of concerns about what might happen if her children put her in a nursing or on the road without utilising the land. These issues need to be addressed. We call for a more pragmatic approach by legal professionals that recognises the agricultural nature of the country.
I will now outline our main proposals on agri-taxation under the headings of income tax and capital tax. In regard to income tax, the 100% young farmer stock relief allows young trained farmers to offset an increase in the value of their stock against their tax liability. At the outset, all livestock farmers need to build up a viable production base through livestock. This is a long-term investment in the farm which needs to be achieved without a heavy tax burden. It would be permissible under state aid rules to extend the duration of the relief from four years to five years. Extending the relief would give young trained farmers an additional year to grow stock numbers and expand output at farm level without a heavy tax burden. Greater flexibility as to the activation timeframe of the relief would facilitate young trained farmers to select the five years they want to apply the relief from their longer term farm business plan. Young farmers do not always benefit from the relief in the first few years because they may not have the financial strength to grow stock numbers quickly. The amount eligible for stock relief should be increased from €70,000 to €150,000. This figure equates to a 100 cow dairy herd, which is a reasonable target for a family farm. Given that the average dairy herd is approximately 70 cows, a herd of 100 cows is an achievable target and it is something younger farmers are aiming for.
The current 50% tax relief for partnerships is limited to a maximum of €7,500. This is restrictive and given the efforts made to promote collaborative and partnership farming this relief should be significantly revised upwards. The 2020 Food Harvest report sets out a target of increasing by 33% the value of primary output over the next ten years. To facilitate investment by primary producers in stock we need to extend stock relief measures to 2020.
Access to land is one of the main structural barriers in Irish agriculture. Long-term leasing of land is unfortunately under utilised at present. Currently, the first €12,000 of rental income per annum is exempt from income tax for leases of between five and seven years, €15,000 for seven to nine years and €20,000 for ten year leases. We think these reliefs should be retained because they offer strong incentives. They need to be better publicised, however. We also propose a double rent relief for the first year of rental expenditure on long-term leases for active farmers. This would disincentivise conacre by offsetting the additional legal costs arising from the fact that each party now needs separate legal representation. Double rent relief would favour the person who is farming the land. The other reliefs favour the landowner. Revenue would need to provide landowners with an information leaflet on tax relief on land leasing. A key factor in allowing future young farmers the opportunity to scale upwards will be land availability and the opportunity for farmers to source land at a reasonable cost. Realistically, farmers are not going to be in a position to buy land and allowing them to lease land for terms of between five and 15 years will allow them to borrow from the banks to make affordable capital investments.
We believe there is justification for introducing a new initiative to alleviate farm income volatility for farmers operating as sole traders. The principle would be the creation of a Government bond to allow farmers to deposit surplus profits in good farming years and withdraw reserves in years with poor returns, subject to certain limits. On encashment, the value of the bond or fund would be liable for income tax. Initiatives of this nature have been introduced in a number of countries, including Australia and New Zealand. The bond or fund would double up as a young farmer fund to allow access to credit at a preferential rate. This could be administered through the NTMA, with the result that we would be investing at a preferential rate. Young entrepreneurs would be able to access credit to finance their business start up ideas and contribute to growth and job creation in rural areas. We propose that the scheme would allow farmers to take some excess income arising from a good year in farming and invest it in a government bond fund and withdraw up to certain limits in a year of poor return while paying tax on exit from the fund. The fund or bond could provide young farmers with access to credit and interest subsidised loans to facilitate establishment of new farm business and collaborative arrangements. While the Government might be paying a low interest rate to the farmer investing the money, it will be able to charge interest when the money is loaned to younger farmers.
Capital allowances are granted for tax purposes in lieu of a deduction for depreciation and are available in respect of certain qualifying expenditure incurred in the provision of certain assets for the purposes of a trade or rental business. We propose the introduction of an accelerated allowance for farm expansion to include buildings and machinery, with 50% in year one and the balance over two years, or at 33% per annum. We would also support the introduction of free capital allowances on plant and equipment that can be attributed to environmental or climate benefit, such as slurry spreading equipment with injection systems which benefit the environment, reduce emissions and deliver an enhanced nutrient value for farmers.

Another key proposal is the introduction of capital allowances on new farm building investments for landowners who are not farming but are engaged in collaborative arrangements to invest in the farm. They have the buildings and are renting them out to young, trained farmers. We think the introduction of capital allowances for those new farm developments should be encouraged. It would also help the farmer who has the land to invest in buildings, so that young farmers will be able to benefit from their use during the collaborative arrangement. We think this would also send a positive signal that the Government believes collaborative arrangements should be further encouraged.

