Publication - Research and analysis

Scottish Agricultural Tenure Evidence Review

Published: 27 Jun 2014
Part of:
Research
ISBN:
9781784126018

A review of tenure arrangements in Scotland and case studies of selected countries

122 page PDF

3.4 MB

122 page PDF

3.4 MB

Contents
Scottish Agricultural Tenure Evidence Review
Annex B: Country Case Studies

122 page PDF

3.4 MB

Annex B: Country Case Studies

B1. This Annex contains short case studies of agricultural tenure arrangements in ten countries: Belgium, Canada, Denmark, France, Hungary, Ireland, the Netherlands, Norway, Poland and New Zealand.

B2. Key points from the case studies are incorporated in the main report alongside insights from the more general literature. However, the case studies are presented in full here since they offer slightly more detail that may be of interest.

B3. The ten countries were suggested by the project's Steering Group as examples of potentially interesting different types of tenure patterns and traditions. For instance, Belgium and France have relatively high shares of rented land, Denmark and Norway (although different in approach) are Scandinavian in outlook, Ireland and the Netherlands have very high land prices, Hungary and Poland have reformed following the demise of communist control, and Canada and New Zealand were dominated by colonial Crown control of land allocations.

B4. Each case study starts with a description of current agricultural production and land patterns plus agricultural policy. This is followed by a summary of key legislation affecting farm tenure, both past and present. Very brief summaries are then given of how agriculture and land are taxed plus how new entrants to agriculture are supported, before some concluding discussion points are made. A list of the main information sources used is given. Table 21 summarises key points for each country.

B5. Information was collated from a variety of sources, including published and on-line academic, government and grey literature plus personal communications with government bodies and academic experts. The assistance and guidance provided by individual local civil servants and academics is gratefully acknowledged. In most cases, two or more sources were used to verify particular points or statistics.

B6. Although care has been taken to portray the situation in each country as accurately as possible, the information presented has inevitably been subject to summary translation and interpretation that may have missed subtle nuances or exceptions. For example, the tenure and tax legislation are often complex, particularly where central and local government both have some influence. Equally, regulatory controls are often reformed repeatedly and administered by different bodies.

B7. In addition, it should be noted that information on ownership, lessors and the relative abundance of different types of leases is often missing whilst data on rental areas, rents and land values can be incomplete. Moreover, formal evaluations of particular tenure control measures are rarely undertaken.

B8. As such, each case study should be regarded as indicative of the broad approach to policy and associated tenure patterns rather than a guide to specific details and causality. Nevertheless, they are sufficient to reveal differences across countries and to identify and categorise different policy approaches.

Belgium

Context

Belgium has a federal structure, with the central, northern and southern regions of Brussels, Flanders and Wallonia each having responsibility for a range of policy areas. These include agriculture and the environment, but taxation plus land tenure and inheritance rules are reserved to the federal government. There are no specific courts connected with agricultural land.

Nationally, agriculture is a very small (<1% of GDP and employment) component of the economy but the utilised agricultural area of around 1.37m ha[24] covers about 45% of the country. Although the number of farms is decreasing (at 3-4% per year) as the average size increases (currently 30 ha), there remain around 48k holdings - of which about 2/3 are in Flanders and 1/3 in Wallonia. In the more densely populated Flanders, production methods are relatively intensive (e.g. horticulture, pigs and poultry) but more extensive systems (i.e. cattle grazing and arable) dominate the less densely populated Wallonia. Brussels is almost exclusively urban.

Over half of all farms have livestock, with 14% being categorised as dairy and 18% as beef farms, but 14% are classed as arable. Farm size varies considerably, with 11% smaller than 2ha but 19% bigger than 50ha. Farms in the 20-100ha category account for 2/3 of the total area. Approximately 92% of farms are sole-proprietorships, with partnerships accounting for most if not all of the remaining 8%; 6% of farmers are under the age of 35, 53% over 55 years. Family labour accounts for 79% of the workforce. Farm incomes vary significantly across farm types and sizes (and over time) but average net farm income in 2009 was around €41k (£34k) or €26k (£21k) per farm work unit.[25]

Over 2/3 of farmland is rented, a proportion that has been relatively stable for at least 150 years. Sales of farmland are very limited, tending to occur only if a farmer exits the industry with no successors and chooses not to rent land out. Most land is rented-out by farmers, indeed some farms both rent-in and rent-out as a mechanism for overcoming land fragmentation arising from adherence to the Napoleonic inheritance code (i.e. equal division between heirs). Land prices are generally increasing, and are currently around €8k/ha (£6.5k) in Wallonia and €15k/ha (£12k) in Flanders, whilst agricultural rents are constrained by legislation and rise more slowly, currently averaging around €150/ha (£120). Local factors can drive some prices extremely high as, for example, neighbouring farmers seize a rare opportunity to expand and/or non-farming interests (especially in Flanders) seek land for other uses.

Agricultural Policy

The CAP dictates agricultural policy in Belgium, but the two farming regions have used available flexibilities. Both adopted the historic model for decoupling and remain reticent about a switch to flat-rates. Initially, activation of entitlements was easier for tenants than land owners, but the rules were aligned in 2008. Depending on the precise model followed, switching to flat-rate payments is anticipated to cause some redistribution between regions and farm types, and from older to younger farmers. In recognition of the fragility of beef production, and mindful of policy choices in neighbouring France and the Netherlands, both regions retained a coupled suckler cow premium, and Flanders also retained the slaughter premium.

Tenure control measures

Statutory protection for tenants was first introduced in 1929 (The Tenancy Act), with successive strengthening in 1951, 1969, 1988, 1999 and 2003. Seasonal (less than a year) lets are not covered by the legislation, but all other farm leases are, provided that proof of payment of some form of rent (cash or other) can be provided. Legally, most such leases are for nine or 18 years, with (repeated) automatic renewal for a further nine years the norm - unless the landlord is (e.g.) looking to farm the land himself or to develop it, in which case up to three years notice and/or compensation payments to the tenant may be required. Long leases and automatic renewal confer security of tenure, reinforced by landlords only rarely seeking to avoid renewal (as evidenced by the stable share of rented land). As a variant on this, the duration of a lease can be set as the expected career length of the tenant, defined as the difference between their age and the retirement age of 65 - with a minimum duration of 27 years. Shorter (non-seasonal) leases are interpreted as having a 9-year duration. Tenants have a pre-emptive right-to-buy if the landlord sells (except if to a family member or business partner) and tenants and their spouses have the right to pass tenancies (or sub-let) to their children without requiring the landlord's approval, although the landlord does have to be informed of the transfer.

Maximum rental values are calculated with reference to a nominal historical rental value, multiplied by a local rent coefficient. The latter are set every three years by a commission for each Provence comprising members of the regional governments plus representatives of agricultural organisations, taking account of changes in agricultural profitability across the country. The nominal rental value (based on factors such as soil quality and agricultural profitability) was estimated through a cadastral survey (i.e. a mapped land registry) last conducted in 1975 and is not index-linked; on average it is approximately €50/ha (£40) whilst rent coefficients tend to be between two and three. Consequently, rental values are typically around €120-€150/ha (£100-£120). To reflect the greater security offered by longer leases, rent coefficients are inflated by 36% for 18-year leases or 50% for a lease of 27 years or longer. Unregulated seasonal rents are higher, and there is anecdotal evidence that some tenants pay additional undeclared rent to access preferred land. Data on the relative abundance of different lease types are not available.

In addition, tenants enjoy freedom to farm - including erecting buildings and other structures (but not planting trees, or conducting non-agricultural activities) - without necessarily requiring the landlord's consent. Moreover, tenants are entitled to compensation for any improvements they leave (although landlords may also be compensated for damage to the land, which is also grounds for early termination of a lease). Non-agricultural uses of land are not covered meaning that, for example, leasing land for use by horses is not constrained with respect to rent or other terms and conditions.

As with other countries operating under the Napoleonic code, legislative attempts to address farm fragmentation by facilitating land consolidation have been made in Belgium, and have been since 1949 with current rules dating mainly from 1970. Perhaps 20% of agricultural land has been consolidated, either through reallocation of parcels of land and/or through improved infrastructure connectivity. Such consolidation can be initiated by Ministers or by a group of at least 20 local stakeholders. In each case, the process is overseen by a commission of local representatives (supported by regional government officials) with attention paid to business disruption (e.g. changes in landlords' tenants and vice versa) and financial compensation. To aid the process, the regional government can take temporary ownership of land through a State pre-emptive right to buy.

Taxation

Income from farming is taxed relatively lightly with tax for owner-occupiers or tenants with leases of at least nine years being based on the cadastral survey value rather than the actual income generated; only income from seasonal lets is taxed at actual value. Income from renting-out is also taxed at the cadastral survey value (less 10% for expenses) rather than the actual rent for nine-year leases, but income from longer leases is exempt (as an incentive to offer career leases). Tax rates range from 25% to 45%.

An annual property tax ("advance levy") is levied on land, but is paid by the owner rather than the tenant unless the lease is for 50+ years. The tax comprises a base levy for the regional government plus add-ons for the local province and/or community. In aggregate, these separate components may amount to a significant percentage tax rate (e.g. >40%). However, the tax is, again, levied on a notional rental income rather than what is actually achieved from the land, with the income value used being an index-linked figure based on the 1975 estimate cadastral survey value (on average, approximately €50/ha in 1975, €73/ha as indexed now). As such, the effective tax rate is somewhat lower. Moreover, it is low relative to current land values - although it remains high relative to rental values (given the controls on these, as described above).

Although the precise tax rate varies slightly with sale value and region, buying land can incur a tax charge of 15% to 20%, comprising registration, notary fees and other administrative costs. This probably inhibits sales and/or encourages tax avoidance, as well as further reinforcing preferences for renting (including possibly within families). Inheritance tax is levied on farmland, but at a lower rate if from older to younger generations rather than within-generation and with possible exemptions if already involved in the business.

New Entrants

Security of tenure across generations means that inheritance of a tenancy is the normal route into farming, with buying out of the previous generation and/or competing heirs (to avoid fragmentation) assisted by soft government loans as well as tax breaks. The same soft loans (under Pillar II) are available to non-family entrants, but thin markets in tenancies and land are likely to constrain such opportunities. Anecdotally, the advent of the SFP has led some retiring farmers to retain land and rent-it out on seasonal lets or use contractors to meet cross-compliance requirements rather than sell or offer longer leases - further limiting land availability.

Discussion

Belgian tenancy law has long offered protection to tenants, in particular through security of tenure and rent controls. Consequently, rented land dominates. Structural change is happening, but has been slowed by the transaction costs of land sales and the inheritability of tenancies constraining the availability of land both for new entrants and existing farmers wishing to expand.

Information sources

Belgian Federal Public Service Finance (2013) Tax Survey. Research and Documentation Department, Brussels. http://financien.belgium.be/nl/binaries/FiscaalMemento2013_EN_tcm306-223399.pdf

Calus, M., Van Huylenbroeck, G. and Van Lierde, D. (2008) The Relationship between Farm Succession and Farm Assets on Belgian Farms Soc. Ruralis, v48/1, p19-36

EC (1982) Factors influencing ownership, tenancy, mobility and use of farmland in the UK. European Communities - Commission, Series Information on Agriculture 74. Luxembourg: Office for Official Publications of the European Communities 268 pp.

EC (1992) Farm Takeover and Farm Entrance Within the EEC. Luxembourg: Office for Official Publications of the European 164pp

EC (2011) Survey of the domestic rules on taxes levied upon death. Report to EC by Copehangen Economics. http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/2010/08/inheritance_taxes_report_2010_08_26_attachment_en.pdf

Eurostat (2013) Farm structure in Belgium. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_Belgium

Flemish Department for Agriculture and Fisheries (pers. comm. 2013)

Gotzen, R. (1992) Agrarian Land Law in Belgium. Chapter 2 (p20-34) in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford. 280pp.

Ravenscroft, N., Gibbard, R. and Markwell, S. (1998a) Private Sector Tenancy Arrangements Volumes I and 2 Literature Reviews. Draft Report to the Food and Agriculture Organisation of the United Nations http://www.fao.org/sd/ltdirect/ltre0007.htm

Van Herck, K. (2008) Study on the Functioning of Land Markets in the EU member states under the Influence of Measures applied under the Common Agricultural Policy: Country Report BELGIUM. LICOS - Centre for Institutions and Economic Performance, Catholic University of Leuven.

Van Herck, K. (pers. comm.. 2013) Catholic University of Leuven

Wallon Directorate General for Agriculture, Natural Resources and Environment (pers. comm. 2013)

Canada

Context

Canada is a large federal state comprising ten Provinces and three Territories. Under the Constitution Act, most land and agrarian law are determined at the Provincial level with municipal and local government also playing a key role in planning issues. Although Federal taxation exists, regional taxation accounts for a higher share of total tax revenues. Quebec follows the European model of a civil code whereas the rest of Canada essentially follows English common law. Different Provinces have different administrative arrangements for handling farm tenure matters - some have specific tribunals/courts, others do not.

Most land in Canada is Crown land, held by Provincial (48%) or Federal government (41%), with the latter dominating the northern territories but being restricted to (e.g.) National Parks in the Provinces. Only 11% of land is held privately (much of it farmed). This distribution reflects a colonial legacy of settlement by the British and French during the 17th and 18th centuries, although prior claims of the indigenous population were recognised and remain protected.

At the aggregate level, agriculture accounts for 1.7% of GDP and 1.8% of employment. However, this varies significantly with farming being almost non-existent in the Northern Territories but more important in (e.g.) Ontario and Saskatchewan. The nature of farming also varies substantially, with dairying being common in the east and grain production dominating the mid-west prairie lands. The utilised agricultural area of approximately 65m ha accounts for 7.2% of the total land area.

