Dáil Éireann - Volume 424 - 29 October, 1992

Adjournment Debate. - Finance Matters.

Mr. Sheehan: I call on the Minister for Finance to reintroduce stamp duty relief for young, trained farmers who have qualified for EC green certificates in farm training. This successful scheme was introduced in 1982 and remained in operation until 1987. However, the annual rate of land transfers has halved in the last five years and is now at a level comparable with the sixties. It is clear that the initiatives introduced during the period 1982-87 encouraged earlier land transfers and was of tremendous benefit to young farmers in taking over the running of the farm units from their aged parents. It also promoted the agricultural industry.

The colossal and exorbitant cost of stamp duty has prevented many young, trained farmers from staying in the agricultural profession. Indeed, young farmers today are leaving the land and competing with other unemployed young people in the already depressed job market, thereby increasing the already high unemployment figures. The high level of emigration in my constituency — Cork South-West — can also be attributed to a lack of a coherent land policy. Therefore, if the current rate of new entrants to farming continues to decline, in 20 years' times there will be only half the number of farmers there are today. This will have the effect of seriously swelling the already huge unemployment queues that exist throughout the country. I urge the Minister to act before it is too late and to ensure that the stamp duty relief be again introduced in the forthcoming budget and, thereby, giving the young farmers of today an opportunity to take over the running of their farms from their respective parents. In many cases young farmers of today must wait until they themselves are middle-aged to become farmer owners. The abolition of the stamp duty relief in 1987 made it [1516] impossible for farmers to hand over their property to their sons and daughters owing to the exorbitant rate of stamp duty that would be imposed on the transfer of the property.

If a new generation of dynamic well trained young farmers are to be brought into the agricultural industry, this situation must now be changed immediately and I urge the Minister to heed my advice and grant this request in the forthcoming budget.

Minister of State at the Department of Finance (Mr. N. Treacy): With your permission, a Cheann Comhairle, I propose to reply to both of the Deputies' questions together.

An Ceann Comhairle: In that case, would Deputy Sheehand like to make his two minute statement in respect of the second matter and the Minister of State will then reply to both?

Mr. Sheehan: I urge the Minister for Finance to restore the exemption thresholds for capital acquisition tax that existed in 1976 to their real level today and continue to be index-linked each year thereafter.

The capital acquisition tax was introduced by the Capital Acquisition Tax Act of 1976. There have been only two minor amandments to the tax free thresholds since its introduction. Therefore, 16 years later it has become a major source of concern for farm families and a disincentive to early farm transfers.

The increase in the liability for capital acquisition tax has been brought about chiefly by the non-indexation of the exemption thresholds until recently. The increase in the value of assets, the introduction of the milk quotas and the classifications of all gifts, both agricultural and non agricultural has aggreganted since 1982.

I call on the Minister to introduce an amnesty for capital acquisition tax and stamp duty to encourage people to get their affairs in order. There is quite a backlog in getting capital taxation cases agreed and I believe that there are a [1517] large number of unadministered estates awaiting decision.

Giving an amnesty would concentrate the minds of all those involved, resulting in a greater flow of capital taxes to the State in the short term and encourage the proper registration of lands and properties within the State. It would also remove an unnecessary and unaffordable burden for many farm families at the most critical time in the family life-cycle when settlements, education and other expenses have to be met.

Therefore, it is vitally important that the Minister restore the exemption thresholds for capital acquisition tax that existed in 1976 to the real level of today and continue index-linking each year thereafter. This is essential if jobs in agriculture are to be preserved and young farmers are to take over their respective holdings and play their part in guiding the policy of agriculture in the years that lie ahead.

Mr. N. Treacy: In response to both questions, let me say that during the course of the debate on the 1992 Finance Act, the Minister for Finance, Deputy B. Ahern, indicated that the Department of Finance would carry out a study of whether the overall tax treatment of gifts tends to discourage the lifetime transfer of farms by the postponement of farm transfers until the death of the farmer. The study is focusing on the interaction of stamp duties and capital acquisition tax on gifts of farms to see whether the current tax arrangements act as a disincentive to the lifetime transfer of farms. The land transfer survey, carried out by Macra na Ferime and published earlier this year, will be taken into account in the Department's consideration of the issues involved. This study will be completed in time for the Government to consider its findings for the 1993 budget.

In 1990 the indexation of the exemption thresholds in line with the consumer price index commenced. As a result, the class 1 threshold, which applied to children, [1518] has increased from £150,000 to £166,350.

Mr. Sheehan: Peanuts.

Mr. N. Treacy: This concession in the capital acquisition tax code will be of considerable benefit in cases of an inheritance of a farm from a parent or the lifetime transfer of a farm from a parent to a child. Given the low yield from capital acquisition tax as a whole, and the low proportion of the overall capital acquisition tax yield represented by payments from the farming community, there is not room for further major concessions in the area of capital acquisition tax thresholds.

Mr. Sheehan: What about the index linking?

Mr. N. Treacy: It is index linked. In this context, I should mention the several concessions already made in the capital acquisition tax code which are of considerable benefit to the farming community. I have already mentioned the introduction of the indexation of the thresholds in 1990. In 1991 the top two rates of tax in the capital acquisition tax code, 55 per cent and 45 per cent, were abolished, leaving the top rate at a standard 40 per cent. In 1991 agricultural relief was increased from £200,000 or 50 per cent, whichever is the lesser, to £200,000 or 55 per cent, whichever is the lesser. The proceeds of insurance policies, in so far as they are used to meet capital acquisition tax liabilities on the lifetime transfer or inheritance of a farm, have been exempted from capital acquisition tax. The total exemption from capital acquisition tax for inheritance by spouses has been extended to gifts to spouses.

It can be seen that measures have been taken over recent years by this Government to relieve the capital acquisition tax liabilities in respect of the inheritance and lifetime transfer of farms. I trust that this puts the matter in perspective and I can assure the House that when the Departmental study is completed the [1519] Minister for Finance will consider it in detail.

Mr. Sheehan: And it will include any [1520] alterations to the proposals in the forthcoming budget?

The Dáil adjourned at 5.50 p.m. until 10.30 a.m. on Friday, 30 October 1992.