As regards capital taxes, the current system of 90% taxation relief is important to land that is being transferred. It means that farmers can keep the block of land together and do not have to delve into assets to pay a taxation bill. That system should be continued.

Currently, relief is given by reducing the market value on which capital acquisition tax is calculated by 90%, provided that 80% of the gross assets post transfer are agricultural assets. We fully agree with that relief, which has served the country well. We therefore completely endorse it.

Landowners should be encouraged to complete a course in collaborative arrangements, particularly if they have no previous agricultural education. This would help them explore options for best utilising their land, be it leasing, share-farming or other collaborative arrangements of which there are many. It is another incentive and a way of getting the message across.

Stamp duty relief provides for exemption from stamp duty on certain transfers of agricultural property to young trained farmers. The fact that it has been kept quite low on farm land means that it helps with the transfer to young farmers. We do not want any obstacles in the way, so we want stamp duty relief to be continued in its current form. This relief should be agreed for a minimum of six years at a time to facilitate succession planning. These issue can sometimes take time to go through.

The future for the next generation of young farmers is promising. Young farmers in Macra na Feirme feel we want to be at the forefront of any developments that are carried out. The agri-taxation review will be key, along with the CAP and everything else, in fostering the development of young farmers into the future.

Andrew Doyle (Wicklow, Fine Gael)
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I wish to thank Mr. O'Dowd and Mr. Kent for their detailed and comprehensive submissions. In many respects they were similar and complemented each other. Do any members wish to comment or put questions?

Thomas Pringle (Donegal South West, Independent)
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I thank the witnesses for their presentations. I am not from a farming background so I might not have the same knowledge of agricultural affairs as my colleagues. The Macra na Feirme presentation seems to make a bit more sense concerning conacre leasing arrangements. If leases are not long enough for farmers to develop their farms, the idea is to penalise people renting on short-term leases rather than shortening the term where maximum relief comes in. That seems to make perfect sense and it would be a worthwhile proposal.

Given that the average farm income in 2013 was €25,000, how many farmers would benefit from stock reliefs? I imagine one would need to have a fairly high taxable income to benefit from the maximum amount of relief. Are any figures available for how many farmers would benefit from such reliefs?

Pat O'Neill (Fine Gael)
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I thank both groups for their presentations and apologise for having missed the ICSA one. We meet all the agri-groups prior to each annual budget and we listen to many similar presentations. Can both groups respond to the question of income averaging, which does cause a problem? Can the ICSA expand further on how income averaging can be achieved? Farming is a volatile sector and much depends on the weather, as well as on world markets.

In the beef industry, we can see the current problems for suckler farmers who will have no income. If they had an income averaging situation, however, they may have a tax liability at the end of the year. How can we manage this income averaging? The ICSA said that farmers could perhaps opt out of averaging for one year.

That ties into the Macra na Feirme presentation on income volatility. Mr. O'Dowd said that a bond could be put in place but can he expand on that? A bond can be taken out but for how many years can it be left in place? I presume that income tax will be paid on it when it comes out. I ask both representatives to expand on those matters.

Andrew Doyle (Wicklow, Fine Gael)
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I must advise both Senators that a vote has just been called in the Seanad.

Pat O'Neill (Fine Gael)
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We will have about five minutes before the vote. Can we ask the witnesses to reply before we leave?

Andrew Doyle (Wicklow, Fine Gael)
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Does Deputy Heydon want to make a brief comment?

Martin Heydon (Kildare South, Fine Gael)
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I will be brief because much has already been said on both presentations. The similarity between them struck me. I thank both representatives for attending the joint committee today. The issues of land mobility and access to land are common to both the ICSA and Macra na Feirme. As regards disincentivising conacre, we will ultimately have to look at making serious changes to how this is structured. During the CAP negotiations it struck me that we were the only country in Europe that had a problem with meeting the historical date for payment. That was all linked to conacre because other countries have medium or long-term leases, partnerships, and a much healthier approach to land, whereas we do not.

As regards rainy day planning, in Kildalton agricultural college I recall being told that farmers should beware of big cheque confidence. A big cheque may arrive one day but they will have to survive for the next six months without another shilling coming in, so they should not spend the money on a new tractor. The ICSA's rainy day proposal is an interesting one. We need to undertake a body of work in the coming months on foot of the presentations. I will allow the witnesses to answer the questions now.

