I move that the Bill be now read a Second Time. I understand it is agreed that we might take Nos. 7 and 8 on the Order Paper together so far as the Second Reading discussion is concerned. Both deal with Shannon Airport. Separate Committee Stages will be necessary. Therefore, I will make the one statement covering the two Bills, if that is agreeable to the Chair.
Customs-free Airport (Amendment) Bill, 1958—Second Stage.
The Customs-free Airport Act, 1947, became law on 18th March, 1947. The establishment of a customs-free airport was a natural development of the Government's policy of providing for international airlines using Shannon Airport the best possible facilities for every form of air transport with a minimum of formalities and impediments. It was then visualised that the bulk of traffic through Shannon Airport would consist of passengers and freight in transit to other destinations and it was desired to encourage this traffic by permitting the greatest possible freedom of movement for transit aircraft, their passengers and cargoes. The primary object of the Customs-free Airport Act, 1947, was, therefore, to facilitate transit traffic, and in this respect I think we can conclude that the measure has been justified. Between 1947 and 1957, the number of passengers in transit through the airport increased by about 200 per cent. and there has been an even greater increase in the volume of transit freight moving through the airport. There is no doubt that the freedom from customs formalities provided for under the 1947 Act has been a source of encouragement to air transport at the airport.
It was hoped also that the establishment of a customs-free airport and particularly the elimination of formalities in the case of goods in transit, would encourage the development of processing and entrepôt trades and businesses within the airport. The fact that the 1947 Act did not produce this result suggests that something more than freedom from formalities is required if we are to promote business activity at Shannon. It is to this end that the Government decided last year to assign special responsibilities relating to the promotion of transit and tourist traffic, as well as freight traffic, to the Controller of Sales and Catering, Shannon Airport, acting for this purpose with the support of an advisory group as the “Shannon Free Airport Development Authority.” The efforts of the authority to date give promise of some desirable industrial projects developing at the airport.
The Minister for Finance announced in his Budget speech this year that consideration was being given to the introduction of a special Bill to provide for exemption from taxation on profits for a period of 25 years for new bona fide export businesses established at the airport. The second Bill we are dealing with on this occasion is designed for that purpose.
The present Bill is designed to facilitate the control of businesses to be established at the airport. In this respect, it may be regarded as being complementary to the Finance (Miscellaneous Provisions) Bill, 1958, which is expected to produce an expansion of business activity at the airport. The present Bill is intended also to remedy certain defects in the 1947 Act relating to customs controls there.
Sub-section (13) (1) of the Customs-free Airport Act, 1947, provides for the making of regulations for the management and control of the airport and, in particular, regulations permitting the carrying on of trades, businesses and manufactures within the airport. Experience has shown this sub-section to be unnecessarily cumbersome in that it is so phrased as to necessitate the making of Orders regulating the manner in which any trade, business or manufacture at the airport should be carried on. I am now satisfied that such detailed regulation is unnecessary, and that the desired control can be achieved by a simple licensing system as provided for in Section 2. Section 11 provides, therefore, for the revocation of Section 13 (1) (b) of the Act of 1947.
Sub-section (2) (2) (a) affords a safeguard for existing businesses established outside the airport by providing that in considering the grant of a licence for any particular business, regard shall be had to the extent to which that business is already carried on outside of the airport. Sub-section (2) (2) goes on to provide that the extent to which the proposed business is likely to lead to the use of air transport, will also be a consideration in the grant of a licence. The reason for these safeguards is that the primary purpose of this Bill, and of the complementary tax concession Bill to which I have referred, is to promote the welfare of the airport, but it is not intended that this should be done in a way which might prove harmful to existing businesses in the State outside the airport.
It is intended, under Section 7, that no trade, business or manufacture will be carried on at the airport except under licence; but the normal operations of airline companies and the activities of persons and companies already operating at the airport under a lease will be exempted from the licensing requirement. The exemption from licensing will not extend to the supply of dutiable commodities for sale on, or for use on, aircraft, which must remain liable to such controls as the Revenue Commissioners may think fit to impose.
Section 4 provides for the attaching of conditions to licences. While it may possibly be found necessary from the point of view of the Department of Industry and Commerce to attach certain conditions to licences, it is contemplated that such conditions will be designed mainly to provide the Revenue Commissioners with a means to control operations involving the use of commodities liable to high rates of duty. In particular conditions may be attached to a licence requiring the holder to commence business before a specified date, fixed only after consultation with him, or requiring him when so directed, to terminate any trade, business or manufacture being carried on by him which is not specified in the licence.
