Analysis: Confusion over policy that was not rural-proofed
Minutes after Paschal Donohoe finished his Budget speech a rural senator was in a flap on the Leinster House plinth.
He’d received a phonecall from a friend wanting to know whether the hike to commercial stamp duty would impact on farms.
The Fianna Fáil politician spotted a Cabinet minister emerging from the building and made a b-line.
“Oh no, we’d won’t do that,” was the reply from the minister when asked if the sale of farms would be hit.
The consensus was that Mr Donohoe wouldn’t target farmers in such a way. More than most they tend to get up early in the morning.
At a press conference Agriculture Minister Michael Creed publicly expressed a similar view, saying: “We need to nail this one, because I’ve seen some commentary on social media. The increase in stamp duty does not apply to agricultural land.”
However, it is now clear that it does. Existing exemptions from normal stamp duty where the sale is within a family or for young trained farmers will continue to apply. In other words a two-tier system has been created where under 35s will pay tens of thousands less for farmland than older farmers.
A common scenario which sees a farmer retire and their neighbour buy up some of the land to extend their own acreage will now be subject to 6pc stamp duty.
Was it an oversight? Source in the Department of Finance say it wasn’t.
Mr Donohoe was aware that farm land is classified as ‘commercial’ for the purpose of sales transaction and was comfortable that it should stay that way. Although it does seem he failed to alert rural colleagues that they might have to go out and defend the move.
For their part Fianna Fáil want to give the controversy a wide berth. They know the Government has to raise money from somewhere to pay for the social welfare increasers and cuts to the USC that they demanded.
In his Dáil contribution on the Budget, Micheál Martin made only a fleeting reference to what was arguably the most significant measures contained in Mr Donohoe’s plan.
“Independent commentators have suggested that the revenue projection for stamp duty is not much better than sticking a finger in the air,” was Mr Martin’s solitary observation.
It doesn’t end there though because experts are also pointing to other potential problems the tax creates for rural Ireland.
Tax Partner at EY Ireland, John Heffernan told the Irish Independent while the hike is “probably justifiable” in Dublin but there is “more reason for concern” for the viability of commercial projects outside the capital.
“Admittedly, prices are lower and therefore the impact is less in money terms, but this is still likely to adversely affect places already struggling,” he said.
Mr Heffernan suggests Mr Donohoe should consider a tapered rate for smaller projects - for example, a 3pc rate for transfers up to €2m and 4pc for transfers up to €5m. “This might particularly help projects outside of Dublin where values are lower,” he said.
This seems like a policy that simply hasn’t been rural proofed.
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