In the past week, the governing coalition pulled off the feat of shaking the political establishment out of its mid-August torpor by creating an entirely predictable internal rift over the residential zoned land tax (RZLT).

Taoiseach Simon Harris was first to launch the controversy on Tuesday, firmly promising that no active farmer would have to pay the tax on their land. As this was in direct contradiction with the legislative provisions of the Finance Act 2021 that introduced the RZLT, the only possible interpretation of Harris’s statement was that the Government would either amend the law or delay its implementation.

Minister for Finance Jack Chambers clarified this the following day, telling RTÉ that he intended to defer the tax for another year to exclude active farmers from the RZLT. The tax, due to kick in this year, had already been postponed.

Cue outcry from the Green Party, who had easy access to the moral high ground by simply asking for the commencement of legislation passed by this coalition nearly three years ago.

The rift opened an avenue for Sinn Féin to call out the Government’s inaction. The party’s finance spokesperson Pearse Doherty described the farming issue as an excuse to defer the tax and a “smokescreen to allow land hoarders to have yet another year to sit on land that should be developed to build homes”.

Niall covered the background to the clash on Wednesday. He analysed the dozens of appeals landowners targeted by the RZLT in its current form filed with An Bord Pleanála ahead of a deadline last month. Some 14 of them are farmers, but State agencies also appear on the list.

As if the planning board did not have enough on its plate, the Government has now saddled it with an endless supply of cases turning on the politically charged definitions of whether land is “vacant”, “suitable for housing”, “actively farmed” and other intractable issues attached to Ireland’s national obsession.

The most infuriating aspect of this fiasco is that it is an exact repeat of the one that surrounded the predecessor to the RZLT, the vacant site levy.

Rewind six and a half years

In March 2018, I first reported in the Irish Farmers Journal that farmers on the outskirts of Kilkenny City were being hit with unexpected vacant site levy bills after the local authority had placed some of their fields on the vacant site register. That list of properties, deemed to be needed for housing but not under development, was the format introduced by the Urban Regeneration and Housing Act 2015 as the first attempt to tax land hoarding under the then Fine Gael-Labour coalition.

All the issues currently at play were thrashed out at the time. On the one hand, there was the reality that a housing crisis was growing and more land was needed to build homes. Agricultural fields near areas of population growth, serviced with transport and utility infrastructure, were being zoned for residential use and pressure was needed to activate them for housing. 

On the other hand, some of that land formed part of farms that were in existence for generations. The rate of the vacant site levy, first at three, then at seven per cent of the land’s sale value for development as estimated by local authorities, far exceeded the returns a farmer could generate from the same land.

More specifically, the levy targeted serviced land. But in most farming enterprises, especially Ireland’s flagship dairy industry, those fields around the yard where water, road access and electricity are available constitute the beating heart of the business. Without them, the rest of the farm becomes effectively worthless.

The minister of state for housing and planning at the time was John Paul Phelan, who is still a Fine Gael TD for Carlow-Kilkenny. The issue had emerged in his constituency before spreading to other counties and he took the lead in addressing it, making it clear that the inclusion of actively farmed land was an unintended consequence of the legislation introducing the vacant site levy.

While farmers battled liabilities, first before An Bord Plenála, then in the courts, the then Fine Gael government eventually introduced an amendment to the Planning and Development (Amendment) Act 2018 passed a few months later. It was a simple quick fix: Anyone who had purchased land before it became zoned for residential use was exempt from the vacant site levy. De facto, this shielded existing farms from its scope. 

It would have created problems down the line: What if a farm was sold to another farmer after being zoned residential? Was it fair that owners who were hoarding land purchased before 2018 before selling it on for development were exempt from the levy? 

The RZLT: back to square one

In the event, those questions were pushed aside in late 2021 when that year’s budget replaced the vacant site levy with the RZLT. There was just one problem: The new legislation was just as deficient as its 2015 predecessor in ring-fencing active farms. 