Andrew Doyle (Wicklow, Fine Gael)
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I do not want to rush Deputy Deering. The two Senators have put a couple of questions, so perhaps the witnesses can respond to them as they will have to attend a vote in the Seanad.

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.

Andrew Doyle (Wicklow, Fine Gael)
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Does Deputy Deering wish to make a point?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I apologise for being late. I think the key point in all of these discussions is to get more young farmers into farming over the next generation. A startling figure from Macra na Feirme is that the proportion of farmers over 80 years of age is larger than those under 35 years of age. That is a startling statistic in 2014. If that figure is not reversed in a reasonably short time the agricultural system will be in serious trouble. There must be a change of attitude and I hope this process will encourage that change. We need a carrot more than a stick approach to try to do that. I welcome the discussion.

Long-term leasing is very important to that process as well. I think the whole process has been very well articulated today. The ICSA has elaborated on long-term leasing and Macra na Feirme has emphasised the importance of the role of young farmers and active farmers becoming involved in the system. An attitude and mentality change needs to come about as a result of this.

Mr. Kieran O'Dowd:

Collaborative arrangements, long-term leasing and shared farming all need to be encouraged. While we would differ from our colleagues in the ICSA in so far as while we need to encourage long-term leases by incentivising and getting them publicised further in order that more of those arrangements are taken up, people who want to continue farming and have some link with the land also need to be encouraged and supported. The key statistic is that 48% of farmers over the age of 55 years do not have an identified successor. That means they will not continue farming indefinitely. They need to be given some option in respect of what they will do with the land. If they were to die in the morning and somebody takes over the land, the land must be farmed effectively and productively.

Deputy Pringle commented on the benefit and the stock relief. In the dairy sector in particular, young farmers in the early days will not be able to avail of the stock relief to its full extent. However, if they are expanding rapidly and if they have a good income coming from the good milk price and they want to reinvest into the business, we believe they could be caught with a significant tax bill at the growing stage. These young farmers are sole traders. They will not be seeking to incorporate the farm and will be paying tax at the higher rate. We believe they should be helped by being given the flexibility to grow and develop in the initial period. This should not apply to the dairy industry only.

Mr. Sean Coughlan:

When one is developing a new business, every pound is a prisoner. Nobody wants to say he is avoiding tax or anything like that. The key metric Macra na Feirme is trying to get across is that we need to create economic activity. We know from the age profile of farmers that younger farmers will create this economic activity, especially in rural areas where it is most needed. That will lead to further taxation down the line and will broaden the tax base. Creating more economic activity will be a win-win for everyone involved.

Andrew Doyle (Wicklow, Fine Gael)
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That is the key to it. Without stock relief, expansion is stifled. Without stock relief one will end up being unable to reinvest in the business. When one is trying to develop a dairy industry, the key is to use stock relief to grow the numbers reasonably quickly. This is the single most important taxation measure in place.

The two presentations today were very useful. I hope the taxation review body takes them on board because the suggestions in both presentations were constructive, productive and worthwhile. The key is to make land available to young people, but they do not necessarily need to own it. It was the tradition to own the land, but now one does not need to struggle to put the capital together to purchase land and then not be in a position to use the working capital to develop the business. Bar inheriting, winning the land or marrying into a farm, one could not get into land management. That is the key.

Short-term conacre is a problem in Ireland. It is unique to Ireland and is a major deterrent. Where somebody is thinking of retiring, is unsure whether he has a successor and wants to go into a collaborative or shared farming partnership for three or five years - I think five years should be the minimum - this provides the person who is trying to get on the farming ladder an opportunity to get started and move to a more permanent arrangement. I think there are very valid arguments for saying that the taxation treatment of income from both should be equal. It does not compel a person to get into long-term leasing to avail of the tax relief but we want that to be the ultimate goal if one does not have a successor. In the meantime we will allow a taxation incentive system for shorter-term arrangements. Both suggestions have merit.

We have invited other organisations to appear before the committee on 17 July.

I thank the witnesses for coming before us at relatively short notice. We consider it is important that before we make a submission to the taxation review body, we would hear from the main stakeholders, that is, the main farm organisations who represent both those who are trying to get into farming and the farmers who are thinking about retiring.

As there is no further business we will adjourn.