Dempsey at Large: missing the core point of farm transfer

It seems obvious, though nobody has said it, but so far as I can see farmland is the accidental victim of this year’s budget. Paschal Donohoe is probably the most impressive politician I have ever met or at least that I have listened to as he spelled out his political philosophy at a lecture in Dublin recently.

That said, I would not expect a Dubliner through and through such as Minister Donohoe to be conscious of the agricultural dimension of his policies. That, after all, is why we have a cabinet where individual ministers can be advised by civil servants on how proposed measures can affect different segments of society.

It’s fairly clear that Minister Creed did not have the benefit of appropriate advice on the whole issue of stamp duty in the runup to the budget, so it’s legitimate to ask if the normal core cross-departmental group of secretaries general still operates?

But that is almost incidental to the core issue of land transfer in this country. It is astonishing that we take measures to ensure the transfer of farmland between generations is made as difficult as possible. While this latest debacle has added to the difficulties, the fact is that land that passes by inheritance is subject to neither capital gains tax nor stamp duty. The incentive is to distribute assets only at the time of death, when business or agricultural relief can be availed of. This incentive has been reinforced by the trebling of the stamp duty on lifetime transfers in this budget.

The case in Britain is instructive. Property passed to the next generation before seven years of death passes without any charge to inheritance tax and with no stamp duty. Capital acquisitions tax is payable here and can be significant on larger farms. Normally, in the UK, if there is a significant amount involved, life insurance will be taken out to ensure there is cash available to pay the tax bill in the event of the donor dying before the seven years have passed. But the incentive to pass on when a successor has been identified is clearly there.

Sweden, which is perceived as among the most egalitarian of societies, has abolished inheritance taxes completely.

It is hard to get a complete picture of the taxes on passing farmland from one generation to the next across Europe, but ours seems to combine the worst of most worlds. Discussions on the age of donor and recipient are needless complications in what should be a simple policy discussion. Farmland as an asset class is intrinsically different from an office block in Ballsbridge. To lump them in together is bizarre.