Reflecting an historical preference for small family-operated farms rather than larger estates, approximately 60% of farmland is owner-occupied - although this has been declining slowly from a peak of 70% in mid-1970s. Leased Crown land accounts for around 13%, but has also been declining slowly whilst private rentals have risen from 18% to 24% over the last decade. Around 3% of land is under cropshare arrangements. Average farm land prices have nearly trebled over the past 20 years to Can$1500/acre (£2k/ha), but vary from Can$523/acre (£700/ha) in Saskatchewan to Can$5000/acre (£7k/ha) in Ontario. Rental values are similarly variable (£20 - £130/ha, more for horticulture), with leases varying from short-term lets to 10 years or longer.

Approximately 55% of the agricultural area is devoted to arable cropping and 58% of farms are classified as cropping. Livestock farms account for 42%, of which beef producers represent 18% - down from around 27% in the wake of BSE. The number of farms has declined from a peak in the 1940s to around 206k currently. Average farm size has increased over this period and is currently 312ha overall, but this varies regionally from 61ha in Newfoundland and Labrador to 667ha in Saskatchewan. Although around 55% of farms are sole-proprietorships, this proportion has been declining steadily from over 80% in the 1980s in favour of incorporated businesses (currently 20%), of which almost 90% are family (rather than corporate) farms. Partnerships and other business forms account for around 25%, but are also declining slowly in favour of incorporation as farm size and turnover increase. Family labour accounts for around 50% of the workforce in terms of employees; 48% of holders are older than 55, 8% younger than 35. Around 46% of farmers report some level of off-farm employment.

The ratio of farm expenses:receipts varies regionally and across farm types, with larger dairy and grain producers being most profitable.

Agricultural Policy

As a significant exporter of agricultural commodities, Canada is an active member of Cairns Group[26] promoting further liberalisation of farm trade. Overall farm support has declined significantly since the 1980s, with grain and beef production now largely market-oriented. Nevertheless, Federal and Provincial support is offered to farmers, primarily in the form of measures to even-out fluctuations in farm income levels. For example, through incentives for farm savings and assistance with disaster recovery. In addition, dairy, eggs and poultry are subject to production quotas and price support measures. The policy framework for 2014 onwards (Growing Forward 2) stresses the need for innovation, risk management and competitiveness.

Tenure control measures

Although private leasing is increasing slightly, the historical pattern of land settlement with owner-occupation being the dominant form of farm tenure meant that private leasing arrangements for farmland have only ever been subject to generic contract law. Each Province has a Tenant and Landlord Act specifying obligations of each party to a lease and sanctions to be applied if these are not met, together with arbitration processes. Although some Provinces have had rent controls for residential properties, this did not extend to farmland and no specific requirements have been imposed on rights to renewal, succession or pre-emption.

By contrast, arrangements for the leasing of Crown farmland are regulated more tightly. For example, applications to lease land typically have to be made via formal public tenders and accompanied by business plans detailing how land will be used. Bids are assessed on a range of criteria, which may include the area of land already controlled, distance to such existing land and an applicant's age, qualifications and experience. Leases vary regionally from 10 years to 33 years, with an option to renew for the same period. Rents may be tied to a percentage of the estimated land value (e.g. Saskatchewan) or linked to the estimated profitability of enterprises (e.g. New Brunswick) but may also increase over time to allow for early years development.

In some Provinces, Crown tenants are actively encouraged to buy farmland through discounted (by up to 10%) sale prices and phased payment arrangements. In addition, financing is facilitated through specialist lending through Crown corporations such as Farm Credit Canada or Financière Agricole du Québec that exist solely to provide finance to the farm sector (broadly defined). Some Provinces (e.g. Saskatchewan) have also intervened in land markets directly by buying land (using State pre-emption rights) for reallocation to new entrants or farms needing to expand.

Many Provinces have also intervened actively to slow the loss of agricultural land to non-farm uses and to constrain ownership. Development of farmland is generally regulated through planning controls, although some (e.g. Ontario) rely on general planning guidance whilst most have more active Ministerial oversight. Expansion of farms and the concentration of land holdings in some Provinces have been subject to scrutiny and control by local Land Boards in the past, but such restrictions have now largely been relaxed for Canadian owners.

However, controls on foreign ownership (including leasing) remain in place for many Provinces, notably Alberta, Manitoba, Prince Edward Island and Saskatchewan. These are motivated by concerns over the effect of capital inflows on land prices, the availability of land for local and/or new farmers, and negative impacts on rural communities. By contrast, Newfoundland and British Columbia have no restrictions and wish to attract inward investment. In some cases (e.g. Saskatchewan) controls previously extended to out-of-province Canadians in an attempt to further restrict ownership to local farmers; such controls have since been abolished. Ownership bids for more than (e.g.) 8 ha are subject to scrutiny by Land Boards which can chose to permit them or not.

Taxation

Taxation is determined partly at Federal level, partly at Provincial level and partly at municipal or local level. Consequently, tax liabilities can vary greatly. However, in general, Canadian farmers benefit from a range of tax advantages not available to other citizens and businesses, although the extent of the advantages varies with business status: hobby farmers receive none, part-time farmers a proportionate share, and full-time farmers all of them. In particular, farms are either exempt from or face lower rates of property taxation and farm assets can be passed between generations without being subject to capital gains tax. Incorporated farms face much lower rates of taxation on income than sole-proprietors, but incur capital gains tax unless the company is structured carefully. In addition, Federal encouragement for business investment in the eastern Provinces offers additional tax incentives, as do national programs aimed at improving risk management and innovation.

New Entrants

The Canadian Agricultural Loans Act 2009 capped interest rates chargeable on farm loans, easing access to finance for all farmers. However, it also specified that young farmers (with less than six years experience) could receive loans of up to 90% of the purchase price rather than the 80% limit for older farmers. Some lenders, such as Financière agricole du Québec, explicitly offer further subsidised and fixed rates to young farmers. In addition, several Provinces offer one-off grants or interest rate rebates to new entrants - with eligibility conditional on age, qualifications and minimum share of a farm business.

Separately, tax exemptions on inter-generational transfers of farm assets ease succession for family farmers and succession planning is actively promoted by government at all levels and by financial bodies. Inheritance is the dominant route into farming, but some funding initiatives explicitly target entrants from non-farming backgrounds whilst some Provinces (e.g. Saskatchewan) give greater weight to younger applicants wishing to lease or purchase Crown land.

Discussion

Canadian Provinces differ in both their legislative controls and administrative structures relating to agricultural tenure (as well as farm types and size). However, in general, efforts have been made to promote family-farms and to constrain both farm size and ownership. In particular, constraints on foreign ownership remain in place for the majority of Provinces. Private leasing is subject to light regulation, but is increasing in popularity as some farms seek to expand. Crown leasing is more tightly regulated, but tenants are encouraged to buy, aided by various preferential funding options.

Information sources

Agriculture and Agri-food Canada (pers. comm., 2014)

Agriculture and Agri-food Canada (accessed January 2014) Growing Forward 2. http://www.agr.gc.ca/eng/about-us/key-departmental-initiatives/growing-forward-2/?id=1294780620963

Bryan, J., Deaton, J., Weersink, A. and Meilke, K. (2011) Do farmland ownership patterns explain variation in farmland rental rates? Department of Food, Agricultural and Resource Economics, University of Guelph, Research Project Number: PR-04-2011

Canada Revenue Agency (pers. comm., 2014)

Canada Revenue Agency (accessed January 2014) Farms. http://www.cra-arc.gc.ca/tx/bsnss/sgmnts/frmng/menu-eng.html

Dombek, C.F. and Button, C. (1992) Agrarian Law in Canada. Chapter 11 in (p196-211) in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford. 280pp

New Brunswick Department of Agriculture, Aquaculture and Fisheries (2014) Crown Lands - Lease for Agricultural Purposes http://www2.gnb.ca/content/gnb/en/services/services_renderer.554.html#serviceFees

OECD (2013) Agricultural Policy Monitoring and Evaluation 2013: OECD countries and emerging economies. OECD, Paris. http://www.keepeek.com/Digital-Asset-Management/oecd/agriculture-and-food/agricultural-policy-monitoring-and-evaluation-2013/canada_agr_pol-2013-9-en#page1

Ontario Ministry of Agriculture and Food (2013) Exploring Trends in Farmland Ownership and Rental http://www.omafra.gov.on.ca/english/crops/field/news/croptalk/2013/ct-0613a6.htm

Parliament of Canada (2006) Federal Taxation of Farmers: Discussion of Issues http://www.parl.gc.ca/content/lop/researchpublications/prb05102-e.htm

Saskatchewan Ministry of Agriculture (2014) About Agriculture. http://www.agriculture.gov.sk.ca/about/

Standing Committee on Agriculture and Agri-Food (2010). Young farmers: the Future of Agriculture. Parliament of Canada, Ottawa. http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=4755476andFile=0 and http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=5051365

Statistics Canada (pers. comm., 2014)

Statistics Canada (accessed January 2014) Snapshot of Canadian Agriculture. http://www.statcan.gc.ca/pub/95-640-x/2012002/00-eng.htm

Denmark

Context

Denmark is the southernmost Nordic country and comprises the Jutland peninsula plus an archipelago of several hundred islands situated in the Baltic Sea.[27] Although a member of the EU since 1973, Denmark has not adopted the Euro. It has three tiers of administration: central government, five regions and 98 municipalities. Although central government retains control of most policies, municipalities have tax-raising powers and have significant spatial planning responsibilities. There is a separate Land Registration Court.

Agriculture accounts for less than 2% of GDP and of employment, but is highly export-oriented. The utilised agricultural area of around 2.6m ha covers approximately 3/5 of the country, and has been protected from development within the planning system. Land prices are high, peaking at around €35k/ha (£29k) in 2007 but have fallen since the financial crisis to perhaps €20k/ha (£16k) currently. Approximately 34% of farmland is rented, an increase of five percentage points on the position a decade ago and almost double the rate in the 1980s. Average rents are around €500/ha (£400).

Approximately 55% of the agricultural area is devoted to grain production and less than 10% to permanent grass. Nevertheless, animal numbers are high at over 4.5m livestock units - reflecting very intensive production systems. There are significant water pollution pressures, and manure disposal is a challenge. Approximately 38% of all farms are specialist cereal producers and 10% specialist dairy.

Farm size varies considerably, with 44% being smaller than 20ha and 18% bigger than 100ha, but the latter account for over 60% of land and livestock. Farm size is increasing over time (currently 60ha) as the number of farm holdings reduces (around 44k in 2007, down from 51k in 2005, 102k in 1982), but the number of very small holdings has actually increased as they transfer land (but not houses) to farms that are expanding. Around 98% of farms are sole-proprietorships. Family labour accounts for around 61% of the workforce in terms FTEs; 44% of holders are older than 55, 6% younger than 35.

Farm incomes vary significantly across farm types and sizes (and over time) but average net value added (including Pillar I direct Payments) in 2008 was around €80k (£66k) or €50k (£41k) per Agricultural Work Unit. Part-time farming is common, with 48% of farmers having some other gainful activity.

Agricultural Policy

The CAP dictates agricultural policy in Denmark, although Danish governments are typically in favour of reduced Pillar I expenditure and further liberalisation. Decoupling was implemented with no regionalisation through the dynamic hybrid model, combining elements of historic entitlements with flat-rate payments - but with clear expectations that it would eventually move to a fully flat-rate-system (as now obligated for the 2014-20 period). Coupled payments were retained within the beef sector (75% beef special premium) and the sheep sector (50% sheep premium).

Tenure control measures

Dating from the late 18th Century when around 2/3 of tenants gained ownership of their farms through the demise of feudal arrangements (notably adscription - the tying of people to the estate of their birth), Denmark has a long-tradition of small, owner-occupied farms. Further sub-division of large holdings was encouraged through a State Land Law Committee during much of the 20th century, leading to the number of individual farms peaking at 204k in the 1950s.

This focus on owner-occupation meant that lease arrangements have been less important, with tenanted farms being almost non-existent and rental activity relatively low (although rising recently). Rents are set by the market, and leases are for a maximum of 30 years with no rights of renewal or pre-emption to buy. In addition, there are limits on the number of individual let-in leases that one farmer may hold (currently five) and on the distance that rented land may be from other parts of the farm (currently 10km). These constraints echo more general controls on the ownership of farmland that were in place until recently under the Agricultural Act (previously Agricultural Holdings Act).

For example, although progressively relaxed since the 1990s, relatively strict controls were in place regarding both the maximum area that a farming family could usually own (recently 150ha, previously 125ha and 70ha prior to that) and the number of individual holdings (currently three, previously two and prior to that one). More land could be acquired, but only if neighbouring (within 2km) farms did not wish to buy the land (NB. pre-emptive rights were but are no longer accompanied by price controls, so despite having first refusal locals can be outbid). The 150ha ownership limit was removed in 2010, but neighbours' pre-emptive right remain. Ownership of land in excess of 30ha did require either prior farming experience or formal agricultural qualifications, but this constraint has also been waived recently. Conversion of farm holdings to other uses remains difficult, but an obligation to farm actively has (subject to CAP-requirements) been abolished.

Ownership of farmland is restricted to EU nationals (previously only Danish nationals) and owners are obliged to reside on the holding (or to have a representative in residence) within a few years of acquiring it and to do so for several years after that. Companies cannot own land, unless the majority share holder can satisfy the residency requirements. In the case of multiple holdings, residence only applies to one holding (which has released some former farmhouses) and co-owners or family members have more flexibility over time limits and residency requirements than others.

Separately, consolidation of fragmented holdings has long been encouraged under the Land Distribution Act (and its predecessors). Specifically, two regional Commissions (now subsumed back into government) and local land acquisition boards have powers to reallocate land between farms and land uses (e.g. infrastructure, conservation) through facilitating voluntary exchanges between landowners and/or through compulsory purchase.

