Farmers should be granted tax relief on land purchases that consolidate their holdings, the Irish Farmers Association (IFA) said in a pre-Budget submission today.
The Association's president, Mr John Dillon, said the incentive was required because cost inefficiencies caused by farmers having parcels of land in different locations.
Mr John Dillon, IFA President
Almost 30 per cent of farmers operate on four or more separate parcels of land while just 28 per cent of holdings are in a single piece of land, the IFA president said.
The fragmentation is "unsustainable" in the face of global competition and recent changes to the EU's Common Agricultural Policy (CAP) and global trade agreements, he added.
In its submission to the Minister for Finance, Mr Cowen, the IFA said it expects the new CAP regulations - linking grant payments to the size of a farm rather than to the number of animals - to radically change Irish farming.
"It is a national imperative that we encourage farmers to maximise their efficiency through attaining a farming structure that is efficient and has the necessary scale to compete," Mr Dillon said.
Relief from Capital Gains Tax and Stamp Duty would help the process of modernising farming, and would be in line with similar moves to boost development in the industry and services sectors, he continued.
Increased costs associated with new environmental regulations, in particular the imminent introduction of the EU Nitrates Directive meant the viability of farming would be further eroded, Mr Dillon maintained.
He estimated the implementation of the directive at in excess of €1 billion - "money that is simply not available within farming itself."
The chairman of IFA farm business committee, Mr Eddie Downey, said tax changes were also needed to bring young people back into farming.
"We've an ageing population and less young people coming into the system. All you have to do is look at the fall in number of students at agricultural colleges.
"The single-farm payment is a new era and we want to get active enthusiastic people into it. And the only way people are going to come into it is if they see an opportunity to expand," he said.
The submission also called for an increase in the farmers' VAT refund rate on business inputs to 5.3 per cent and an increase in personal tax credits for all taxpayers.
There are more than 300,000 employed in farming, food processing and related industries in the State.