Provisions relating to the revocation and variation of licences are contained in Section 5.
In the case of the Control of Manufactures Acts, a licence may be revoked only on the application of the holder or where the holder has been convicted of a serious offence under the Acts. In the case of certificates of exemption provided for under the Industrial Development (Encouragement of External Investment) Act, which we passed this year, there is no provision for revocation except on the application of the holder of the certificate. It was hoped that, in the interest of encouraging external promoters, the provisions in the present Bill relating to revocation would be no less attractive. There are, however, special considerations in the case of Shannon Airport where businesses dealing in high-duty goods may enjoy immunity from customs control and the Bill necessarily provides that a licence will be liable to be revoked in the event of a breach of the conditions attached thereto or in the event of a conviction for an offence by the licensee against the customs laws relating to goods brought into the airport under the licence.
As district from revocation, it is proposed that a licence may be varied only with the consent of the holder.
As an encouragement to external concerns, there are no conditions attaching to a transfer of a licence other than a simple obligation on the transferee to notify the Minister of the transfer.
The Control of Manufactures Acts provide for the keeping of registers of new manufacture licences and certificates of exemption and for their being made available for inspection by the public on the payment of a nominal fee. It is considered that there should be a similar provision in respect of licences issued under this Bill, and Section 6 provides accordingly.
Section 6 of the Customs-free Airport Act, 1947, which requires that goods intended for personal use or consumption within the airport or for retail sale therein shall be brought into the airport only from another part of the State, has been found to be defective in two respects. First, while it is an offence, under sub-section (3) of the section, to bring or to be concerned in bringing or to assist any person concerned in bringing, such goods into the airport in contravention of the section, it is not an offence for a person to use personally or to consume goods so brought into the airport by another person; nor is it an offence to dispose irregularly of goods so brought into the airport for personal use or consumption. It is proposed to remedy these defects by means of Section 10.
A second defect of Section 6 of the 1947 Act is that it prohibits the bringing of goods directly into the airport from a place abroad for retail sale therein. It is proposed to provide in Section 9 for the grant of permission, subject to such necessary conditions as may be imposed, for the bringing into the airport from a place, other than another part of the State, of goods for retail sale in the airport for exportation—for example, to transit or embarking passengers—or for retail sale for shipment as aircraft stores.
Having regard to the provisions in this Bill for the issue of licences and to the measure of control thereby afforded, it is felt that the Control of Manufactures Acts need not apply to the airport and it is proposed to provide accordingly in Section 8.
The Finance (Miscellaneous Provisions) Bill, 1958, taken in conjunction with the Customs-free Airport (Amendment) Bill, 1958, is designed to implement the proposal, referred to in the financial statement last April, to grant a 25-year tax exemption of profits of bona fide export businesses at Shannon Airport. The Customs-free Airport (Amendment) Bill provides for the licensing of businesses to be carried on in the airport area; the Finance (Miscellaneous Provisions) Bill deals with the granting of the actual tax concession to companies operating at the airport. It also deals with certain customs and excise matters relating to the airport with which I shall deal later.
The way the tax concession will be applied is as follows: companies carrying on a trade at the airport may be given a certificate to the effect that their trading operations constitute what is described in the Bill as "exempted trading operations" and where such a certificate is given, the company will qualify for full relief from income-tax and corporation profits tax in respect of those trading operations during a period of 25 years from the date of the passing of the Bill.
The trading operations which may be certified as exempt are set out at sub-section (5) of Section 3 of the Bill. They fall within one or more of the following six categories:—
(1) the sale for export of goods produced, manufactured or processed in the airport;
(2) the sale for export of imported goods;
(3) the repair or maintenance of aircraft;
(4) the provision, within the airport or outside the State, of services entailing the use of aircraft or air transport;
(5) other trading operations which contribute to the use or development of the airport;
(6) trading operations ancillary to trading operations qualifying under any of the previous heads.
Certain trading operations are not to be certified as exempt and these are described at sub-section (6) of Section 3. The broad effect of the exclusions is to secure that tax exemption will not extend to profits attributable to trading operations carried on in the State outside the airport or to profits from the sale of goods, or the rendering of services, to persons resident in the State, even if the relevant sales, etc., are made in the airport. Profits arising from trading in, as distinct from trading with, Britain and the Six Counties are also excluded from exemption; the necessity for this exclusion arises from the basis of the double taxation agreement with Britain.
