Mr. Tim Cullinan:

I thank the Chair and members for inviting the IFA to address the committee. I am joined by Ms Rose Mary McDonagh, chair of the IFA farm business committee, and Dr. Shane Whelan, IFA farm business policy executive.

As the oldest and largest indigenous industry, the agriculture sector has been the foundation stone on which economic activity and employment, both upstream and downstream, has been built in towns and villages throughout rural Ireland. Many Governments have prioritised agriculture and food as a major economic driver for the Irish economy, which explains in part the large suite of tax relief measures that are currently in place to support the sector spanning multiple facets. Given same, the IFA is disappointed not to be afforded an opportunity to have a representative on the commission despite numerous attempts on our part. We have serious concerns about many of the proposals within the commission's report. There are concepts still which we agree with, most especially adopting equity and fairness as a core principle in the design of our future taxation and welfare system, that is, taxing people according to their ability to pay.

Many of the proposals within the commission's report, for example, the progressive removal of reduced VAT rates, capital tax and or charges will, if introduced, undoubtedly have a disproportionate impact on farmers. It is, therefore, essential that the full economic impact of any proposed amendment is thoroughly understood, not just in isolation, but from its cumulative effect before being implemented. This will help to avoid the creation of an economically unviable operation, something which, regrettably, the unjust residential zoned land tax has failed to do to date.

To comment on all of the proposals that the IFA is concerned about would take some time and, we understand, that it will undoubtedly be the Government that will decide which, if any, of the commission's proposals will be implemented in the medium to long term. Today, I will touch on some of our most significant concerns now and perhaps others will materialise in our subsequent discussions.

First, the report referred a lot to increasing revenue yields from capital taxes. The report claimed that they are more economically efficient, sustainable and there is potential to increase yields from new or amended capital measures. The report does not fully acknowledge, in any material way, the huge reliance many farm families and SMEs place on the existing capital tax relief measures to support intergenerational renewal and sustain operations. To put it simply, many businesses would exit without these supports.

Let me be crystal clear. The IFA is totally opposed to any reduction in agricultural relief or any decline in the Category A capital acquisition tax threshold. The latter proposal completely contradicts the commitment made in the programme for Government to increase the Category A threshold to €500,000, which more reflects the reality of inflationary property and land price pressures that are currently endured. The 90% agricultural relief from capital acquisitions tax reflects the fundamental reality that land, as an asset, has a value far beyond what it generates in terms of income. Any reduction in the relief rate would have a disproportionate impact on the farming sector and would be very punitive on farm families trying to organise orderly succession plans for the future. It would also place a huge tax burden on the next generation at a time when they will be seeking to invest in their farm enterprise. However, the IFA shares the commission’s view that there is a need to protect the active and genuine farmer, and maintain the integrity of the agricultural relief.

In terms of some of the other proposals, given the typically low level of profitability on-farm, the IFA opposes any potential progressive increase in the PRSI rate as we believe that it would only add increased financial pressure on farm families, hinder entrepreneurial activity and innovation so, therefore, should be resisted.

Finally, there is the proposed introduction of a site value tax. While the commission recommends a differential treatment to agricultural land, the IFA strongly opposes the inclusion of agricultural land within its remit. I return to the principle of fairness. In its broadest sense, most farms may be considered asset rich but cash poor. For most farmers the correlation between wealth and income painted by the commission simply does not apply. Average farm assets in 2021 were estimated at €885,000 with 87% related to land and buildings. However, average farm income was less than €35,000 with wide variation depending on the farm size and farm system.

One of the justifications provided by the commission for introducing the site value tax is to support achieving our housing objectives so effectively forcing land sales by imposing a recurrent tax that makes retaining land ownership unsustainable.Where is the fairness in that? Let us be clear about the following. Farmers are private land owners who utilise land for food production and earn an honest living. Farmers hold land to farm, not hoard it as an investment. This an undeniable fact that must be recognised.

To conclude, Irish farmers across all sectors are facing into an increasingly uncertain future. With almost 60% of farm families earning less than €20,000 in 2021, in the interest of fairness and equity, it is incumbent on the Government, and all Department officials, to ensure that additional cost or tax liabilities are not placed on already low-income farm families now or into the future.