Taxation

Denmark has relatively high tax rates and farmers and farm businesses are subject to the same taxes as other Danish citizens and businesses. That is, there are no concessional rates or exemptions specifically for farm income or for property (wealth) or sales taxes on agricultural land. Similarly, all businesses - whether agricultural or not - are subject to the same rules on inheritance and succession. This reflects Danish government preferences for all sectors and citizens to be treated equally in terms of taxation and social security arrangements. Tax rates are generally progressive, including for property - so larger farms will face higher marginal rates.

New Entrants

There are approximately 700 new entrants to Danish agriculture each year, with inheritance the usual entry route. Beyond providing specific work-experience, vocational and university education for aspiring farmers, specific policy measures have not generally been adopted to aid these farmers (although aspects of previous tenure controls may have helped to dampen demand and thus prices). However, formal contractual (partnership or joint venture) succession between generations on a farm is recognised under Danish law and is supported by private credit associations (which are not restricted to agriculture and do receive government funding) which can fund leases or purchases (typically the latter).

Essentially these contractual arrangements provide a phased transition, over ten or more years, for a young farmer to gradually take over from a parent or other older farmer. This provides an opportunity for joint working but also staggered purchasing of land and assets - with the older farmer using the proceeds to fund their retirement (retirement homes on farms are treated favourably within the planning system).

Backed by a State Guarantee, the credit agencies offer soft loans at 2% below market interest rates for up to 70% of the purchase price. In addition, they run tax-efficient savings accounts that aspiring farmers can pay into to build up capital (for the balance) in the years prior to buying into a farm. Nonetheless, high land prices mean that new entrants accumulate significant debts under this process - indeed Danish new farmers suffer the highest debt repayments within the EU. Moreover, a farm has to be able to generate sufficient income or (more typically) permit off-farm working to support two partners for the duration of the transition.

To be eligible, a new entrant must be younger than 40 and have minimum agricultural qualifications and experience plus they must have sufficient capital to buy at least 20% of a farm on which they will work for at least 833 hours a year. The price paid for the farm can be around +/-15% of the agreed market value, with different tax benefits (e.g. capital gains vs. depreciation allowances) flowing to the buyer or seller depending on the over or under-valuation.

Discussion

Until the late 20th Century, stated policy preferences for small, owner-occupied farms were enacted through strict controls on land ownership. Compliance with EU requirements (e.g. foreign ownership) and acceptance of the need for farm expansion to maintain farm incomes led to gradual relaxation of these controls. In particular, allowing individual control of greater areas and of multiple holdings combined with less stringent residency and activity obligations has facilitated the transfer and/or amalgamation of land from owners seeking to exit farming to those seeking to expand within it. Some of this has been achieved through land sales, but (notwithstanding no significant changes to the regulation of leases) some has been achieved through an increase in the amount of land leased. The resulting reduction in the number of holdings and increase in average farm size may have structural benefits, but land prices remain high and new entrants from outwith farming families are still likely to be disadvantaged.

Information sources

Commission of European Communities (1982) Factors influencing ownership, tenancy, mobility and use of farmland in Denmark, CEC, Luxembourg.

Dethlefsen, H. (2010) Denmark. EUROPEA

Eurostat (2013) Farm structure in Denmark. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_Denmark

Ministry of Food, Agriculture and Fish (pers. comm. 2014)

Natural Business Authority (pers. comm. 2014)

Ravenscroft, N., Gibbard, R. and Markwell, S. (1998) Private Sector Tenancy Arrangements Volumes I and 2 Literature Reviews. Draft Report to the Food and Agriculture Organisation of the United Nations http://www.fao.org/sd/ltdirect/ltre0007.htm

Sørensen, E.M., Anne Kristine Munk Mouritsen, A.K.M. and Staunstrup, J.K. (2002)Regional and Local Patterns of Change in the Ownership of Rural Lands in the Landscape Geografisk Tidsskrift, Danish Journal of Geography, Special Issue, 3, 2002

Statistics Denmark (pers. comm.. 2014), also http://www.statistikbanken.dk/bdf2 and http://www.statbank.dk/BDF307

Perrier-Cornet, P., Blanc, M., Cavailhes, J., Dauce, P., Le Hy, A. (1991) Farm take-over and farm entrance within the EEC Internal to European Commission, ECSC-EEC-EAEC, Brussels.

van der Veen, H.B., van Bommel, K.H.M. and Venema, G.S. (2002) Family farm transfer in Europe

A focus on the financial and fiscal facilities in six European countries. Agricultural Economics Research Institute (LEI), The Hague. http://edepot.wur.nl/40193

Wulfe, H. (1992) Agrarian Law in Denmark. Chapter 3 in (p35-50) in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford. 280pp

France

Context

In France, agriculture accounts for around 2% of GDP and 3% of employment but the utilised agricultural area of around 27 million hectares covers approximately 51% of the continental country. The average farm size is currently around 55 ha; an increase from 42 ha in 2000. There were 490k holdings recorded in the 2010 agricultural census. Only 23% of the utilised agricultural area is owned. There is however, a regional contrast with farms tending to be small and farmed by the owner in the South while in the North tenant farming is much more common.

Over half of all farms have livestock, with 11% being categorised as dairy farms and 13% as beef farms; 23% are classed as arable. Farm size varies considerably: 18% are smaller than 20ha, 31% are between 50 and 100ha category, while only 6% of farms are 200ha or more; 27% of farms were at least 100ha and were responsible for around 58% of the total area farmed. Approximately 59% of farms are sole-proprietorships, with farming companies accounting for the remaining 41%. Of these, 13% were agricultural joint operating groups, and 21% were limited companies. Family labour accounts for 70% of the workforce. Farm incomes vary significantly across farm types and sizes (and over time) but average net farm income in 2009 was around €15k (£12k) or €11k (£9k) per farm work unit. Finally, 38% of farmers were aged 55 years or over, 8% 35 years or younger.

Sales of farmland are limited. In 2012, 326k of agricultural land was sold, compared to 428k in 1999. Since 1997, the average price per hectare of 'free land' in France increased, on average by 4%. Currently, the price of agricultural land is around €5k/ha (£4k), although this does vary considerably across regions - €12k/ha (£9.8k) in Nord-Pas-de-Calais and €2.6k/ha (£2.1k) in Franche-Comté. The sale price of leased land has also increased since 1997 at an average 3% per year. It currently commands a price of around €4k/hectare (£3.3k) and displays much less variability between French regions (€2.4k/ha to €6.5/ha; £2k to £5.3k). Approximately 2/3 of plots sold are bought by famers.

Agricultural Policy

The CAP dictates agricultural policy in France with successive reforms influencing the French rural sector. France adopted the historic model for decoupling, although they also retained the maximum permitted coupled support - most notably in the beef, sheep and goat sectors, but also in the arable sector. France has received the most absolute and relative money from CAP, because of its large agricultural sector, and under the latest reforms, it is likely that the share of first pillar envelopes will be over 18%, although per hectare payments will be only marginally above the EU-15 average.

Tenure control measures

The 1960 Agricultural Act created the Safers (Sociétés d'Aménagement Foncier et d'Etablissement Rural; Land Development and Rural Settlement Companies) system to regulate the land market. The main aim of the 23 Safers operating across continental France is to regulate the transfer of agricultural land with the specific objectives of settling farmers, especially young farmers; to support land and farm consolidation; and to support rural development and environmental protection. The Safer is entitled to purchase (under pre-emptive rights), transfer and exchange land, farms (land and/or buildings, equipment, livestock) or cultivated woodland. A land owner who intends to sell land should notify the local Safer that then has two months to either accept or reject a presale market purchase.[28] The law determines the preconditions to which a presale can be undertaken (e.g. settling, resettling or helping farmers; enlargement of existing farmers; helping farms survive if some of a farmer's land is expropriated for public works; preventing real estate speculation; and assisting viable farms that are under financial stress because buildings and land are separated). For approval of presale to a Safer, two government Commissariats, one representing the Ministry of Agriculture and other from the Ministry of Finance must explicitly sanction the sale. Furthermore, representing the state, each has a veto on all of the Safers' decisions. The role of the state is to ensure that each presale results in a better arrangement than would have occurred via a free market sale.

Laws concerning the status of tenancy date from the 1940s[29] and are now part of the body of legislation referred to as the 'Code Rural'. The legislative aim was twofold: to limit the power of a landlord on what were then "their" farmers and, correspondingly, to limit the amount of rent that a landowner levied on income from a farm's income. To improve security of tenure, the Code Rural relating to leases entitles a tenant to a legal minimum term of nine years (whether contracts are written or verbal) although longer terms are possible including 18, 25 and career tenancies (whose term is fixed to the retirement age of the tenant). In addition, a tenant is also entitled to renew a tenancy for a further nine years, except in cases of termination for cause or exercise of the right of recovery by the landlord. In the event of a tenant's death, his or her successor (i.e. spouse, descendants and ascendants) are entitled to continue the tenancy providing they were actively involved in the farm's operations for five years before the incumbent's death. Improvements to the rented land (through labour or investment) are also recognised, with compensation payable from the landlord on the expiration of the tenancy.[30] The farmer also has the pre-emptive right to buy if the owner of the land decides to sell the farm.

Rental values in France are also regulated. The 'Prefet'[31] sets a price index. This 'indice des fermage' as it is known, is calculated as a weighted sum of average gross farm income measures: at the département level; at the National level, and farm income in specific production categories, all of which are averaged over five years to reduce variability. With weights specific to each département, the index is re-evaluated each year. This index is then used to set a minimum and maximum rental values to enable the landlord to agree with the tenant appropriate rental value.[32] National rental values in the final quarter of 2013 ranged from €36/ha (£30) to €154/ha (£125), which represents a 25% increase since 1998.[33]

Taxation

In France, owners of land are required to pay tax on their property based on its estimated value. The rate at which this tax is charged depends on the characteristics of a property. Tax on undeveloped properties (TFPNB) is payable. Specifically, farm houses are taxed while other agricultural buildings are exempt. While this tax is the responsibility of the owner of the land, a proportion of the tax may be paid by the tenant in agreement between both parties. In the absence of an agreement, the tenant's fraction is set at 20% in the Code Rural. A higher rate can be agreed between the two parties but the landlord is not allowed to charge the tenant the entirety of the property tax.

The TFPNB is calculated by multiplying the taxable amount shown on the tax notice, a rate which is fixed by the local authority. The imposition of the TFPNB base is equal to the cadastral rental value and is reduced by 20%. Furthermore, a farm owner may obtain a tax discount should their crops be damaged as a result of an extraordinary event, livestock losses because of a disease outbreak, or the concerned parcel of land has disappeared. A 50% tax discount is available to young farmers, during their first five years of taking on their farm. In addition, some local authorities grant discounts on the remaining 50% of the TFPNB.

In France, the transfer of land is subject to a 5.09% tax payable by the buyer. This is comprised of a state tax (0.2%), a département tax (3.6%, on which an additional State tax of 2.5% is levied), and a municipal tax (1.2%). This tax is levied on both built and non-build land but is reduced to 0.6% at the département level and 0.1% at the state level for non-built agricultural land. For young farmers, the tax rate is 0.715% of the land price. Transactions done by or via the Safers are exempt from this tax.

New Entrants

The Safer system provides a route for new entrants into French agriculture. In 2012, 34% of sale interventions by Safer were made to install new entrants. In total, 1,230 installations were made, with the majority (65%) of these new farmers from outwith farming families. In total, new entrants were responsible for managing nearly 30k hectares. Since 1993, new entrants through the Safer system had increased from 800 to over 1200 per year. Furthermore, in recent years, since 2004, there has been a divergence with increasingly more new entrants being installed from outwith farming families and fewer from within farming.

However, security of tenure across generations means that inheritance of a tenancy is still the normal route into farming provided, as mentioned above, the successor was actively involved in the farm's operations for five years before the tenant's death.

Discussion

The majority of farmers in France are tenants. French tenancy law has long offered protection to tenants, in particular through security of tenure and rent controls. In particular, the Code Rural stipulates length of tenancies, property taxes and its allocation between the land owner and tenant. Provided particular criteria are met, the Safer system enables a degree of structural change, particularly as one of the remits of the system is to provide a route for new entrants in to farming. Indeed the Safer system and favourable tax rates enable young farmers, particularly those outwith traditional farming families, to establish farm businesses more easily than elsewhere. It also allows consolidation of farms to increase the possibility of financial stability.

Information sources

Boinon, J. P. (2003). Land policy in France and its consequence for the farmers.ZEMEDELSKA EKONOMIKA-PRAHA-,49(4), 166-172.

Coulomb P. (1999). La politique foncière agricole en France : une politique foncière "à part" ? La déstabilisation de la politique des structures. La transmission du patrimoine de l'exploitation agricole familiale en France. In Jouve A.-M. (ed.), Bouderbala N. (ed.). Politiques foncières et aménagement des structures agricoles dans les pays méditerranéens : à la mémoire de Pierre Coulomb. Montpellier: CIHEAM, 1999. p. 69-94 (Cahiers Options Méditerranéennes; n. 36)

EC (1982) Factors influencing ownership, tenancy, mobility and use of farmland in the UK. European Communities - Commission, Series Information on Agriculture 74. Luxembourg: Office for Official Publications of the European Communities 268 pp.

EC (2011) SURVEY OF THE DOMESTIC RULES ON TAXES LEVIED UPON DEATH. Report to EC by Copehangen Economics. http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/2010/08/inheritance_taxes_report_2010_08_26_attachment_en.pdf

Eurostat (2013) Farm structure in France. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_France

Ingénieur d'études (2013). Les marches fonciers agricoles en Europe et aux Etats-Unis en 2011, le prix des terres mai 2013.

Jégouzo L., (Pers. Comm.). Ingénieur d'études.

Latruffe, L., and Le Mouël, C. (2006). Description of agricultural land market functioning in partner countries.INRA-ESR, Deliverable,9.