Sections 4 to 10 contain the technical tax provisions to give effect to the proposed exemptions. It will be noted that the effect of Section 7 is to substitute, in the case of exempted trading operations, the new 25 years' tax exemption for the exports tax concession available under the Finance (Miscellaneous Provisions) Act, 1956. The latter concession is retained, however, for any export business in the airport that might fail to secure the 25 years' exemption.
Part III of the Bill deals with customs and excise matters. Under the Customs-free Airport Act, 1947, goods imported from the airport into the State are treated as imported from abroad and are liable to customs duty accordingly. While the provisions of this Bill will not change the customs status of the goods, which will still be imported goods, Section 11 will, in the case of products manufactured in the airport, substitute for the ordinary customs duties, if any, applicable to the finished products a duty equivalent to the sum of the duties on the materials used in their manufacture. Such goods, therefore, will be placed as far as possible in a position of equality with goods made elsewhere in the State.
It is necessary, however, to make an exception as regards goods made from materials subject to import restrictions in the State. Airport manufacturers of such goods have an advantage over manufacturers elsewhere in the State in that they can freely obtain the restricted materials. These goods will remain liable to the duties applicable to finished products, but, under Section 12, they will be eligible for the most favourable preferential rates of such duties granted to like goods originating in any part of the British Commonwealth.
Because of the danger of diversion to dutiable purposes of high duty goods brought free of duty into the airport for further manufacture or for export, the Bill provides, in Section 13, that duty will be payable on such goods where they are subsequently reported missing and there is no satisfactory explanation therefor.
The principle of a customs-free airport at Shannon is one that has already been accepted in earlier legislation and therefore the principle of these two Bills—which of course are complementary—is one we need not discuss this morning. That being so, it seems to me that both these Bills are Bills more for discussion on Committee Stage than on the Second Stage. However, I want to make two general comments.
I do not like the system of licensing in relation to any type of operation, but I can appreciate and understand the necessity for having a control in the vicinity of an airport in a different manner from that in which control is necessary outside, but it does seem to me that there is no advantage in having an industry inside the airport, unless placing it there means that it will bring traffic to the airport itself.
I cannot understand the justification for suggesting that an industry should go to the airport, if it does not, by doing so, bring additional traffic. I do not want to refer to any particular firm, but we have all seen the advertisements of one firm. For the life of me, I cannot understand what benefit that firm will bring to the airport traffic. I cannot see at all why special facilities should be given, merely because an industry plants itself at Shannon, if the industry can function just as adequately in any other part of the country. Of course, if the effect of putting it there means that there will be greater utilisation of the airport, I can understand that, having regard to the principle already accepted in earlier legislation, but I do not think that the licensing facilities here should be used in such a way that they can possibly under any circumstances enable a licensce to compete with industry in the remainder of the country, unless there is to be some very distinct advantage for the air traffic as such.
Secondly, I want to say this. No type of Bill such as this, no type of attempt to popularise Shannon and to attract people to make greater use of Shannon will make up for civility and cleanliness. If we do not maintain in the airport itself for the people who pass through it as passengers the highest possible standards, the airport will very soon get a name that will prevent traffic coming near it. It is common case with all of us—certainly as between the Tánaiste and myself—that in relation to the tourist business, cleanliness and courtesy are the first qualifications. That is even more necessary at Shannon Airport and the type of measure envisaged here will not make up for those two essentials.
As far as the Finance (Miscellaneous Provisions) Bill is concerned, this was foreshadowed by the Minister in his Budget. I can see that it will be difficult to administer and I can certainly see the necessity to provide that there can be a revocation of a licence in the event of a serious breach of customs formalities, laws or regulations. Candidly, I am in some doubt as to whether the manner in which this is being done is the best way, but, as I said at the beginning, that is more a question for the Committee Stage than for the Second Reading, and no doubt we shall have adequate opportunity to discuss it then. It does seem to me that the justification for this must be the bringing of more traffic to the airport and not merely that there is a greater benefit for a licensee in operating at Shannon than in any other part of the country.
