The report of the Commission on Tax and Welfare contains some proposals that would have a dramatic effect in rural Ireland.

The commission was set up in fulfilment of a commitment in the Programme for Government. It was given a very tight deadline to complete its work, and this may explain the gaps in its analysis.

The commission was chaired by an academic. It had two civil servants in its membership, a tax consultant, an accountant, two members from economic research institutes, one person from a homeless charity, a businesswoman, one from an environmental charity, someone from IBEC … but nobody representing agricultural or rural interests.

In addition, it received at least 28 submissions, mostly from other civil servants, State agency employees and academics but not one, as far as I can see, from the food and agriculture sector. This is surprising.


The terms of reference of the commission seem to assume that a steadily rising level of spending by Government in Ireland will be necessary, equitable and inevitable.

Its task, as it saw it, was simply to “ensure sufficient resources would be available to meet the cost of public services” as if that cost was a given that could not be altered.

More “resources” in the form of more taxes are simply assumed to be required.

Deciding on the details of the tax changes the commission recommends, as a consequence of this assumption, is to be left to elected representatives.

The commission offers them a long, and unpalatable, menu of tax changes from which they may choose.

But the Commission does not look at the expenditure side of Government at all.

Over the last 50 years, the functions taken on by Government have steadily increased. Childcare, free GP services, subsidised elder care, and insurance against the use of defective building materials, are examples of responsibilities being shifted onto the shoulders of the general taxpayer in recent years.

We are also about to substantially increase our armed services, and to increase benefits for those affected by the energy cost squeeze.

Do we have an agreed basis for prioritising these expenditures? I do not think so.

Should the commission have provided politicians with advice on how to prioritise spending, before advocating tax increases? Yes, I think it should.


A more balanced approach by the commission would have started with a rigorous analysis of present and future spending commitments, on the basis of explicit criteria.

Such an approach might not necessarily have meant the rejection of the commission’s tax proposals, but it would have made them more understandable. Ideally, the commission should have identified different levels of Government spending relative to GDP, and what each would have meant in service and taxation levels.

Unfortunately, the tight time limit set for the commission would not have allowed an exercise like this.

In fairness to the commission, it does suggest that our ageing population will mean increases in present levels of health and pension spending. It says adapting to climate change will cost a lot of money. Corporation tax revenues will fall from their presently artificially high levels.

Unpalatable proposals

The commission report contains a number of unpalatable proposals, including that a tourist tax should be imposed on accommodation and that pensioners should pay PRSI.

It advocates this on the basis of what it calls the principle of equity and it defines equity as treating people in similar situations similarly.

Turning to agriculture, all land, including agricultural land remote from towns, should be subject to a site value tax, according to the commission. This tax would eventually be merged with commercial rates.

Obviously agricultural land that had little prospect of being needed for housing or roads, would be valued and taxed at a lower level than agricultural land near a town.

But land that had the possibility of being needed for housing, might go up in value and thus in tax liability, even though the housing development might never take place.

This proposal amounts to a reintroduction a centrally administered form of agricultural rates.

Let us not forget that the site value tax would have to be paid out of after-tax income, by borrowing or by selling of land or stock.

I can see a tax like this becoming the subject of a lot of litigation between landowners, the valuation office and the Revenue.

The commission gives no idea of the likely rate of the site value tax – would it be 1%, 2%, or 0.5% per annum? How might the rates be altered and by whom?

It is impossible to assess the social effect to this proposal without having answers to these questions.

Capital acquisitions tax

As well as paying the annual site value tax, the commission recommends that holders of agricultural land pay substantially more capital acquisitions tax (CAT) on the transfer of the farm to their children.

The CAT exemption limits for transfers to children would be reduced.

Again, the commission does not say by how much. The “experts” on the commission leave that unpalatable task to the politicians.

The present system, whereby agricultural land is valued at less than market value when it is being passed to a child, whose main assets after the inheritance are agricultural land, is also to be curtailed. The inheriting child would have to be active in the business to qualify for the relief.

Again, this additional CAT would have to be paid by the inheriting child by borrowing, by selling property, or out of income saved and not spent in past years.

The combined effect of these proposals, affecting farms, would reduce the value of agricultural land quite substantially.

It is unlikely that recommendations of this Commission will be acted upon in the near future. The Government has enough on its mind.

But they will be used in negotiations for the formation of future Government. They may also be turned to if a Minister for Finance should find things a little tight in a particular year.

Given that the farming community had no input at all to the commission, their representatives should go through the report with a fine comb to be ready for the arguments of the future.