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.