6% stamp duty will test government-farmer relations
The weekend before the Budget, there were media predictions that Finance Minister Paschal Donohoe would increase stamp duty rates on commercial property, writes Stephen Cadogan.
With the matter in the public arena so far in advance, it is likely that the government was well prepared for the post-Budget outburst from farmer organisations, over the increased 6% stamp duty applying to some farm transfers.
Commending the stamp duty motion to the Dail for voting, Education Minister Richard Bruton seemed happy enough to risk the wrath of farmers, in return for this major budget fundraiser.
The Government was also happy to take the risk in return for its plan to divert activity from the thriving commercial property market, and transfer it into residential construction, by trebling the 2% stamp duty.
Mr Bruton noted that while some farmers will pay the 6%, on the other hand, substantial investment is being put in to strengthen the position of farming, particularly in light of Brexit pressures.
The unspoken subtext there may be that farmers should count themselves lucky that the Department of Agriculture got €64m extra in the Budget, including a €25m disadvantaged areas top-up in 2018 worth €250 on average for 95,000 landowners. Farmers did at least as well as most of the sectors clamouring for help from the Budget riches.
The Leader of Seanad Éireann, Fine Gael’s Jerry Buttimer, said agricultural land is a vital and valuable part of our infrastructure, but it is equally important to
develop land for housing.
Such sentiments dash hopes some farmers might have that they are among the chosen few that the Government will handle with kid gloves.
And it is worrying that Minister Bruton fended off some farmer kickback, even before it materialised, with his statement that exempting land purchased for farming and held for farming purposes at least five years, would require state aid approval from the EU.
Farmers may therefore need to convince the EU as well as the Government, to succeed in their efforts to avoid the 6% stamp duty.
Meanwhile, the Government is also hearing from the other side of the argument, from economists who say the best way to deal with intergenerational wealth inequality is inheritance and gift tax (capital acquisitions tax). But Ireland has gone the other way, with generous reliefs so that many people can have an “inheritance worth millions without paying a penny in tax”, in the words of Dr Tom McDonnell, senior economist from the Nevin Economic Research Institute, which is partly funded by the Irish Congress of Trade Unions.
He mentioned farming and business assets among those given much easier treatment than other types of assets, in terms of generous reliefs.
Whether the Government is interested in looking down that road might become evident in the Finance Act, and if it eases the 6% stamp duty for farmers.