Latruffe, L., Piet, L., Dupraz, P., and Mouël, C. L. (2013).The influence of agricultural support on sale prices of French farmland: A comparison of different subsidies, accounting for the role of environmental and land regulations(No. 152372). International Agricultural Trade Research Consortium.

Legifrance (2013). Code Rural, Book IV: Rural Leases http://www.legifrance.gouv.fr/affichCode.do;jsessionid=C5323B559E84AFCE62E4B0E246CCB430.tpdjo05v_2?idSectionTA=LEGISCTA000006121422andcidTexte=LEGITEXT000006071367anddateTexte=20140114

Lorvellec, L. (1992) Agrarian Law in France. Chapter 4 in (p51-70) in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford. 280pp

Merlet, M. (2007). Land Policies and Agrarian Reforms.Proposal Paper, AGTER. Nogent Sur Marne, France.

Safer (2013). Le Livre blanc des Safer : 19 propositions pour mieux contribuer à l'aménagement du territoire. http://www.safer.fr/livre-blanc-2013.asp

Service-Public.fr. Property tax on undeveloped properties: calculation, payment and discounts. http://vosdroits.service-public.fr/particuliers/F20651.xhtml

Hungary

Context

Hungary is a small landlocked country in Central Europe, administered through three tiers: central government, 19 counties and 174 sub-regions. Central government retains responsibility for agricultural, tenure and tax policies, but local government has some discretion over property taxes. As of 2013, an arbitration tribunal for tenure disputes is run by the National Chamber of Agriculture.

Hungary experienced a turbulent 20th century, including the demise of the Austro-Hungarian Empire after World War I, Nazi-influenced autocratic government in the period leading up to and during World War II and then subsequent occupation and assimilation by the Soviet Union. Amongst other consequences, these events resulted in over 70% of territory being lost to neighbouring countries and the coercive mass collectivisation of farming. Parliamentary democracy was achieved in 1990 and Hungary joined the EU in 2004 (although remains outside the Eurozone with its own currency, the Forint). Agriculture accounts for approximately 3% of GDP and employment.

During the 1990s, many state-owned assets were distributed through a variety of mechanisms including direct restitution to previous owners, allocation to workers in collectives and privatisation auction sales. In the case of agricultural land, 5.6m ha were transferred to 2.6m private individuals through these processes. As a consequence, land ownership is extremely fragmented with many small plots. However, farming operations are more concentrated with many owners leasing land to other private farms or to large cooperative or corporate farms: over 60% of land is rented.

Agricultural holdings cover around 5.5m ha (60% of the country), with over 1m ha of woodland and a utilised agricultural area of 4m ha dominated by cereals (55%) and other arable crops (30%). Around 55% of farms are classed as specialist arable, but livestock enterprises are widespread and much arable output is used as animal feed. Although rising, land prices are low relative to many other countries, currently around €2k/ha (£1.6k). Rents are also relatively low at less than €100/ha (£80).

Farm size varies considerably, with over ¾ being smaller than 1 economic size unit and over 80% of the remainder being smaller than 20ha and only 5% bigger than 100ha. However, the latter account for over 20% of livestock, 30% of labour and 70% of land. Average farm size is increasing over time (currently 29ha) as the number of farm holdings reduces (around 626k in 2007, down from 711k in 2005), but the size distribution remains dominated by the multitude of very small holdings vs. relatively few very large farms. Around 96% of farms are sole-proprietorships, but this falls to 60% for farms over 100ha. Family labour accounts for around 58% of the workforce in terms FTEs; 48% of holders are older than 55, 7% younger than 35.

Farm incomes vary significantly across farm types and sizes (and over time), not least since part-time farming is reported for over 80% of holdings, and 55% of holdings are farmed primarily for home consumption. Average net value added (including Pillar I direct Payments) in 2008 was around €30k (£25k) or €18k (£15k) per Agricultural Work Unit.

Agricultural Policy

Accession to the EU in 2004 brought Hungarian agriculture within the influence of the CAP. However, as a New Member State there has been a ten-year transition period and the nature of support has been slightly different. In particular, decoupled Pillar I payments are through the simplified, uniform Single Area Payment Scheme (SAPS) rather than the Single Farm Payment (SFP). However, coupled payments were offered through a system of national support and permitted CAP coupled payments CAP will be used from 2014 onwards. Relative to the position before the 1990s reforms, the level of public support for agriculture is much reduced whilst, post-accession, exposure to competition is much greater and recourse to intervention buying has not been uncommon.

Tenure control measures

The redistribution of agricultural land during the 1990s was largely under two "Compensation Acts" passed in 1991 and 1992. These offered partial compensation for the loss of private property during the period 1939 to 1989. This took the form of "compensation notes" (effectively IOUs) which could then be used to bid for land through auctions (of which there were around 30k). The amount of compensation offered was based on land valuations dating from the 19th century (in "golden crowns"), but auction land was valued on the same basis. In addition, unless they voted to remain as a collective, employees of State farms were allocated shares in the land farmed. It appears that many recipients of land had no prior experience of farming and many subsequently either sold or (more often) leased land to others. Moreover, relatively few active new landowners have chosen to farm jointly, preferring instead to farm individually. Allegations of corruption in allocation and auction processes emerge periodically. The State still retains some land for reallocation and leasing.

Under the 1994 Land Act (revised with effect from May 2014), leasing of land has been relatively unregulated beyond generic contract law. In particular, rent levels and rent changes are left to the market. Lease duration is flexible, but for no longer than 20 years and there are no specific obligations for lease renewal - although if the land is leased again, the tenant has first right of refusal. Pre-emptive rights to buy are granted, but only for leases of at least three years and then only if other close relatives or business partners of the landowner are not interested. However, a maximum lease area of 300ha was set (2500ha for collective or corporate entities). The same limits applied to owned land, with collective and corporate entities being forbidden to buy farmland. Pre-emptive rights to buy extend to other local farmers.

In addition, the purchase of agricultural land by foreign interests was forbidden. On accession to the EU, a grace period of seven years (subsequently extended to ten) to remove the ban with respect to EU nationals was granted. Notwithstanding intense domestic debate (reflecting, in part, memories of the loss of territory in the 1920s), the ban will be lifted from 2014 for EU nationals. Although un-quantified, it is believed that constraints on foreign ownership have been circumvented in some areas close to borders with neighbouring countries through the use of "pocket contracts" (i.e. kept hidden in a pocket) which give de facto ownership to foreign interests whilst maintaining apparent de jure Hungarian ownership. Relaxation of constraints on ownership by EU nationals may lead to a rapid conversion of such arrangements into legal ownership.

However, foreign buyers will still have to comply with eligibility criteria which include agricultural qualifications and at least three years working in agriculture in Hungary plus a commitment to farm the land (i.e. not sell or lease it) for five years. Corporate purchases are still forbidden and there will be limits on the area that can be purchased - typically 300ha. Up to 1200ha may be leased, less if some land is already owned. Eligibility (for purchases or leases) will be judged by a committee of local stakeholders. Indeed, the criteria apply to Hungarian as well as foreign buyers - meaning that land markets will remain tightly controlled. Local farmers have pre-emption rights with respect to land offered for sale or lease (provided that no family, close relatives or business partners take precedence).

Recognition of the need for land consolidation to improve productive efficiency, and pilot studies showing consolidation to be hampered by insufficient financial resources and a lack of technical and organizational competency, prompted establishment of a National Land Fund (in 2001) and the Hungarian State Holding Company (in 2007). These have powers to facilitate, via local land committees, consolidation through voluntary exchange but also to use compulsory purchase as a means of configuring land holdings to better suit agricultural, infrastructure or development purposes. However, pending completion of privation programmes, consolidation has not been promoted actively to-date, although this may change with the updating of the Land Act and relaxation of foreign ownership constraints.

Taxation

Hungary has a progressive tax system for both citizens (18 - 36%) and businesses (10 - 19%), but no special provisions are applied to agriculture or rental income from land (unless on a lease of at least five years, in which case rental income is exempt from taxation). That is, farms benefit from the same range of exemptions and allowances available to all businesses and farm income is treated the same as any other income source. Land sales are subject to a transfer tax (2%) as well as a possible capital gains tax (19%) whilst inheritance and gift taxes (5 - 40%) may be applicable depending on the amount involved and the family relationship between parties. Farmland is also subject to local property taxation.

New Entrants

Data on new entrants are not available, but the relatively low price of farmland and abundance of rented land suggest that land availability may not necessarily be an issue. Nevertheless, Hungary has made use of provisions under Pillar II to support new entrants via capital grants and subsidised loans. This is intended to continue for the 2014-20 period, at least partly in response to possible greater bidding power from incumbent farmers and (especially) from foreign investors.

Discussion

The privatisation programme of the early 1990s led to widespread ownership of farmland, but the resulting fragmentation of both farms and farming assets had a negative effect on efficiency. The downward pressure of this on overall output and farm incomes was exacerbated by reductions in agricultural support levels and exposure to competition with other EU countries. However, notwithstanding significant transaction costs of multiple leases, widespread renting facilitates the operation of larger farming units and structural adjustment is occurring as land is amalgamated through sales (although these remain relatively thin). Relaxation of controls on foreign ownership of land is anticipated to increase capital investment, but land prices and rents are likely to increase.

Information Sources

Biró, Sz., Wasilewski, A. and Tóth, O. (2014): Land Tenure, in: N. Potori and A. Kowaslski (eds), Structural Changes in Polish And Hungarian Agriculture Since EU Accession: Lessons Learned for the Design of Agricultural Policies. Budapest: AKI.

Biró, Sz., Research Institute for Agricultural Economics, Budapest (pers. comm., 2014)

Burger, A. (2009) The Situation of Hungarian Agriculture. http://ageconsearch.umn.edu/bitstream/90651/2/THE%20SITUATION%20OF%20HUNGARIAN%20AGRICULTURE.pdf

Eurostat (2013) Farm structure in Hungary. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_Hungary

Flachne, Sz. (2007) Land consolidation in Hungary : lessons learned from the Bereg FAO pilot project. www.fao.org/fileadmin/user_upload/Europe/documents/Events_2007/Land2007/Hungary.pdf+andcd=6andhl=enandct=clnkandgl=uk

Ministry of Rural Development (pers. comm., 2014)

Potori, N., Kovács, M. and Vásáry, V. (2013) The Common Agricultural Policy 2014-2020: an impact assessment of the new system of direct payments in Hungary. Studies in Agricultural Economics 115, 118-123 http://ageconsearch.umn.edu/bitstream/161079/2/1318-potori_v3.pdf

Nyiri, J. (2009) The present state of Hungarian land tenure and land consolidation. University of West-Hungary. http://www.clge.eu/documents/events/128/13_03_22_Presentation_The%20Present%20State%20of%20Hungarian%20Land%20Tenure%20and%20Land%20Consolidation.pdf

Official Portal of the Hungarian Land Administration (2014) Act LV of 1994 (Land Act) http://en.foldhivatal.hu/images/english/act/act_arableland_2010.pdf

Osskó, A. (1996) Development of the land management framework in Hungary. F I G Commission 7, Annual Meeting 1996,Budapest, Hungary. One Day International Conference, 18 June 1996 "Land Management in the Process of Transition"http://www.fig.net/commission7/reports/events/bud96/bud964.htm

Ireland

Context

Ireland gained independence from the UK in 1922, and joined the EU alongside the UK in 1973. Although there are 34 local authorities (currently due for reform) with some planning powers, the Dublin government retains responsibility for agricultural, tenure and taxation matters. There are no specific courts connected with agricultural land, although these did exist in earlier periods.

Prior to the 1980s, agriculture was a significant economic sector but declined in relative terms as other parts of the economy grew. The financial crisis following the banking collapse in 2007/8 reversed this slightly as the economy shrank, with agriculture currently representing around 2.5% of GDP. Although the number of farms is decreasing slowly as the average size increases (currently 33ha), there remain around 140k holdings and the utilised agricultural area of around 4.2m ha covers about 64% of the country.

Approximately 80% of the agricultural area is devoted to grass and a further 11% is rough grazing - with over 90% of all farms having some livestock. Beef and dairy herds dominate, with 6.5m cattle contributing significantly to overall output value (much of exported). Farm size varies considerably, with 39% smaller than 20ha but 4% bigger than 100ha. Farms in the 20-100ha category account for around 70% of the total area. Over 97% of farms are sole-proprietorships, with other forms of ownership being rare, and largely confined to more profitable dairy farms; 55% of holders are older than 55, 5% younger than 35. Family labour accounts for 93% of the workforce. Farm incomes vary significantly across farm types and sizes (and over time) but average net value added (including Pillar I direct Payments) in 2008 was around €25k (£21k) or €20k (£16k) per Agricultural Work Unit. Part-time farming is common, with around 1/3 of holdings requiring less than one annual work unit of labour and 43% with some other gainful activity. Land values are high at around €25k/ha (£21k) on average, although this is more than 50% lower than their peak immediately prior to the financial crisis - indicating the extent to which non-farming interests invested in rural land. Agricultural rents fluctuate, reflecting variation in agricultural profitability over time and regionally.

Official data on lease types and areas of rented land are not available. However, it is estimated that around 11% of land is rented - mostly on unregulated seasonal lets (conacre), often agreed orally. Longer leases are extremely rare[34] and, although in written form, are also unregulated. The dominance of ownership largely reflects an historical legacy from the end of the 19th century/early 20th century when the UK Treasury offered favourable mortgage terms to tenants wishing to buy their farms and then the Irish Government (post-1922) promoted State purchase of land for division and reallocation via mortgages to tenants (a process that only ended in 1992, when the Land Commission was dissolved). Given that mortgage repayments were significantly lower than most rents, over time, most tenants pursued this option. Ingrained cultural preferences for owner occupation may be being reinforced by the Single Farm Payment encouraging continued occupation rather than leasing-out.

