It looked like a bit of preelection good news from the Government — but it would be more accurately described as damage limitation.
Mr Noonan really had no choice but to turn down the potential tax windfall, because it was the Government and the EU which had — perhaps unwittingly — set a tax trap for farmers who were doing the right thing.
Mr Noonan announced the exemption for farmers who had leased out all of their land and entitlements for a term including 2013, and are accordingly forced by unexpected clauses in the CAP reform to sell their single payment entitlements.
Even Mr Noonan’s party colleague, Simon Harris, an Ireland South MEP candidate, said farmers had entered into agreements in good faith, and should never have been penalised — and put under huge stress — by the CAP reform.
“We shouldn’t penalise producers who had already entered into leasing agreements, and we should recognise the role long-term leasing has in growing the agri-food sector,” said Harris.
But penalised they are, by the straitjacket of European rules, and political agree-ments on these rules which are designed for expediency rather than for the good of farmers.
This combination has resulted in a farcical situation which is likely to significant-ly set back the adoption by farmers of long-term leasing.
In order to facilitate active farmers to acquire more land, the Government had put in place generous exemptions — at considerable cost to the exchequer — from income tax on rental income from long-leased land.
However, recent estimates suggested that about 640,000 hectares is still rented in 11-month conacre terms, and longer leasing remains in a poor second place to conacre, with little more than 100,000 hectares in long-term leases.
Now, the conacre fans have been proved right; the wisdom of their option is clear.
And long-term leases have “ trapped” up to 6 , 446 landowners. The CAP reform forces them to sell their single payment entitlements — or lose them.
To rub salt in their wounds, they faced tax bills on these sales possibly amounting to tens of millions of euro — until Mr Noonan’s exemption announcement last week.
However, Mr Noonan has no discretion under EU law to provide for a VAT exemption on the disposal of the payment entitlement assets, and some of the 6,446 farmers forced to sell will face big VAT bills, if they sell payment entitlements without land, where the sale proceeds exceed €37,500.
With hindsight, these farm-ers will know their mistake was to enter into arrangements which fell foul of one of the CAP reforms which are liable to turn EU agriculture on its head every few years.
The lesson learned from this experience is to plan no more than four or five years ahead, which will give farmers every chance to avoid traps set by the next CAP reform.