With farmers on a top tax rate of 55% in a good year, it is no surprise that any new activity is assessed taking the potential tax liability into account.

Leaving aside an extraordinarily severe death duty system in Ireland, the taxes applying to income generated from Irish farmland vary from total tax freedom to a penal 55%. While land mobility is theoretically a key part of Government tax policy, the existence of the Basic Payment Scheme-type of income means that those owning land have every incentive to hang on to it.

The average age of landowners is very high and rising, but that does not necessarily extend to those using the land. It would be interesting to track how the age of land users is going. Nobody seems to have a methodology for doing this and one needs to be developed.

Forestry is one of the clear tax-driven sectors. With a tax-free premium system and timber sales free from tax, we have seen forestry cover in Ireland go from 1% of the country’s surface area to over 11% today. Still below the EU average, but not by much.

The treatment of forestry income means that on a post-tax basis, forestry returns surpass the returns earned by most cattle and sheep farmers. This has been demonstrated clearly in an economic analysis by a Teagasc team.

The moves to encourage land leasing also depend on a tax-exempt treatment of the income earned by the owner leasing out his land. With a couple being eligible for €40,000 tax free, if leasing to an eligible farmer for a 15-year period, the attraction is real and substantial. But anecdotally, I am hearing of cases where eager young farmers have signed into a long-term lease but find themselves unable to meet the terms. This may well become more common if low milk prices persist. As a result, some farmers of my generation are having second thoughts on entering such long-term leases unless there is some kind of extra guarantee in place.

While on the energy side, with a new intense interest by a myriad of solar companies, the tax treatment of the income and the eligibility of the land for the Basic Payment Scheme will come centre stage – I presume these areas will be dealt with in the coming white paper on renewables as well as the crucial feed-in tariff.

The other major tax innovation that farmers have been drawn into by high personal tax rates is the company. Where there are borrowings, especially if they are substantial and the farming participants are prepared to leave the money and profits in the company structure, then there are real attractions to the company structure. However, it is an added complication and cost.

The Department of Agriculture has led the review of agri-taxation that formed the basis for the changes in last year’s budget. The efforts have been well intentioned and helpful but the basic aim of whether farm taxation is a means of raising revenue or of nudging the sector towards greater productivity needs to be clarified. The whole question of income taxation in a climate of intense volatility is a completely different but highly relevant issue.