Agricultural Policy

The CAP dictates agricultural policy in Ireland. The historic model was adopted on a national basis with no regionalisation or intention to move towards a flat-rate system, although the latter will now have to be adopted during the 2014-20 period. No coupled payments were retained, despite pressure from some stakeholders for partial coupling of beef payments. However, a suckler cow payment was subsequently introduced.

Tenure control measures

Historically, a succession of Land Acts from 1881 to 2005 sanctioned significant state intervention in land markets. Notably, this included establishment of the Irish Land Commission and the provision of soft loans to tenants. The Commission was dissolved in 1992 and provisions under the 1965 Land Act for controls on leases were repealed in 2005. Under the controls, no land could be let, sublet or subdivided without formal approval (which typically had attached conditions) - a response to problems of land fragmentation arising from the splitting of land under inheritance rules.

By contrast, agricultural leases are now subject to market forces as a private matter between the lessor and lessee. Regulation is essentially limited to conveyancing law and the normal dispute resolution procedures, including the courts, although there are some generic landlord-tenant regulations.

Taxation

Although farm income was exempt from income tax until 1974, it is now taxed as any other business income. For the minority of incorporated farms, this equates to 12.5% Corporation Tax but for the majority of sole-traders it is 20% to 40%. In addition to general allowances, there are some specific reliefs available for agriculture. For example, capital gain allowances for increased livestock valuations - 100% for young farmers, 50% for partnerships, 25% otherwise.

Income from land rented-out is taxed as any other income, but has a separate code (Case V) since it cannot be offset against capital expenditure. In an attempt to encourage longer leases, tax exemptions increase with length of lease. For example, the first €12,000 (£10k) of annual leasing income is exempt where the lease is for a term of at least five years, €15,000 (£12k) where the lease is for a term of at least seven years and €20,000 (£16k) where the lease is for a term of at least ten years. Leases between immediate relatives do not qualify and the lessor must be aged 40 years or over.

There is no additional tax levied on land ownership in Ireland, but land transfers are subject to Capital Gains Tax (CGT), Stamp Duty and inheritance tax. However various reliefs are available on these taxes, with some enhancements for transfers to young farmers.

For example, "retirement relief" is available on CGT for farmers aged 55 or over if they have owned and farmed land for at least ten years and transfer ownership to somebody else to farm. Full relief is available to farmers aged 55-65 for transfers to children, up to a limit of €3m (£2.5m, it was previously uncapped). If land is subsequently sold within six years, claw-back charges apply. Relief for transfers not to children is capped at €750k (£600k) for famers aged 55-65, but €500k (£400k) for those aged over 65. Although referred to as retirement relief, a farmer may continue to farm other land - allowing for a gradual withdrawal from farming.

In addition, within-family transfers of farmland have long been subject to lower stamp duty charges than residential property. Currently, consanguinity relief reduces stamp duty to 1%. In addition, young farmers are exempt from stamp duty, provided that they satisfy educational and age criteria.

Finally, agricultural Relief has been available for gift and inheritance tax since the introduction of a Capital Acquisitions Tax in 1976. The relief reduces the market value of agricultural property by 90% with this lower 'agricultural value' used for tax purposes. In general, the relief applies provided the beneficiary qualifies as a 'farmer' - an individual for whom at least 80% of their assets (after taking a gift or inheritance) consist of agricultural property on the valuation date of the gift or the inheritance. An equivalent relief is available to other (non-farm) businesses on succession.

New Entrants

Data on the number of new entrants to agriculture are not available. Nevertheless, given the high price of farmland and the lack of long-term leases, it is generally accepted that the number of new entrants is likely to be low - as reflected in the age profile of farmers. Inheritance is the main route for new entrants and various measures have been tried to encourage earlier inter-generational transfers. However, previous instances of early retirement schemes and installation grants proved ineffective and were withdrawn. Current support measures focus on tax breaks (described above, but not yet evaluated - partly due to some being relatively new), but active consideration is being given to targeted installation aid under the next Rural Development Plan.

In particular, collaborative farming approaches (i.e. multiple generations working the same farm) are being encouraged as a means of facilitating phased inter-generational transfers. This includes promotion of (e.g.) partnerships and co-operative business structures, but also the provision of information about (e.g.) tax reliefs, eligibility for the SFP and pension planning.

Discussion

An historical legacy has resulted in Irish farmland being predominately owner-occupied. Government intervention throughout the 20th century favoured owner-occupation, and leases were tightly controlled. More recently, leases have been deregulated but seasonal lets remain the dominant form of leasing. Rapid growth in the Irish economy contributed to increasing farmland prices as non-farm investors purchased rural land. Although prices have fallen, land remains expensive and inheritance is the usual route of entry for new farmers. Structural change is happening, but slowly with the availability of land being constrained both for new entrants and existing farmers wishing to expand. Following the failure of previous early retirement schemes and capital grants for new entrants, various tax breaks are currently used to encourage earlier inter-generational transfers - although awareness of tax breaks appears patchy and leasing is viewed with suspicion by many farmers. More innovative, collaborative approaches are being considered.

Information Sources

Bogue, P. (2013) Land Mobility and Succession in Ireland; Report by Broadmore Research for Macra na Feirme

http://www.ifa.ie/wp-content/uploads/2014/01/Land-Mobility-and-Succession-in-Ireland-Report.pdf

Commission of European Communities (1982) Factors influencing ownership, tenancy, mobility and use of farmland in the member states of the European Community, CEC, Luxembourg.

Department of Agriculture, Food and the Marine (pers. comm., 2014)

Department of Agriculture, Food and the Marine http://www.cso.ie/en/releasesandpublications/agricultureandfishing/censusofagriculture2010-finalresults/

Department of Agriculture, Food and the Marine http://www.agriculture.gov.ie/media/migration/publications/2013/ARODocumentFinalPDF2013050613.pdf

Donnellan, T., Hanrahan, K. and Hennessy, T. (2008) Country report: Ireland. Study on the Functioning of Land Markets in the EU member states under the Influence of Measures applied under the Common Agricultural Policy. Rural Economy Research Centre, Teagasc.

Eurostat (2013) Farm structure in Ireland. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_Ireland

Irish Tax and Customs (2014) A Revenue Guide to Rental Income - IT 70. http://www.revenue.ie/en/tax/it/leaflets/it70.html#section9

Land Mobility Service (2014) http://landmobility.ie/

Ravenscroft, N., Gibbard, R. and Markwell, S. (1998a) Private Sector Tenancy Arrangements Volumes I and 2 Literature Reviews. Draft Report to the Food and Agriculture Organisation of the United Nations http://www.fao.org/sd/ltdirect/ltre0007.htm

Savills (2011) Irish Farmland Market http://www.savills.ie/documents/farmland-update-lr.pdf

Perrier-Cornet, P., Blanc, M., Cavailhes, J., Dauce, P., Le Hy, A. (1991) Farm take-over and farm entrance within the EEC Internal to European Commission, ECSC-EEC-EAEC, Brussels.

Teagasc (2104) Agriculture in Ireland http://www.teagasc.ie/agrifood/

Netherlands

Context

The Netherlands is a small but densely populated country with three levels of government: central, twelve provinces and around 400 municipalities. Central government retains responsibility for agricultural, tenure and taxation matters, but provinces and municipalities lead on local land use planning- which includes agriculture and nature conservation. Special courts exist for resolving tenancy disputes.

Dutch agriculture is highly productive, underpinning significant agri-food exports and accounting directly for around 2.8% of GDP and 2% of employment. The utilised agricultural area of around 1.9m ha covers about 60% of the country, although this is declining slowly over time through conversion to nature conservation, water management and (especially) urban development. Indeed urbanisation pressure largely accounts for land prices in many regions being extremely high at around €40k/ha (£33k) currently. However, prices can be volatile and fell by 17% between 2001 and 2005 having doubled in the previous ten years. Moreover, there are some regional variations. Approximately 41% of farmland is rented, a slight increase on the position in the 1990s but still lower than in the post-war period.

Approximately 40% of the agricultural area is devoted to grass with perhaps 2% for permanent crops, leaving arable as the dominant agricultural land use. This is a reversal of the position in the 1970s and 1980s. However, specialist dairy farms account for almost 1/3 of farms, as do other grazing livestock whilst indoor pigs and poultry account for a further 10%. Unsurprisingly, there are significant water pollution pressures from intensive livestock production, and manure disposal is a challenge.

Farm size varies considerably, with 58% being smaller than 20ha and 2.6% bigger than 100ha, but the average farm size is increasing slowly over time (currently 25ha) as the number of farm holdings reduces (around 77k in 2007, down from 82k in 2005). Around 93% of farms are sole-proprietorships, with incorporated firms representing 5% and partnerships around 2%. Family labour accounts for around 60% of the workforce in terms FTEs; 44% of holders are older than 55, 4% younger than 35.

Farm incomes vary significantly across farm types and sizes (and over time) but average net value added (including Pillar I direct Payments) in 2008 was around €112k (£92k) or €42k (£34k) per Agricultural Work Unit. Part-time farming is common, with around 1/4 of holdings requiring less than one annual work unit of labour and 27% with some other gainful activity.

Agricultural Policy

The CAP dictates agricultural policy in the Netherlands. The historic model was adopted on a national basis with no regionalisation, but with clear expectations that it would eventually move to a flat-rate-system (as now obligated for the 2014-20 period). A shift to a flat-rate system is expected to favour arable farms over livestock ones. Coupled payments were retained within the beef sector (suckler cow premium and slaughter premium) plus the specialised starch-potato sector.

Tenure control measures

Legislation to encourage agricultural development through consolidation and productivity improvements dates from at least the 1920s. However, the 1985 Land Development Act extended policy goals to include non-agricultural uses of rural land (e.g. conservation, recreation, housing). Consolidation (or non-agricultural development) can proceed through voluntary or compulsory transfer of land, with displaced owners and tenants being compensated by the State with money or alternative land - including farms in other regions.

Under the 1958 Agricultural Lease Act, leases were heavily regulated. For example, any form of rental contract (e.g. oral, written, short-term etc.) was deemed to be covered by the Act and had to be approved by a Land Control Board. All leases were de jure for either 6 or 12 years, renewal was generally enforced and rents were kept artificially low. Farmland prices were also strictly controlled (indeed price increases were forbidden for some years) by Boards until 1963.

Concerns that the 1958 Act was reducing the amount of rented land led to liberalisation of the legislation in 1995 and (given a continuing decline in rented area) again in 2007. In particular, the basis for regulated rents was altered (leading to rent rises) and unregulated leases of less than 6 years were permitted. Landlords favour such leases and they are increasing in usage (22k ha in 2008, 59k ha in 2012), contributing to an increase in the rented area from 460k ha in 2007 to around 500k ha in 2012. However, regulated tenancies still account for the bulk of rented land. Tenure legislation is, once again, currently being reviewed (on a similar time-line to the Scottish exercise).

Regulated rents are set though detailed analysis of farming conditions in each of 14 regions categorised on the basis of agricultural characteristics (e.g. soil, drainage, infrastructure, type of farming). A sample of farms is visited and detailed financial data collected to allow the agricultural economic institute (LEI) to calculate a maximum rent for each region, sufficient to provide an adequate return to the landlord whilst leaving sufficient income for tenants. For 2013, regulated rents were €373 to €823 (£300 to £675; higher for horticulture). Although such maximum rents apply only to regulated tenancies, the market seems to use them as an objective benchmark for setting rents for unregulated tenancies too.

Taxation

Farmers and farm businesses are subject to the same taxes as other Dutch citizens and businesses. That is, there are no concessional rates or exemptions specifically for farm income or for agricultural land. However, generic flexibilities to manage cash flows by offsetting losses against income tax are available and around half of farms use these to reduce tax liabilities. Income from land rented-out is treated similarly.

Similarly, all businesses - whether agricultural or not - have exemptions from inheritance tax (up to €1m (£800k), plus lower rates on amounts in excess of this) to facilitate businesses succession. To qualify, the donor farmer must have been farming for a year prior to transferring the land and the recipient must farm the land for at least five years. Purchases of land are subject to a 6% transaction tax (i.e. stamp duty), unless the land remains in agricultural use for at least ten years. Business assets (including farmland) are also exempt from annual wealth tax of 1.2%, levied through income tax (there is no capital gain tax).

New Entrants

Data on the number of new entrants to agriculture are not readily available. Nevertheless, given the high price of farmland and the lack of long-term leases, it is generally accepted that the number of new entrants is likely to be too low - as reflected in the age profile of farmers. Inheritance is the main route for new entrants, either as owners or as tenants.

Beyond providing education and training, specific policy measures have not generally been adopted to aid new entrants. However, there is a tradition of formal contractual succession between generations on a farm via "maatschap" (partnership) associations. Essentially these provide a phased transition, over ten or more years, for a young farmer to gradually take over from a parent. This provides an opportunity for joint working but also staggered purchasing of land and assets from the parent - with the parent using the proceeds to fund their retirement (sale and leaseback through the State was offered as an alternative way of releasing retirement funds in the 1980s, but was seldom used). Notwithstanding that land is typically transferred below open market values, new entrants still accumulate significant debts under this process - although it can possibly be funded in a tax efficient manner with parental loans or venture capital. Moreover, a farm has to be able to generate sufficient income (or permit off-farm working) to support two partners for the duration of the maatschap. However, since over 3/4 of family transfers are through this process, it clearly offers some advantages over the alternatives.

Discussion

Despite a relatively small average size, Dutch farms are highly productive. This reflects highly capitalised, intensive production systems. For example, many dairy farms deploy automated feeding and robotic milking systems. To an extent, this intensification has offset constraints on expanding farms through acquiring more land, maintaining farm incomes through higher output but also allowing for off-farm activities. Nevertheless, acknowledgement of the need to improve the availability of land to new entrants and to existing farmers wishing to expand has prompted several revisions to tenancy legislation in an attempt to increase the area of land made available for leasing. Urban pressures suggest that land prices will continue to be detached from agricultural incomes, implying that leasing land may be the main route for structural change.

