Finance Bill 2013: Second Stage

Thursday, 21 February 2013

I wish to deal with a few aspects of the Finance Bill.

I will start on section 19, which deals with the tax treatment of farmers. I welcome the extension of the stock relief. This, especially the 100% stock relief for young trained farmers, is comforting news to the agriculture sector. These are measures which mean a great deal in the farming scene. The Bill also mentions that these particular farmers must have business plans set out and agreed with Teagasc.

This raises another aspect at which we could look. As important as business plans are, cash-flow analysis is very important. Maybe we should encourage taxation measures that would allow for part-time employment in farming businesses to conduct cash-flow analysis on a continuous basis because farming is up and down and it will get more volatile as things happens. I note there has been a horse food scandal lately, and all that went with it. Unfortunately, for farmers, it means that their income could dip through no fault of their own and it is important to have constant analysis of the accounts. I would welcome allowing some tax incentive to employ someone who is a third party, obviously, not a member of the farm.

Section 24, which amends section 1003A of the Taxes Consolidation Act 1997 and provides tax relief for donations of heritage property to the Irish Heritage Trust or the Commissioners of Public Works, is a practical change and I welcome it. It allows accompanying buildings and lands to be donated in tandem with heritage gardens. I accept it is a small part of it. It is a good measure. It will see important heritage properties coming to the State at little cost. It is really important because we may not get the chance to get these properties again. However, I encourage the Minister to increase the tax relief, from the 50% he is seeking, to 65%. I understand there is more being purchased and he is trying to get value, but in this depressed property market, even allowing 65% relief on what is essential one-offs would be practical.

I welcome section 29, the living city initiative. Certainly, we all can appreciate that getting families back into the centre of cities and refurbishing old homes brings life to cities. It is a nice measure in the Bill.

In section 45 I think there is a problem. The limit of €3 million should be removed for capital gains tax on land transfers. This discourages lifetime transfers and that is something we cannot do. In death, obviously, there are no capital gains tax implications. We do not want a situation where farmers will not transfer land over until they go to their eternal reward. There is an elderly population in farming and with the targets we are setting out for ourselves in Harvest 2020, this is a worrying issue. We will not achieve those targets with land not being transferred to young farmers. It simply will not happen. Any measure that discourages the transfer of land cannot be allowed. Capital gains tax was introduced in 1974 when land was valued at approximately €500 an acre and the indexation factor, which was abolished in 2002, had reached a factor of approximately seven, giving land a value, roughly speaking, of €4,500 an acre. This causes a capital gains issue of approximately €8,000 an acre presently. I will not elaborate on marginal relief – it gets too complex. However, it is something that needs to be looked at because there is no initiative to hand land over. Also, a consideration of €3 million might sound considerable, but when one adds up the cost of stock and buildings, such as milking parlours which are getting ever more complex by the day, and one reaches that figure and it will be an impediment to transfer over. This also applies to many qualifying business, not only farming.

Unfortunately, there is not a retirement scheme in place. The retirement scheme, which was most valuable and which came through Europe, allowed a retirement pension for elderly farmers. It gave them a sense of financial security and it allowed them transfer over their land. There is nothing like youth and vibrance to increase production and to move farming in a new direction. I am glad to say I was a recipient of the farm retirement scheme in the sense that my parents received it. It created the stimulus to transfer land. It allowed us to move in a direction which saw production increase considerably and, therefore, more benefits to the State as we moved along. This is one area that needs to be looked at more closely.

Section 46, which is a really good measure, provides relief from capital gains tax for restructuring of farms. One of the historical problem we have faced in Ireland is the whole farm structure. The fragmentation issue is incredible. Having ones farm in different fragments is a high cost game as one must travel from one place to the other. It costs to move machinery and animals. One cannot build up necessary infrastructure because one does not have enough land around one’s parlour. This is a fabulous scheme and I am amazed it has not been thought of earlier. I advise the Minister to keep an open mind on the final date here and not to be wedded to the closing date in the Bill. Farmers have a tie to their land and it takes them a while to get their head around letting go of a part of their land and swapping it for another. The Minister merely must bear in mind that there might be a conflict until it sinks in properly that this is a good idea. I would watch it closely. It is something on which momentum could take a little while to build up.

I might have a look at section 56 regarding niche producers and micro-breweries, especially ones where there is micro-production of cider. Such business persons need a stimulus in early production and maybe we should look at them being allowed allowances.

On section 59(1)(c), on carbon tax, I encourage the Minister to enter into discussions with the farm contractors’ associations regarding carbon tax on farms. It is only another spancel to production. Farmers do not have large incomes at present and this is something that needs to be looked at.

Maybe the Minister should consider tax reliefs for those who substitute fuel with carbon-neutral options because there are options out there. The reason I ask for tax reliefs in this area – these are quite specific – is because there are high capital costs in putting in place systems which replace diesel fuels in agri-production. It is akin to the inverse of section 59(1)(c). If it is good one way – as they say, sauce for the goose is sauce for the gander – it should work in both directions.

Section 71 relates to VAT. While this reduction, from 5.2% to 4.8%, looks innocuous, it has had a significant effect on the pig sector. I will go into more technical detail on this. The matter has generated much stress there. Maybe it needs to be exempted for that sector because it is on its knees.

They do not particularly need any more nasty shocks along the way.

I wish to address the issue of rates. For many people not involved in business, there is no appreciation of the issue. Rates need to be considered in totality. It is possible for a business to have huge ground cover and very low turnover. For such a business, rates could represent a major proportion of the profit whereas for a multinational on the same land, it would only represent a fraction of it total turnover. That needs to be borne in mind.

I welcome the Bill which contains many progressive provisions and a few that need to be considered in more detail.