Kieran Coughlan: Ireland's booming economy and the farm succession dilemma for Budget 2027
Undoubtedly, farm succession is becoming a major issue for the future of Ireland’s farming sector. Picture: iStock
The Budget is less than 10 weeks away, and despite the headwinds of the conflict in the Middle East and Ukraine, it would appear the exchequer, if not the economy itself, is going gangbusters.
Another year of exceptional tax receipts is in train. Income tax receipts of €18.6bn to the end of June are 6.7% ahead of 2025, corporation tax receipts of €13.7bn also increased by a very strong 4.7% year-on-year and similarly VAT receipts are well ahead of last year.
In the past few years, there has been much more awareness at a State level to encourage farm succession. An attempt was made to amend the agricultural relief rules to address issues around the abuse of agricultural relief in 2024, but the changes to the tax rules were stalled as a result of real-life concerns that the revised legislation was just too blunt.
This past week has seen the Tax Strategy Group report on Capital Taxes ahead of the Budget and noting that this issue of Agricultural Relief is so thorny, the paper notes that the options now are to push ahead with the new legislation, warts and all, to deal with the non-farmer issue via the Department of Agriculture or to develop a cap on Agricultural Relief.
Undoubtedly, farm succession is becoming a major issue for the future of Ireland’s farming sector. The figures are stark, with just 5,971 farmers under the age of 35 in 2024 versus 18,398 farmers under 35 in the year 2000.
It’s a topic close to my heart, and I have been working and promoting that very issue for nearly a decade and a half, but in some respects it seems that encouraging succession, and more particularly succession to a generation of inactive land owners, will actually conspire against the future of farming in Ireland. Spare a minute to indulge in these thoughts. For centuries, the story of Irish farming and farming globally carried the same pattern.
The number of farmers and their workers on the land reduced as farming practices improved, as technology and equipment became available and more affordable, and a consolidation of the number of farmers on the ground happened on a continual basis throughout the centuries. There were approximately 359,700 farm holdings in 1916, dropping to 250,000 pre-EU accession in 1972, and dropping to 141,527 in 2000 and 133,174 in 2023.
The loss of farmers between 1916 and 1972 in absolute terms was 1,959 farms per year, increasing to 3,874 farms per year in the period from 1972 to 2000, whilst the number of farms lost per year in 2000 to 2024 fell to 363 farms per year. One could say that the effective retention of the number of farmers in Ireland is a societal good.
The factors that led to the retention of farmers is more nuanced, though, as more older farmers qualified for contributory pensions and as farm payments became decoupled from production, allowing less active farmers to continue to both survive and thrive as farmers.
The quid pro quo of a static number of farmers is that there is near no room for farm holding expansion and that the productive element of our farming class has been locked out of the capacity to expand their farming holdings to create the scale of viability needed for a future generation. In Ireland, the average size of a farm was 31.4 hectares (about 77.6 acres) in the year 2000, increasing to just 34.7 hectares (about 86 acres) 24 years later.
The current system of agricultural relief and super low rates of stamp duty, along with the income tax exemption schemes and the capacity to continue to generate income from the ownership of entitlements as a landlord, are factors that offer huge incentives for intergenerational retention of land ownership.
One further metric worth looking at is the number of farm holdings with off-farm income, which has risen from 28% in the year 2000 to 43% in the year 2024. A near-static number of farmers, a declining drop in the number of young farmers, no real shift in the scale of farms and an increasing reliance on off-farm income spell out a story of the demise of the economic sustainability of farming.
The question arises: does an overgenerous tax system in the form of agricultural relief and income tax reliefs stall the increase in scale and efficiency of farms, which will drive more farmers into reliance on part-time off-farm income? The statistics clearly indicate a strong correlation if not causation.
Ahead of this year’s Budget, the Government has the chance to make a change to slowly reverse the trend. At an EU level, there is an acceptance that the decoupled payment system has compounded the problem of overholding by older generations of farmers and the pressure is on to exclude pensioners from access to some EU payments.
Domestically, changes to our tax system can either come in the form of a restriction in agricultural relief only to those who are and those who will farm land, or to introduce a maximum time limit to the period of income tax exemption, letting both of which will stimulate increased land mobility.
At a national level, the amount of land actually owned and farmed by farmers has dropped from 83% of all farm land in the State in the year 2000 to 78% in the year 2024, with an additional 265,000 hectares now owned by inactive farmers in the year 2024 versus 2000.
Encouraging farm succession without addressing the structural issues of the long-term viability of full-time farm holdings and sustainable growth in land ownership by active farmers will see a continuation of the current trends.