Information Sources

Brussaard, W. (1992) Agrarian Law in the Netherlands. Chapter 7 in (p114-133) in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford. 280pp

Commission of European Communities (1982) Factors influencing ownership, tenancy, mobility and use of farmland in the member states of the European Community, CEC, Luxembourg.

Eichholtz, P., Lindenthal, T. and Pennings, J. (2008) Country report: Netherlands. Study on the Functioning of Land Markets in the EU member states under the Influence of Measures applied under the Common Agricultural Policy. Maastricht University, Faculty of Economics and Business Administration.

Eurostat (2013) Farm structure in Netherlands. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_the_Netherlands

Ministry of Economic Affairs (pers. comm. 2014)

Ravenscroft, N., Gibbard, R. and Markwell, S. (1998) Private Sector Tenancy Arrangements Volumes I and 2 Literature Reviews. Draft Report to the Food and Agriculture Organisation of the United Nations http://www.fao.org/sd/ltdirect/ltre0007.htm

Perrier-Cornet, P., Blanc, M., Cavailhes, J., Dauce, P., Le Hy, A. (1991) Farm take-over and farm entrance within the EEC Internal to European Commission, ECSC-EEC-EAEC, Brussels.

van der Veen, H.B., van Bommel, K.H.M. and Venema, G.S. (2002) Family farm transfer in Europe

A focus on the financial and fiscal facilities in six European countries. Agricultural Economics Research Institute (LEI), The Hague. http://edepot.wur.nl/40193

New Zealand

Context

New Zealand comprises two main (plus numerous other smaller) islands lying in the remote south west of the Pacific. It is a former British colony and underwent radical economic liberalisation during the 1980s. Central government retains most powers, but there are 11 regional councils with particular responsibilities for environmental regulation plus 67 territorial authorities responsible for local public services. There are no longer any specific land courts.

Although long-settled by Polynesians, European settlement of New Zealand began towards the end of the 18th Century with British sovereignty declared in 1840 following the Treaty of Waitangi. This secured pre-emption rights for the Crown over all land and much was subsequently purchased. Although Maroi land rights were supposedly to be respected, rising demand for land led to conflict and further Maori land was confiscated during the 1860s.

The historical legacy of this is three forms of land tenure; Maroi land held under traditional title or treated as such; Crown land managed by the State or leased-out; and freehold land, representing land granted or sold to private interests by the Crown at some point since 1840. Most Crown land is used for forestry or conservation purposes, but some is leased for agricultural use. Most (c.80%) agricultural land is farmed freehold, with Crown leases accounting for the majority (c.15/20ths) of rented land (notably several hundred leases for extensive upland pastoral land). Although displaying some volatility, average farmland prices more than doubled in the decade to 2012 and are currently around NZ$22k/ha £11k/ha) for dairying land, NZ$16k/ha (£8k/ha) for other grazing land. Rental values have also risen, but less steeply to NZ$1k/ha (£500/ha) for dairy land.

Agriculture is an important part of the economy, underpinning significant agri-food exports and accounting directly for 4% of GDP. Excluding on-farm woodland and bush, the total utilised agricultural area of 11.2m ha covers 42% of the country, with grassland accounting for 7.9m ha and other grazing land accounting for a further 2.7m ha. Of a total of 58k farms, c.21% are specialist dairy and c.45% mainly sheep and beef. Farm sizes vary, with 36% being smaller than 20ha but 39% over 100ha. Average farm size (currently 248ha) is increasing as the number of farms declines.

Official data on the demographic and business structure of farmers and farms (including tenure) are not available. However, industry sources suggest that reliance on family labour is high (c.80%), the age profile is skewed towards older farmers (3% under 35, 44% over 55) and sole-proprietorships are less common than partnerships (30%) or family companies (38%) in dairying but dominant (77%) amongst beef and sheep farms. Profitability is variable across farm types and sizes, and over time. In 2012, dairy profits were around NZ$1400/ha (£700/ha), beef and sheep NZ$200/ha (£100/ha). Debt levels are slowly rising and business structures are becoming more complex.

Agricultural Policy

Although granted preferential access to the UK market following Britain's accession to the EU in 1973, New Zealand agriculture was adversely affected by the loss of a major traditional export market. Attempts to compensate for this through various domestic support measures proved to be unaffordable and were abandoned during the 1980s as part of economy-wide reforms to de-regulate and adopt free-market approaches in all sectors. As a result, New Zealand agriculture currently receives virtually no direct government support. However, various government agencies and farmer-led bodies fund and promote innovation, competitiveness and trade whilst a high-degree of concentration of supply control through a few large co-operatives has been permitted (e.g. Fonterra has over 10.5k farm members and accounts for approaching 1/3 of global dairy exports). Government funding is also available in the event of disease outbreaks or other natural disasters. Pending agreement on measuring GHG emissions, plans to include agriculture in an economy-wide emissions trading scheme have been delayed until 2015.

Tenure control measures

Early allocation by the Crown of both leasehold and freehold agricultural land during the 19th Century led to the establishment of large estates employing agricultural labour rather than a pattern of smaller, family farms. In the 1890s, legislation was passed to combat this trend through a policy of "closer settlement", overseen by bodies such as a Land Settlement Board and a Land Valuation Tribunal. For example, smaller land purchases for family-farms were facilitated through favourable financing for Crown tenants and the compulsory purchase and sub-division of land for re-allocation, together with upper limits on the total area that an individual could hold. Leasehold arrangements were also promoted as a means of allocating scarce private capital to livestock rather than land.

Policies to "...foster the ownership of land by the greatest number of independent farmers..." continued throughout the 20th Century, most obviously through the 1948 Land Act and the 1952 Land Settlement Promotion and Acquisition Act 1952. The latter imposed bureaucratic oversight on all leases or sales of land of more than 2ha, with decision criteria for consent weighted against excessive aggregation of land. Although a 1982 review of the Act suggested that such constraints were largely ineffective since they could be avoided by the formation of farming companies, family farms remained dominant. The Act also constrained foreign ownership and leasing of farmland, again requiring all transfers to be subject to bureaucratic scrutiny. The Act was repealed in 1995, marking the end of constraints on land aggregation, but constraints on foreign ownership continued under more general legislation relating to foreign investment in New Zealand - indeed recent approval of overseas investment in large dairying enterprises has renewed debates about this.

As part of the wholesale economic reforms of the 1980s, Crown land defined under the 1948 Land Act was further delineated into unproductive (e.g. for conservation) and productive land, with the latter being managed more explicitly on a commercial basis by Crown bodies. This led to higher rents, but also to a renewed emphasis on promoting the sale of leasehold land to its tenants. Under the 1948 Act, such land was typically let on a 33-year perpetually-renewable lease with (effectively) an absolute right to buy.

However, under the 1948 Act, ecologically fragile "pastoral" Crown land used predominantly for extensive grazing (mainly in the uplands of the South Island) was let on perpetually renewable leases without a right to buy. This inconsistency was addressed by the Crown Pastoral Land Act 1998 which introduced a formal review process to consider converting some pastoral leaseholds to freeholds. The review process has to balance farming and environmental interests, and conversion may be conditional on some land being transferred to conservation usage. To-date, very few reviews have been completed, several have been controversial and not all have led to conversion to freehold status. More recently, in response to concerns about rent increases outpacing farm income growth, the basis for pastoral rent calculations has been adjusted from 1.5% - 2% of land value to a system based on the carrying capacity of the land.

Given the historical dominance of Crown leasehold land and freehold private land, there is no tradition of regulation of private rental arrangements beyond generic contract law. Hence there are no requirements relating to private lease types, duration, renewal or pre-emption, nor for rent levels or reviews. Commercial guidance is available and some commercial entities (e.g. Fonterra) will act as intermediaries for agreeing terms and conditions and even (e.g.) arranging payment for rent from a lessee's milk cheque whilst others will buy land chosen by a tenant to then rent to that tenant.

All land tenure is subject to environmental regulation through the Resource Management Act 1991 which introduced explicit consideration of sustainability into land use policy. For example, with respect to water pollution and biodiversity impacts. The Act superseded and consolidated a large number of separate Acts - including those on Town and Country Planning, Water and Soil Conservation and Soil Conservation and Rivers Control - but also attempted to alleviate conflicts of interest within any given individual Crown body by separating responsibility for different aspects to different bodies, most notably with the creation of the Department of Conservation.

Taxation

New Zealand has a relatively simple tax regime. For example, there are no liabilities for capital gains or inheritance tax. Agriculture is generally treated equally with other sectors, although there are some specific livestock valuation allowances, and farm enrolment in the GHG emissions trading scheme has been postponed until 2015. Property taxes vary regionally and may be applied to farmland.

New Entrants

Notwithstanding the lack of official data on farm demographics, there is awareness of the need to promote business succession planning and to ease new entrants into agriculture. This is most evident in the dairy sector, where sharemilking has been commonplace since the late 19th century. Although the precise allocation of expenditure, revenue and management responsibility between the farm owner and the sharemilker can vary, this is essentially a system for existing farmers to gradually exit from active farming yet retain an income from their farm whilst new entrants gain experience and accumulate capital. Currently, around 1/3 of herds are managed in this way - approximately the same proportion as in previous decades. However, changing market pressures (especially rising land prices) mean that traditional sharemilking is now competing with other entry routes, including hired farm workers, professional farm managers, equity partnerships and contract farming. There are no government funded support measures for new entrants.

Discussion

The historical legacy of Crown ownership of most land, controls on private ownership and an explicit preference for family farms have created and maintained a farming structure dominated by owner-occupation, with renting largely restricted to Crown leases. However, market pressures for farm expansion are leading to an increase in average farm size and a greater diversity of management structures.

Information sources:

Allen, J. and Waugh, N. (2012) Ensuring a viable progression path in the dairy industry. AgFirst and Federated Farmers.

DairyNZ (pers. comm., 2014) and (2013) Economic survey 2011-12. http://www.dairynz.co.nz/page/pageid/2145871201/DairyNZ_Economic_Survey

BeefandLambNZ (pers. comm., 2014) and (2012) Domestic Trends and Measuring Progress. http://www.beeflambnz.com/Documents/Information/Red%20meat%20sector%20conference.pdf

Kalderimi, D. (2011) Regulating Foreign Direct Investment in New Zealand - Further Analysis. Regulatory Toolkit Project, Faculty of Law, Victoria University of Wellington. http://www.regulatorytoolkit.ac.nz/resources/papers/book-2/chapter-3-regulating-foreign-direct-investment-in-new-zealand-further-analysis

Lattimore, R. and Hawke, G. (undated) Visionaries, Farmers and Markets: An Economic History of New Zealand Agriculture. Lincoln University. http://ageconsearch.umn.edu/bitstream/123830/2/LATTIMOR.pdf

Land Information New Zealand (pers. comm., 2014) see also Crown Pastoral Rents http://www.linz.govt.nz/crown-property/pastoral-land-tenure-review/crown-pastoral-lease-rent

Lucas, P.H.C. (1966) Land Settlement. Department of Lands and Survey, Wellington. http://www.teara.govt.nz/en/1966/land-settlement/page-8

Ministry for Primary Industries (pers. comm., 2014) see also http://www.mpi.govt.nz/agriculture/

Statistics New Zealand (pers. comm., 2014) see also 2012 Agricultural Census tables. http://www.stats.govt.nz/browse_for_stats/industry_sectors/agriculture-horticulture-forestry/2012-agricultural-census-tables.aspx

Shi, S. and McCarthy, I. (2013) Pricing of New Zealand dairy farmland, Journal of Property Investment and Finance, Vol. 31 Iss: 2, pp.118 - 134

Slatter, M. and Round, D. (1992) Agrarian Law in New Zealand. Chapter 13 in (p234-253) in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford.

Taylor, G. (1996) A Review of Sharemilking: 1972-1996. Ministry of Agriculture, Wellington. http://maxa.maf.govt.nz/mafnet/rural-nz/profitability-and-economics/trends/sharemilking-review/shrmlk01.htm#E11E1

Tipples, R. and Wilson, J. (2005) The Dairy Farming Population and Migration. Lincoln University. http://www.ruralemploymentrelations.org.nz/Documents/Rural_Employment_Relations/Dairy_Farming_Population_and_Migrations.pdf

van Bysterveldt, A. (2013) Large Dairy Business Project. DairyNZ. http://www.onefarm.ac.nz/assets/Uploads/Large-Dairy-Business-Project-Adrian-van-Bysterveldt.pdf

Norway

Context

Norway occupies the western part of the Scandinavian peninsula, stretching from about the same latitude as Wick to within the Arctic circle. Land use is dominated by mountainous and afforested landscapes with only 3% used for agricultural purposes. Although there are some specialised arable farms, livestock farms dominate - especially sheep and cattle plus dairying.

The current utilised agricultural area (UAA) is about 1m ha (55% arable, 45% grazing), effectively the same as in the year 2000. Similarly, the total number of livestock units has remained relatively constant at around 1.2m. However, the number of farms declined by over 1/3 during the same period to around 47k, with the bulk of losses being smaller farms. Unsurprisingly, the average farm size increased - from 14.7ha to 21.6ha. As in many other countries, despite being outnumbered by smaller farms, a high proportion of land and of output is accounted for by larger farms. Almost all farms are run under sole-proprietorship, with partnerships accounting for perhaps 6% and limited companies, financial institutions and state ownership accounting for less than 1%. Family labour accounts for 80% of the workforce; 8% of farmers are younger than 35, 36% older than 55. Farm incomes vary significantly across farm types and sizes (and over time) and non-farm income is important: average gross farm incomes in 2011 were around NOK 511k (€61k) of which agriculture contributed NOK 154k (€18.5k).

