The Irish Farmers' Association has called for urgent reform of inheritance tax, amid concerns that the current rules are being used by wealthy investors to avoid tax.
If a person receives an inheritance of farm land, the amount of Capital Acquisition Tax is reduced, in certain circumstances, by 90%.
It means farmland has become a lucrative investment to some wealthy people with little to no interest in farming.
On Newstalk Breakfast, IFA President Francie Gorman described Agricultural Relief as “crucial” to farming families, but called for changes to who qualifies for it.
“I think at the moment, roughly the investor's farmer percentage buying land is 50-50,” he explained.
“That tax relief is massively important to encourage the transfer of farmland from people who are farming it to the next generation.
“Because in general, while farms are worth a lot of money, the income that's generated from them does not reflect the value of the land.
“That's why the tax relief is there and, if you didn't have that, you wouldn't have that transfer of farmland from this generation to the next.”
Sheep. Picture by: Alamy.com. To reduce the incentive for wealthy investors to snap up agricultural land for tax purposes, the IFA has called for tougher rules governing the entitlement to Agricultural Relief.
“We want that period extended to 15 years for people who are either transferring the land or receiving it, that either one or the other or a combination of both have to farm that land for up to 15 years,” Mr Gorman said.
“And that has been a proposal of ours going back a number of years; Minister Chambers did change that to six years for both in last year's budget - which is a step in the right direction.”
Mr Gorman continued that the overall price of land is a reflection of “how well the economy is going”.
“And there are a lot of people in this country, high net worth individuals, who have done really, really well in the last number of years,” he added.
“And land is in huge demand, both at farm level as well, to meet various different standards that you have to have around stock and rates.”
A farmer works in Timoleague, Co Cork. Picture by: AG News / Alamy. While the IFA is strongly supportive of reform to Agricultural Relief, Mr Gorman said believe some form of tax relief for farming families is essential for the rural economy.
“Tax reliefs are used to facilitate activity that otherwise wouldn't happen because the money wouldn't be there to do it,” he said.
“The last thing that we need is someone receiving a farm of land in the morning and not being in a position to pay the tax and having to sell some of that land.
“So it's a crucial relief, it needs to work properly, it needs to be focused on people who are genuinely farming and I think that's our big concern.”
Main image: Farmer in Ireland walking behind a herd of cows on a narrow country road on Valentia Island. Picture by: Alamy.com.