I should like to say that, in principle, I certainly welcome anything that will, not alone, as Deputy Sweetman said, encourage greater passenger traffic through the airport, but make use of the facilities at Shannon which cost this country something like £3,000,000. Even if there were no questions at all of encouraging passenger traffic, it would be very good to develop and utilise the equipment, runways and buildings there in any possible way we can to provide employment at Shannon, with consequent benefit to the areas outside the airport. So that, even if the question of passenger traffic did not arise at all, I still think we should do everything possible to utilise the very useful and expensive national asset we have down at Shannon.
We should not lose sight of the fact that the main income for Shannon and it main opportunity for expansion is through passenger traffic. Every encouragement must continue to be given not only to our own airline, Aerlinte, but to aircraft of every other airline that lands at Shannon Airport. That is an important development which, I am sure, is very close to the Minister's mind at all times. The first consideration is to encourage as many aeroplanes as possible to land at Shannon Airport because the passengers flying on those planes want to land there.
I welcome these two Bills, but I am just wondering if they do not leave a possible loophole. As I understand the Minister's introductory remarks, the reason for providing these tax-free and other facilities is to encourage people to bring in raw materials that would normally be subject to heavy duty and to re-export them from Shannon Airport, or to process or repack them in some shape or form and to export them from the airport again, primarily using air traffic.
There has been, as Deputy Sweetman points out, a recent development which seems to indicate that raw material manufactured—I do not know whether "manufactured" is the correct expression, but certainly produced —within the State can be brought into Shannon Airport and there further processed. Would it be possible for any Irish company to set up a subsidiary in Shannon Airport in order to get the benefit of those 25 years tax free, to send in raw materials at a nominal price and, with the very substantial tax-free concession, to make a profit very much in excess of what it would normally make through its trading activities? I do not know whether that is a figment of my imagination, but it seems to me there is a possibility that Shannon could be used as a means of evading State taxes.
There is no doubt that the type of industry that would be set up there would be for the production of goods of which the value would be very high indeed and to some extent I presume that would limit the type of industry there. However, it should also be visualised—I think the Minister has made provision for this, but whether sufficient provision I do not know—that an industry might be established for the manufacture of aircraft, not the heavy type of aircraft but the light aircraft used for civil or private flying. Such an industry could be established there and planes flown to various parts of the world. I wonder if the relevant paragraphs of Section 3 are sufficiently clear to cover the establishment of such an industry.
I welcome any effort to utilise or expand the facilities of Shannon Airport, whether through the encouragement of passenger or commercial traffic. The Minister did make one reference to the Shannon free airport development authority, but I do not see any reference in either of these Bills to that authority. I think it is desirable that the Minister should refer to this authority from time to time in the granting of licences or, more important still, before he revokes a licence. I do believe that something more than seven days' notice might be given when the Minister intends to revoke a licence. There may be very good reasons for a licensee transgressing the regulations, and it seems to me that something more than a week would be necessary to consider representations. I am sure other points will arise on the Committee Stage, and I have nothing further to say now, except that I welcome the Bill in principle and hope it will lead to further development and employment at Shannon Airport.
I welcome the Bill also as another national advance. The advances that have been made over a number of years as far as our airport traffic is concerned are very encouraging and these two Bills will assist further development. I hope everything the Minister desires will be achieved when these Bills are enacted. Having said that, I want to strike another note. I am surprised that some of the bureaucrats that control Air Lingus should have to come to this House at all because some of those people put there by this House——
Surely that does not arise on this Bill under any circumstances?
Aer Lingus has nothing to do with it.
The Deputy should keep to the Bills before the House.
I am merely using them as an excuse to deal with problems very near my heart for some time.
The Deputy would need a better excuse than this.
Deputy Sweetman knows well what I am going to say and he would be well advised to give me an opportunity of saying it.
Acting-Chairman
In fairness to the House, the Deputy should keep to the Bills under discussion.
I shall have an opportunity of discussing some of the bureaucrats on another occasion and I shall avail of it. As public men, we do not want anything from anybody. We just want co-operation and understanding. We do not want any public officials to do anything dishonourable. We want them to carry out their duties in an honourable way. However, on another occasion, I shall refer to the people I have in mind who have not treated public men as they should be treated.
I hope to have the opportunity then also of defending them and putting them on a higher plane than that on which Deputy Burke put them after that remark of his— not that they need any defence from a person like Deputy Burke.
I resent that.
And I resent what the Deputy has just said.