Historically, relatively little farmland was rented in Norway. For example, in 1959, 87% of all farm holdings were wholly owned and rental land accounted for only 12% of all farmland. However, the rapid decline in the number of farms has been accompanied by a sharp increase in renting, such that only 35% of farms are now wholly owned and rented land accounts for 42% of farmland (varying from 32% to 59% regionally). Although some (c.6%) farms are wholly rented, the relative abundance of these has not changed and the increase in renting is reflected instead by the rise of mixed tenure farms as owner-occupiers expand through renting. This expansion is also reflected by increases in the total number of leases in place (90k in 1999, 109k in 2010) and the average number of leases per farm (2.54 in 1999, 3.6 in 2010). Average rents range from £32/ha to £1600/ha (less on rough grazing, more for horticulture), but land prices are not recorded due to most transfers being within families and other transfer prices being regulated.

Agricultural policy

As with many developed countries, Norway's agricultural policy during the second half of the 20th century focused on improving productivity and food production plus raising farm incomes. Policy measures to attain such objectives have included input subsidies, price guarantees and production quotas, typically with more generous support offered to smaller farms. More recently, environmental and wider rural development objectives have been included.

Norway remains outwith the European Union, but Norwegian agriculture is covered by Article 19 of the European Economic Area (EEA) treaty and the Agreement on Agriculture under the World Trade Organisation (WTO). Both of these have seen a gradual liberalisation of trade in selected agricultural outputs and (more so) processed food products, and domestic policy places an increasing emphasis on deregulation and market orientation for commodity production - although livestock headage payments are still in place (with quota limits) and arable land currently receives an area payment.

Tenure control measures

All Norwegian law derives from the Constitution of 1814 and the Norwegian Storting (Parliament) has supreme budgetary and legislative powers, with Ministers responsible for policy proposals and enforcement. Although the Ministry of Agriculture oversees agricultural policy, various other Ministries and parts of Local Government also have influence over tenure-related legislation. Municipalities (of which there are 448, within 18 Counties) are responsible for the procedural handling of tenure cases, through Municipal Land Boards and/or County Agricultural Boards comprising a mix of public officials and local stakeholders.

The Allodial Act of 1974 (but dating back centuries) conveys preferred buyer status on family members whenever farmland is offered for sale. That is, if any family member wishes to buy such land, their pre-emptive interest overrides that of any non-family buyer. There is no absolute right to buy per se, but if allodial rights have not been observed, the rightful family member can force the illegal owner to sell to them. Notwithstanding that definitions of "family" have been gradually tightened and that land of less than 2.5ha is exempt, 59% of all land transfers are still made within-family under the Allodial Act. Ownership of land for 20 years confers Allodial rights.

The Concession Act of 2003 (and earlier versions) applies to all real estate, including farmland, and essentially precludes acquisition of property without approval by the King - as delegated through the Ministry of Agriculture. Approval, or a "concession", is typically conditional on, for example, new owners not being a company plus residing on farmland and managing it for at least five years. If land is sold without a concession, the state may take (temporary) ownership for reallocation. Although possibly now being relaxed, sale prices are also regulated under the Concession Act (to dampen price rises). Holders of Allodial rights do not need to obtain a concession.

The Agricultural Act of 1995 (evolving from the Land Act of 1955) promotes the use of land resources to benefit society, emphasising policy goals such as raising agricultural productivity, maintaining rural communities and protecting the environment. The Act places an obligation on landowners to actively manage their land, either themselves or through leasing to another farmer. It also generally precludes sub-division of farms to sell parcels of land - although exceptions can be made for farmers wishing to sell their land but remain in the farmhouse when retired.

The Act of Tenancy of 1965 lays down basic leasing rules, with effectively no regulation of leases of less than 10 years for bare land. Leases of longer duration have to be approved by the State. Leasing a farm with buildings requires a written lease and a cash rent, but the rent level is not regulated and need not be indexed. However, the Municipal Board can stipulate an appropriate rent if one cannot be agreed privately

The Land Consolidation Act of 1979 (originally enacted in 1821) seeks to facilitate the pooling, reallocation and redistribution of land to improve the operational efficiency of holdings, and can do so either through aiding co-operation amongst individual farmers and/or through (temporary) state acquisition of land (the latter power is seldom exercised). The Act is implemented through the Land Consolidation Service (LCS) of the Ministry of Agriculture, which can proactively seek to intervene or can respond to requests from one or more farmers for action. The LCS has Court powers, with decisions taken by a Judge, two lay people and a small technical staff.

Taxation

Taxation in Norway is levied through central government (86%), the counties (2%) and the municipalities (12%). The system was revised in 2006 to address inconsistencies between income and capital taxation but the new Norwegian government has recently proposed further adjustments. The general marginal income tax rate (including social security contributions) is 51%, but a general allowance of up to NOK170k implies that many farms will be paying nothing on farm income. Agricultural land is exempt from property taxes, but is subject to capital gains tax.

Land passing through family inheritance is exempt from capital gains tax (up to 51% for non-family transfers). Stamp duty of 2.5% is levied on all land transfers, but inherited land is valued at 25% below its market value for tax purposes. Inherited land is subject to a graduated inheritance tax (8-20% for children, 10-30% for others), but with an allowance of NOK250k. Moreover, if an inheriting farmer pays a pension to the outgoing farmer, the capitalised value of the pension is deducted from the taxable inheritance value.

New Entrants

No specific policy measures are offered to aid new entrants from outwith farming families. Indeed it appears that renting farmland without already owning or renting some land is difficult to arrange - suggesting that inheritance is effectively the only route for new entrants. Moreover, the pension-related tax break on inheritance mentioned above is accompanied by provision for inheritance tax to be paid through (interest-free) instalments - further reducing the capital costs of inheriting farmland relative to buying land as an entry route. To encourage early retirement, the State pension can be paid from 62 (rather than 67) if an experienced farmer earning a reasonable income from farming (i.e. running a productive farm) transfers the farm to somebody else. This is intended to aid other farmers to enter the industry or to expand an existing farm, yet the average age of new owners is 50.

Discussion

Norwegian agricultural policy has sought to maintain small family farms. Despite this, the number of farms has declined and the average farm size has increased - reflecting external pressures arising from technological change, increasing globalisation and rising incomes elsewhere in the economy. However, much of the shift in farm size has been achieved through renting of land rather than the transfer of ownership. That is, most farmers exiting the industry have chosen to retain ownership of their land and to lease it to others to farm. This may partly reflect cultural preferences, but is probably influenced by the Allodial Act favouring within-family transfers, the Agricultural Act limiting the scope for sub-division of farms and the Concession Act limiting the availability of farmland to external (non-farming) buyers. For example, the 'residency obligation' and 'active management obligation' under the Concession Act have been effectively used to preclude the purchase of land by companies, financial institutions or absentee landlords whilst (notwithstanding possible exemptions) constraints on sub-division under the Agricultural Act and a presumption of family succession are perceived as difficult to overcome. Hence renting (out or in) is seen as easier than trying to sell or buy.

Information sources:

Anderson, F. (2008) Review of policies that affect land mobility and/or value (Norway Case Study) p107-112 in Agricultural Support, Farm Land Values and Sectoral Adjustment The Implications for Policy. OECD, Paris

Austena, T. (1992) Agrarian Land Law in Norway. Chapter in Grossman, M.R. and Brussaard, W. (Eds) Agrarian Land law in the Western World. CAB International, Wallingford. 280pp.

Ravenscroft, N., Gibbard, R. and Markwell, S. (1998a) Private Sector Tenancy Arrangements Volumes I and 2 Literature Reviews. Draft Report to the Food and Agriculture Organisation of the United Nations http://www.fao.org/sd/ltdirect/ltre0007.htm

Dramstad, W.E. and Sang, N. (2010) Tenancy in Norwegian agriculture Land Use Policy 27 946-956

Eurostat (2013) Farm structure in Norway. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_Norway

Forbord, M. (pers comm., 2013) Centre for Rural Research, Trondheim, Norway.

Forbord, M., Bjørkhaug, H. and Burton, R. (2014) Drivers of change in Norwegian agricultural land control and the emergence of rental farming. Journal of Rural Studies 33 9-19

Johnsen, E.M., Strøm, E.J. and Støen, A. (2009) Organizational Structure and Company Forms Within Traditional and Industrial Farming in Norway. XXV. European Congress and Colloquium of Agricultural Law Cambridge - 23 to 26 September 2009

Ministry of Agriculture (pers. comm. 2013) also http://www.regjeringen.no/nb/dep/lmd/dok/rundskriv/2002/m-32002-priser-pa-landbrukseiendommer-ve.html?id=109014 (land price controls)

Ministry of Finance (2013) Summary of Norwegian Budget details http://www.statsbudsjettet.no/upload/Statsbudsjett_2014/dokumenter/pdf/tax_programme_2014.pdf

Norwegian Agricultural Authority (pers. comm. 2013) also https://www.slf.dep.no/no/eiendom-og-skog/eiendom/jordleiepriser/statistikk/jordleieunders%C3%B8kelsen-2013-stabile-jordleiepriser (rents)

OECD (2005) Taxation and Social Security in Agriculture. OECD, Paris.

Statistics Norway (pers. Comm. 2013)

Statistics Norway (2013) Various reported agricultural statistics:

http://www.ssb.no/en/jord-skog-jakt-og-fiskeri/statistikker/binfo/aar/2013-03-08#content (incomes)

http://www.ssb.no/en/jord-skog-jakt-og-fiskeri/statistikker/laeiti/aar/2011-10-27 (land transfers)

http://www.ssb.no/en/jord-skog-jakt-og-fiskeri/statistikker/landt/hvert-10-aar/2011-12-19#content (rented land)

Poland

Context

Poland is a Central European country, the largest and most populous post-communist member of the EU. Administratively, it is divided into 16 provinces, 379 counties and 2478 municipalities. Central government retains responsibility for agricultural, tenure and tax policies, but local government has some discretion over property taxes. There are no special courts for agricultural land.

The borders of Poland were repeatedly redrawn throughout the 18th, 19th and 20th centuries by neighbouring countries competing for territory and political power. Following both German and Russian occupation during the Second World War, Poland subsequently became a client state of the Soviet Union. Parliamentary democracy was achieved in 1990 and Poland joined the EU in 2004 (although remains outside the Eurozone with its own currency, the Zloty).

Although collectivisation of agriculture was attempted during the Communist era, this was (almost uniquely in Eastern Europe) effectively abandoned in the 1950s and highly fragmented privately-owned farmland dominated (some large estates were divided during the 1920s and many more during the 1940s). Yet State-owned farms occupied around 18% of farmland (co-operatives a further 4%) and State control of farm inputs and outputs was enforced. During the 1990s, unlike many other CEECs, privatisation of farmland was not required but large State farms were mainly divided and sold or leased-out. Currently, around 20% of land is rented - but this is dominated by leasing from the State rather than private landowners. Sales of State-owned land also significantly outweigh private sales. Agriculture accounts for approximately 3% of GDP and 13% of employment.

Poland is heavily forested, with woodland accounting for over 30% of the land area. However, the utilised agricultural area of 16m ha accounts for almost 60%, predominantly arable land with mixed farming being most common. With the exception of minor dips in 1994/5 and 2010/11, average land prices have risen year-on-year since 1992, registering a 40-fold increase over the period to over €5k/ha (£4k) currently. Rents are also rising, but are still relatively low at close to €100/ha (£80).

Farm size is dominated by very small holdings, with over 1.3m being smaller than 1 economic size unit and nearly 90% of the remaining 1.1m holdings being smaller than 20ha: less than 2% are bigger than 50ha. More than 80 % of the dairy cows and 60 % of the pigs are kept in farms with less than 50 livestock units. However, average farm size is increasing slowly over time (currently 12.3ha) as the number of farm holdings reduces. Over 99% of farms are sole-proprietorships. Family labour accounts for around 93% of the workforce in terms FTEs; 23% of holders are older than 55, 17% younger than 35.

Farm incomes vary significantly across farm types and sizes (and over time), not least since part-time farming is reported for over 75% of holdings and 30% have some other gainful activity. Average net value added (including Pillar I direct Payments) in 2008 was around €10k (£8k) or €3.5k (£3k) per Agricultural Work Unit.

Agricultural Policy

Accession to the EU in 2004 brought Polish agriculture within the influence of the CAP. However, as a New Member State there has been a ten-year transition period and the nature of support has been slightly different. In particular, decoupled Pillar I payments are through the simplified, uniform Single Area Payment Scheme (SAPS) rather than the Single Farm Payment (SFP). Adoption of the SFP from 2014 is expected to lead to adoption of a regionalised flat-rate system. Some domestic coupled payments were offered through a system of national support, including from 2010 for beef and sheep production, but Polish governments have advocated complete decoupling under CAP reform. Relative to the position in 1990s, the level of public support for agriculture has increased and, notwithstanding many uncompetitive small farms, access to EU markets has generally offered opportunities for Polish agriculture.

Tenure control measures

During the communist era, State-owned land was managed by the National Land Fund. Under the 1991 Act on Management of Agricultural Property of the State Treasury, responsibility was transferred to a new Agricultural Property Agency of the State Treasury, later renamed simply the Agricultural Property Agency (APA). Initially (1991 - 1995), the APA focused mainly on selling land (almost 1.5m ha then, now 2m ha) released by the liquidation of State farms. This resulted in over 300k private farms increasing in size, albeit modestly.

Subsequently (1995-2003), the APA also began to lease State-land (around 2m ha), often in larger blocks to co-operative and corporate entities. APA leases are typically for between 10 and 30 years, although longer (e.g. 99 years) is possible under exceptional circumstances. Lessees gain pre-emptive rights to buy if a lease has run for at least three years, but this does not apply to corporate entities.

