No tax exemption for farmers whose land is rezoned as residential

A new tax on zoned undeveloped land does not propose to offer any exemptions to farmers whose land has been zoned as residential, The Irish Times understands.

The New Residential Zoned Land Tax (RZLT) will be introduced in early 2024 and will replace the Vacant Site Levy which is being discontinued. The site levy was introduced in 2017 to impose financial sanctions on landowners who did not develop land zoned for housing. However, it had a poor record of revenue collection. In addition there were regional inconsistencies in the levy being applied.

The new tax will be a self-assessment one but the key difference will be that the tax will be collected by the Revenue Commissioners rather than local authorities. The rate that will be applied will be 3 per cent of the value of the land.

However farming organisations and rural TDs have said the proposed RZLT will pose significant difficulties for farmers whose land has been zoned as residential and is serviced.

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Sources say the new tax has been designed to give no exemption to any farmland that is zoned as residential. As such the farmers who own the land will be liable to the 3 per cent tax.

Nor are there any plans to exempt farmland from the tax. A source said the tax was “black and white” and if any category of tax payer was excluded it could lead to difficulties in complying with EU State Aid rules. Moreover, the purpose of the tax is not to raise revenue, rather as an incentive to build housing on the land. As such, added the source, the land that is zoned is deemed to be the most suitable for housing, even if it is being farmed.

As of now, there are no exemptions. A farmer may apply to have their land dezoned but that might not be possible. Suggestions of a design of a clawback tax for exempted farm sold on for development were not accurate and had not been discussed, said the source.

This issue was raised by a number of Fine Gael TDs at the party meeting on Thursday night. Taoiseach Leo Varadkar told his colleagues he would be working with ministerial colleagues to fix the issues. He said it was affecting people who were not land-hoarders and they were never the intended target of the tax.

He said the tax would bring within its net people who sought to get their land dezoned but were refused; developers that have planning permission but it is on appeal or in the courts; and land where it is zoned for residential development but cannot be developed in the short to medium term.

The Irish Farmers Association said yesterday it had been campaigning on the RZLT since it was mooted in the 2021 Finance Act.

“Farmers, who in many instances had zonings imposed on them, were very concerned about the viability of their farm if they had to pay the 3 er cent tax,” said a spokesman.

“The Taoiseach signalled a commitment during the week to fix the issue so genuinely-farmed land would be excluded. We are looking for a meeting with the officials who will be charged with unwinding the issues in this legislation. When we see the detail of what they are proposing, we will decide how to proceed,” he said.

The chair of the Oireachtas Agriculture Committee Jackie Cahill said that some farmers with zoned land did not want to sell it under any circumstances.

“The want to continue farming and you have other farmers near towns and villages where the development of that land is not currently economically viable.

“They feel hard treated by this tax. However, we also have to (acknowledge) the policy position which is that zoned land is the first step in the requirement for getting houses built,” he said.