Documentation prepared by the Departments of Finance and Housing in April 2023 to help farmers and taxpayers navigate the RZLT is clear. In answer to the question, “Will owners of farmland zoned ‘residential’ be liable for residential zoned land tax?”, the document replies: “Apart from owners of residential property subject to LPT [local property tax], there are no further specific exemptions for particular categories of landowners and as such where agricultural land meets the criteria for falling into scope for the tax, owners of this land will be liable.”

As previously, zoning, servicing, and usage criteria apply. The new law is essentially a jump back in time to 2015, except tax-liable land is now presented in map format by each local authority. Land used in business activities subject to commercial rates is exempt, but this doesn’t include farms. There is also an option for landowners (including farmers) to both challenge the application of the criteria and apply for land to be re-zoned, and to appeal to An Bord Pleanála if they’re unhappy with the outcome.

The onus is again on a farmer to hire planning and legal consultants to challenge the unrequested designation of their property for residential use (or, in a mixed zoning situation, its “vacant” status). This is against legislation that leaves limited scope for success.

The Irish Farmers’ Association has described the process as an effective compulsory purchase order. While an exaggeration, the phrase has some merit.

The average price of agricultural land sold last year was €29,500 per hectare, according to the Irish Farmers Journal’s annual land report. The average farm income was €438 per hectare, according to Teagasc’s National Farm Survey 2023. At the current rate of three per cent, the RZLT amounts to €885 per year on the average hectare of farmland – twice the return from farming.

This is before any gain in value is added to reflect the land’s residential zoning. The landowner is responsible for self-assessing its market value including potential development upswing.

It is fair to say that the only option for a farmer effectively hit with an RZLT bill would be to sell the land. Arguably, they might be financially better off than if they had continued to farm it. It might not be their career, lifestyle, or property owner choice, however. 

There are off-the-shelf definitions of active farms the Government could have used at any point to keep them outside the RZLT tax net. Agricultural relief on the taxable value of a farm transfer is conditioned to a well-established “active farmer test”. European and national subsidies available to farmers are subject to a plethora of criteria, resulting in readily available lists of eligible farms.

The repeated failure by successive governments to introduce a tax on the hoarding of land banks suitable for housing while shielding local working farms from effective shutdown raises a range of questions for all political parties involved. 

• Do they really intend to introduce a stick approach to accelerate housing development on suitable land?
• If so, do they want to focus it on urban infill sites and along key public transport corridors, where academic consensus suggests that new housing should be, or continue to favour urban sprawl into rural areas and force farmers to give up land for this?
• If they favour the urban sprawl option, are they prepared to alter agricultural policy accordingly, clearly stating that housing should take precedence over food production? 

Since the vacant site levy was first mooted, Ireland has experienced almost a decade of political flip-flopping on the tax instrument intended to deliver policy in this area. Inexcusably, none of the questions above is any closer to finding an official answer. 

*****

Elsewhere last week, Alice interviewed Padraic McKeever, the founder of McKeeveer Sports. The Northern Irish clothing company has supplied kit to Ireland’s successful team at the Paris Olympics, Armagh’s All-Ireland winning men’s Gaelic football team and now Irish Paralympians heading to France this week. It had strong echoes of another interview I did with Tom Cotter, founder of OceanR in Cork, the previous week: Both companies have spotted the opportunity to produce high-end apparel for sports enthusiasts, used their nimbleness to secure B2B partnerships, and acquired factories to re-shore manufacturing to Europe. 

Mike Lynch, the British tech entrepreneur born to Irish parents, was confirmed to have died after his yacht was caught in a freak storm in Sicily last week. As hope of finding him alive faded, John wrote an insightful profile reflecting Lynch’s multi-faceted career.

Share-based remuneration has been a crucial instrument for multinationals to attract skilled workers in Ireland and is increasingly used by domestic companies, too. The Government wants to broaden its usage, but officials have warned of the Exchequer cost arising from associated tax breaks. Ian had the story.

In the wake of the recent inspectors’ report into Independent News and Media and its scrutiny of the media group’s proposed acquisition of Newstalk in 2016, Willie examined the valuation of such a broadcast business in the digital age. His analysis has implications beyond the radio station now owned by Bauer Media.