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21.4.2.  Direct support schemes for European farmers

    One of the core objectives - and one of the key requirements - of the sixth CAP reform (of 2013) is the reduction of the administrative burden, notably the relevant provisions for the direct support scheme. The new regulation establishing rules for direct payments to farmers provides the basic rules for granting direct income support to farmers in order to reward them for the provision of public goods and services [Regulation 1307/2013, last amended by Regulation 2015/851]. It also contains a number of specific support schemes (particularly for young farmers, small famers and farmers in areas with natural constraints) and rules for granting a limited amount of coupled support (linked to production). The rules guaranteeing compliance with the obligations laid down by direct payment provisions include checks and the application of administrative measures and administrative penalties in the case of non-compliance, the rules related to cross-compliance such as the statutory management requirements, the good agricultural and environmental condition, the monitoring and evaluation of relevant measures and the rules related to the payment of advances and the recovery of undue payments.

    The new basic payment scheme combines a number of pre-existing direct payments received by a farmer from various schemes in a single payment, determined on the basis of previous entitlements, within a reference period, adjusted to take into account the full implementation of measures introduced by the reform of the CAP. While decoupling leaves the actual amounts paid to farmers unchanged, it is aimed to significantly increase the effectiveness of the income aid. The single farm payment is therefore made conditional upon cross-compliance with environmental, food safety, animal health and welfare, as well as the maintenance of the farm in good agricultural and environmental condition.

    In order to ensure that it contributes to achieving the objective of a more balanced distribution of payments between small and large beneficiaries, the adjustment of the direct payments should only be applied to payments to be granted to farmers in excess of EUR 2000 in the corresponding calendar year. To ensure that support is better targeted, Member States should refrain from granting direct payments to certain natural and legal persons unless such persons can demonstrate that their agricultural activity is not marginal. To avoid the excessive administrative burden caused by managing payments of small amounts, Member States should in general refrain from granting direct payments where the amount would be lower than EUR 100, or where the eligible area of the holding for which support is claimed would be less than one hectare. However, as Member States' farming structures vary considerably and may differ significantly from the average farming structure in the Union, Member States are allowed to apply minimum thresholds that reflect their particular situation. Larger beneficiaries, due to their ability to exploit economies of size, do not require the same level of unitary support in order for the objective of income support to be efficiently achieved. Moreover, the potential to adapt makes it easier for larger beneficiaries to operate with lower levels of unitary support. Member States should therefore reduce by at least 5% the part of the basic payment to be granted to farmers which exceeds EUR 150000.

    One of the objectives of the new CAP is the enhancement of environmental performance through a mandatory "greening" component of direct payments which supports agricultural practices beneficial for the climate and the environment applicable throughout the Union. In particular, 30% of direct income support for farmers may be granted only if they observe certain farming practices that are beneficial for the environment and the climate. For that purpose, Member States should use part of their national ceilings for direct payments in order to grant, on top of the basic payment, an annual payment which may take account of internal convergence in the Member State or region, for compulsory practices to be followed by farmers addressing, as a priority, both climate and environment policy goals. Those practices should take the form of simple, generalised, non-contractual and annual actions that go beyond cross-compliance and that are linked to agriculture, such as crop diversification, the maintenance of permanent grassland, including traditional orchards where fruit trees are grown in low density on grassland, and the establishment of ecological focus areas. Internal convergence means a progressive rebalancing of direct payments levels at national or regional level. The reformed CAP also provides for a more equitable distribution of direct payments envelopes between Member States by progressively reducing the biggest differences in the average level of direct payments received by farmers across the Union ('external convergence'). Therefore, Member States that have direct payments below the level of 90% of the Union average should close one third of the gap between their current level and this level, with all Member States arriving at a minimum level by financial year 2020. This convergence should be financed proportionally by all Member States that have direct payment levels above the Union average level.

    Member States are allowed to establish a simple and specific scheme for small farmers in order to reduce the administrative costs linked to the management and control of direct support. For that purpose, Member States are allowed to establish either a lump-sum payment that replaces all direct payments, or a payment based on the amount due to the farmers each year. Rules simplifying formalities should be introduced by reducing, inter alia, the obligations imposed on small farmers, such as those related to the application for support, to agricultural practices beneficial for the climate and the environment, to cross-compliance and to controls. The objective of that scheme should be to support the existing agricultural structure of small farms in the Union without countering the development towards more competitive structures. For that reason, access to the scheme should, in principle, be limited to existing holdings.

    In order to improve the effectiveness and usefulness of the administration and control mechanisms, each Member State must establish an integrated administration and control system (IACS) for certain European aid schemes with a view to including the single payment scheme, the various support schemes, specific regional aids as well as controls on the application of the rules on cross compliance, modulation and the farm advisory system [Regulation 73/2009, last amended by Regulation 994/2014]. The integrated system must comprise: (a) a computerised data base, (b) an identification system for agricultural parcels,(c) a system for the identification and registration of payment entitlements, (d) aid applications, (e) an integrated control system, and (f) a single system to record the identity of each farmer who submits an aid application.

    A farmer receiving direct payments must respect the statutory management requirements, provided by the competent national authority. Member States must, in particular, ensure that all agricultural land, especially land which is no longer used for production purposes, is maintained in good agricultural and environmental condition. Therefore, Member States must define, at national or regional level, minimum requirements for good agricultural and environmental condition, taking into account the specific characteristics of the areas concerned, including soil and climatic condition, existing farming systems, land use, crop rotation, farming practices, and farm structures.

    Concerning the application of articles 107 and 108 of the Treaty on the functioning of the EU (ex Articles 87 and 88 TEC) to national aids in the agricultural sector, the Commission regards as de minimis (not requiring prior notification) [see section 15.5.1] aids not exceeding EUR 15,000 per beneficiary over three years, with the exception of: (a) aid the amount of which is fixed on the basis of price or quantity of products; (b) aid to export-related activities; and (c) aid contingent on the use of domestic over imported goods [Regulation 1408/2013].

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