APA land prices and rents are typically lower than those in the private sector, with rents index-linked to the prices of agricultural products. In addition, for APA land, payment of (already lower) prices and rents can be further reduced and/or delayed/staggered if various exemptions apply. Prices and rents for private land are not controlled, nor are lease duration or renewal (other than by a general Civil Code). However, pre-emptive rights to buy can apply - but not for corporate entities.

The 2003 Act on the Formation of Agricultural Systems expanded APA powers to include pre-emptive land purchases (for reallocation) and to intervene in private land sales. The aim was to avoid excessive concentration of land ownership (through a maximum individual area of 300ha) whilst facilitating consolidation of small farms. The 2003 Act also introduced requirements for those acquiring farmland to have agricultural qualifications or experience and to have been farming locally for at least five years. The latter constraint replaced a more general moratorium on foreign buyers of farmland and a system of permits for EU and EEA citizens (although there are suspicions that de facto foreign ownership may have occurred in some cases, particularly along borders).

Non EU and EEA buyers are still excluded from buying farmland, but (to comply with EU regulations) EU and EEA citizens can buy farmland if they have previously leased (and farmed) land for between three and seven years (depending on which part of the country is involved). The constraints on foreign (including non-EU) ownership expire in 2016.

Taxation

From 2014, Polish farmers will be subject to personal income tax for the first time. Until now, they have been exempt and have instead paid an Agricultural Property Tax. This has varied regionally, but has been unrelated to the actual value of land and has instead been based on a nominal value linked to an assumed yield of rye. Income tax liability will displace this property tax, and is intended to reduce abuse whereby many non-farmers have claimed exemption on the basis of owning a very small plot of land - although farmers will continue to benefit from lower social security contributions (via separate provision). Sales of agricultural land are exempt from capital gains and sales taxes, provided that land remains in production and is not sold again within five years (with an exemption for transfers to close relatives). Rental income from land is taxed as any other income. Tax incentives for farm expansion have now been withdrawn.

New Entrants

Data on new entrants are not available, but Poland has a relatively high proportion of young farmers. Inheritance accounts for almost 85% of farm transfers and 80% of farmers report having children or grand-children to whom land will be passed (with around 1 in 10 planning to use the proceeds for retirement purposes). Nevertheless, various support measures are offered to aid new farmers - either directly or via encouraging older farmers to exit.

For example, access to preferential financing (soft loans) through the Agency for Modernisation and Restructuring of Agriculture (ARMA) is available to new farmers buying APA land (and to all farmers wishing to expand). The State absorbs the cost of interest-rate subsidies, although this is subject to EU State Aid rules (ARMA is also the accredited payments agency for EU support).

In addition, Poland has made use of provisions under Pillar II to support new entrants via capital grants and early retirement schemes. For the latter, this required somebody over the age of 55 passing actively farmed land of 3 or 6 ha (depending on region) to somebody under the age of 40. Funding for early retirement ceased in 2010, but could continue for the 2014-20 period.

Separately, as a means of encouraging retirement, the APA's powers extend to buying holdings (for reallocation) in return for providing a pension annuity. However, relatively strict eligibility criteria and modest funding mean that this has been exercised relatively infrequently.

Discussion

The persistence of private ownership during the communist era meant that adjustments to land tenure since the 1990s were less disruptive in Poland than in many other CEECs. Nevertheless, the highly fragmented ownership pattern is acknowledged to weaken competitiveness and consolidation/expansion of family farms is encouraged through various means. However, given a dwindling stock of State-owned land, the scope for the APA to influence land tenure directly is diminishing and further structural change may be inhibited by the relatively low levels of private sales and leasing (although there are regional variations). Fears of land speculation by foreign buyers have been allayed by, initially, an outright ban and, now, residency constraints. Moreover, size limits on farm size continue to favour a smaller family farm structure (which is actually mentioned in the Constitution as the basis for agriculture).

Information Sources

Agricultural Property Agency (2014) http://www.anr.gov.pl/web/guest;jsessionid=E116143DF8C8E3F9939A95EF6C2849EB.internet_sb1

Agricultural Property Agency (pers. comm., 2014)

Bański , J. (2011) Changes in agricultural land ownership in Poland in the period of the market economy. Agric. Econ. - czEch, 57(2): 93-101

Biró, Sz., Wasilewski, A. and Tóth, O. (2014): Land Tenure, in: N. Potori and A. Kowaslski (eds), Structural Changes in Polish and Hungarian Agriculture Since EU Accession: Lessons Learned for the Design of Agricultural Policies. Budapest: AKI.

Eurostat (2013) Farm structure in Poland. Eurostat, Luxembourg. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Farm_structure_in_Poland

Marks-Bielska, R. (2013) Factors shaping the agricultural land market in Poland. Land Use Policy 30, 791- 799

Hurrelmann , A. (2005) Buying or renting in? Selling or renting out? Exploring contract choice on the Polish land market. IAMO - Forum 2005 How effective is the invisible hand? Agricultural and Food Markets in Central and Eastern Europe 16 - 18 June 2005, Halle (Saale)

Ministry of Agriculture and Rural Development (2013) Agriculture and Rural Economy in Poland. http://www.bip.minrol.gov.pl/FileRepozytory/FileRepozytoryShowImage.aspx?item_id=49419

Ministry of Agriculture and Rural Development (2013) Agriculture 2012. http://www.stat.gov.pl/cps/rde/xbcr/gus/AF_agriculture_2012.pdf

Ministry of Agriculture and Rural Development (pers. comm., 2014)

Suchoń, A. (2013) Legal principles of managing Agricultural lands in Poland and their Impact on changes in the agrarian structure. Paper presentation at the 53rd Annual Conference of the German Society of Economic and Social Sciences in Agriculture (GEWISOLA) Berlin, September 25-27, 2013. http://ageconsearch.umn.edu/bitstream/156124/2/C3-Suchon-Legal_c.pdf

Suchoń, A. (pers. comm., 2014)

Vergano, L. and Zantomio, F. (2004) Tax Policy in New EU Members: Poland. Working Paper No 307

Zadura, A. (2005) Agricultural Land Markets in Poland - Prospects and Challenges. Agricultural Property Agency http://www.eastagri.org/files/poland1173091590[1].pdf

Zawojska, A. (2005) Process of Land Reforms in Poland: Explanation by Using Theories of Institutional Change and Theories of Political Behaviour Electronic Journal of Polish Agricultural Universities, Economics, Volume7, Issue 1

Table 21 Summary points from each case study

Case Study % rented Agricultural Policy Tenure control Tax New Entrants
Belgium c.67% private rented (stable) CAP
Adopted historic model for decoupling but retain coupled suckler cow premium
Legislation for all leases of more than 1 year. Leases generally 9 or 18 years, but can be 'career' up to age 65. Tenants have pre-emptive right to buy and can pass leases to family members. Rent levels are controlled. Local land consolidation mechanisms. Lightly taxed based on cadastral survey value not actual income. Income from renting out is taxed (but career leases are exempt).
Property tax is paid annually by owner not tenant but based on nominal income.
High tax rates for buying land.
Inheritance normal route.
Soft loans offered to assist generations to buy-out. These are also available to new entrants but a lack of land supply is problematic.
Canada 24% private rented (increasing) 13% State lease, 3% cropshare Active promoter of liberalisation of farm trade but quotas and price support on dairy, eggs and poultry. Support offered to farmers to even out farm income levels eg. disaster recovery. Dominant owner occupation reflects colonial land allocations. Private leasing relatively unregulated, subject only to fairly generic contract law.
Leasing of Crown land regulated more tightly with rents linked to land value or profitability of enterprises and security of tenure.
Specialist lenders support buying farmland. Controls on foreign ownership of land.
Tax liability varies across Canada. Range of tax advantages to farmers e.g. lower property tax, and no capital gains tax if structured appropriately.

Inheritance normal route.

Interest rates capped on all farm loans and young farmers allowed access to loans of up to 90% of price (80% for older farmers).

Tax exemptions ease inter-generational transfers of assets.

Denmark 34% private rented (increasing) CAP Decoupling implemented with clear expectation of move to flat rate (from 2014). Coupled payments retained for beef sector and sheep sector. Long tradition of small owner-occupied farms.
Leases relatively unregulated with rents set by market, .max term of 30 years and no right of renewal. Limits of number of leases held by one farmer (5) and on distance between land (10km). Controls on maximum farm sizes and number of farms held only recently relaxed. Ownership restricted to EU nationals and generally has residency requirements. Local land consolidation mechanisms
No concessional rates for farming.

Inheritance normal route.

Formal contractual succession between generations is recognised and supported by staggering purchase of land and assets. Still high cost/debt despite soft loans for up to 70% of purchase price and bespoke savings accounts.

France 67% private rented (stable) CAP - historic model for decoupling but also maximum coupled support for beef, sheep, goat and arable. Land market heavily regulated by 'Safers'. Main aim is to settle young farmers and support land/ farm consolidation. Safer have pre-emptive right to buy and reallocate any land.
Code Rural entitles a tenant to a minimum term of 9 years although longer and career terms are possible. Tenants entitled to renew lease or to succeed. Improvement recognised and compensation payable by landlord. Pre-emptive right to buy if owner decides to sell. Rental values and land prices controlled.
Tax is paid on property by owner (although proportion can be paid by tenants - up to 20%).
50% tax discount to young farmers for first 5 years. Land transfers (outwith Safer) are taxed but for young farmers this is set at 0.715%.

Safer system installed 1230 with 65% of these outwith farming families in 2012. (Still on 0.2% of holdings)

Inheritance normal route.

Hungary 60% private rented (economy in transition) CAP since 2004 but 10 year transition arrangements. Decoupled Pillar 1 payments but some coupled payments offered. Redistribution of land during 1990s under Compensation Acts. Leasing of private land through contract law. Tenant has first refusal on lease expiring but no automatic renewal. Pre-emptive right to buy for tentants and neighbours (with price controls). Ban on EU nationals owning land will be lifted in 2014 but buyers still have to comply with eligibility criteria of working in agriculture and farming the land. Corporate purchases are forbidden. Limits on area (300ha purchased and 1200ha leased). Land Fund in place to encourage voluntary exchange but also compulsory purchase to configure land better.

No special provisions for agriculture or rental income from land.

Land sales subject to 2% transfer tax, local taxes and capital gains tax.

Land availability probably not an issue but support for new entrants offered due to competition from greater bidding power of incumbent farmers and foreign new entrants.
Ireland 11% private rented (increasing) CAP Will have to move to flat rate system from 2014. Retained partial coupling of beef payments. Historically significant state intervention in land markets led to domination of owner-occupation. Leases largely unregulated and subject to market forces. Farm income taxed as any other business. Tax exemptions of income from leasing out land increase with length of lease. Land subject to capital gains tax, stamp duty and inheritance tax but retirement tax relief if older farmers transfer ownership early.

Inheritance is main route.

Previous instances of early retirement schemes and installation grants proved ineffective.
Now have retirement tax relief and encourage collaborative farming approaches.

Netherlands 41% private rented (slight rise) CAP - shift to flat rate expected to favour arable farms. Coupled payment retained within beef sector plus starch-potato sector. Leases were heavily regulated but increasingly liberalised with unregulated leases of less than 6 years now permitted. Tenure controls currently being reviewed. Maximum rents are regulated. Local and consolidation mechanisms.

No concessions to farmers.

All businesses have flexibility to offset losses against income tax and exemptions for inheritance tax to facilitate succession.

Land purchase taxed at 6% unless land remains in agricultural use for 10 years.

Inheritance is main route. Land price high and supply limited. No specific policy measures beyond education and training.

Maatchap (partnership) working allows phased transition for a younger farmer to take over from a parent (or other) with staggered purchase of land and assets.

New Zealand 5% private rented, 15% Crown leases (no official data but probably stable) Free market approaches in all sectors apart from natural disasters. High degree of supply control in co-operatives is permitted. Dominant owner occupation reflects colonial land allocation and explicit policy of favouring family farms. Private leases regulated by contract law only. Crown leases more tightly regulated, with rent controls, good security and (mostly) pre-emptive rights to buy. Constraints on foreign ownership of land remain. Agriculture treated as other businesses although some allowances for livestock valuation and potentially for farm enrolment in the GHG emissions trading scheme. Not seen as an issue. Share-farming is important but under pressure from other entry routes as entry costs rise.
Norway 58% private rented (increase) Focus on improved productivity and raising incomes. Emphasis on deregulation and market orientation. Policy and legislation actively sought to maintain small family farms. Farms have got bigger generally through renting of land as current owners exit the industry but retain ownership. Presumption of family succession to land is difficult to overcome and residency and active management obligations generally preclude purchase by companies, institutions and absentee landlords. High allowance on farms means most pay little tax. Land passing through families is exempt from capital gains tax. Stamp duty is paid on all transfer but inherited land is valued lower for tax purposes and inheritance tax can be paid in interest free instalments

No policy measures. The tax advantages favour inter-generational transfer.

State pensions can be paid from 62 if an experienced farmer transfers the farm to somebody else.

Poland 20% mostly State leased (economy in transition) CAP since 2004 but 10 year transition arrangements. Favour fully decoupled payments under CAP reform. Highly fragmented private ownership persisted during Communist era and remains dominant. Maximum area of 300ha and requirement for purchasers to have agricultural qualifications and farmed locally for 5 years which restricts foreign ownership. Pre-emptive right to buy for individuals with leases over 3 years. Leased land almost entirely from State to large co-operative and corporate entities. Leases for 10-30 years, with controlled rents. Will start paying income tax from 2014 rather than agricultural property tax based on a nominal value. Sale of agricultural land is exempt from capital gains and sales taxes provided land remains in production and is not sold again within 5 years.

Relatively high proportion of young farmers. Inheritance is normal route.

Soft loans to new farmer buying land.

Also used Pillar 2 to support with capital grants and early retirement schemes.

State (APA) will buy holdings in return for providing a pension annuity to older farmers - but limited funding.


Contact

Email: Angela Morgan