Deputy Sweetman questioned whether there was any national advantage in having an industry established at Shannon Airport rather that elsewhere, unless it brought traffic to the airport.
I would not altogether disagree with him in that point of view, except for other considerations of which we must not lose sight. There is the need for some development work in connection with Shannon. The question of action to expand traffic, passengers and freight, at the airport, arose out of the consideration of the possible consequences for the airport of the development of jet aircraft on the transatlantic routes. It is by no means certain yet what that effect will be, but it is not unreasonable to assume that, in the course of time, transit stops at Shannon for operational reasons will become less frequent and consequently that the revenues of the airport may diminish and that employment at the airport may contract. It was against that possibility that we thought it necessary to plan for the development of the traffic at the airport on the one hand and for the extension, on the other hand, of activities in the airport area capable of maintaining the employment level there.
Apart altogether from the need to build up the trade of the airport and to maintain the airport as a commercial operation, there is also the possible social consequences for that part of the country if there should be, at any time in the future, a substantial deterioration in the employment position. Therefore while it is true, from the point of view of the country as a whole, that a good industry is a good industry no matter where it operates, there are reasons which justify channelling to the Shannon Airport industries of a special character, particularly industries which are likely to use air transportation in the course of their operations. May I say, however, that what the advantages of location at the airport may be for a particular industry will have to be determined by those who are going to operate it? Already there has been one case of a company which proposed to put up a manufacturing operation at the airport and had almost decided to do so and had come here to make its plans but decided that it would be just as well off in another location and decided to go to the other location for some special reasons of its own.
In such circumstances, it would get exactly the same licensing treatment—of course, not the financial treatment?
As any other firm in the country. In the case of the airport, there is the possibility of attracting there operations—not necessarily industrial operations—of an important kind where air transportation would be a great facility; and Shannon is, of course, a great air transport centre with connections all over the world. There are also possibilities in the direction of which Deputy Russell spoke, in connection with the provision of equipment for air operations or required by air operators.
The intention is to confine operations at Shannon so far as possible to the type of industry which will normally use air transportation in the supply of materials or the distribution of its products and for businesses of a processing or commercial kind for which Shannon is particularly suitable. Deputy Russell, for instance, asked would it be possible for an Irish company to set up a subsidiary undertaking at Shannon and thus evade State taxation or in some other way get an advantage over other Irish concerns. The licensing system is intended to take care of that. One could not give a complete answer to the Deputy's hypothetical question without knowing whether the subsidiary company at Shannon merely represented the transfer of operations from some other part of the country—which would certainly be discouraged—or a new development in the operations of that company.
Specifically I should make it clear that there is certainly no requirement that operations at Shannon Airport should be confined to external companies. Indeed, I should hope that Irish companies would in the course of the development of their activities find it advantageous to them to do at Shannon the type of operations we have in mind. As I mentioned, there are some proposals for industrial operations at Shannon which appear likely to proceed and which represent the type of development desired.
In that connection, I should mention the position of the Shannon Airport Authority. It is in an undefined position at the moment and clearly something has to be done about it. There is no legal personage with whom contracts can be made and forthwith arrangements will be completed to establish the authority as a company registered under the Companies Acts, so that it will be a legal person. Clearly, we will have to provide by legislation for the future status of that company and also for the provision of capital for its operations.
Amongst the operations which we contemplate it will undertake will be the construction of factory premises for letting. It should be clearly appreciated that the Shannon Airport Development Authority, as it is now, is not confined solely to the promotion of industrial activities at Shannon. It has the very special duty of developing the freight traffic and passenger traffic of the airport. It is recognised that the potentialities in the freight field are very considerable indeed.
In the case of passengers, obviously we must contemplate development there becoming increasingly of the character of terminal operations, that is to say, of passengers coming to Shannon for the purpose of disembarking at Shannon or of spending a holiday in this country before re-embarking somewhere else. It is inevitable that over the next ten years or so, the volume of pure transit traffic will diminish whether or not it becomes operationally necessary for jet aircraft to land there. We know that many of the flights of jet aircraft which have taken place already over the Atlantic have in fact used Shannon; but there are circumstances which make it difficult to effect the normal type of operation there which other aircraft do. These are very large aircraft and there is a very large number of passengers on them. Getting those passengers off the aircraft and back on to it again would in itself involve a great deal of time. The practice appears more likely to develop that the passengers will be kept on the aircraft while they are on the ground at Shannon. That is something we may have to think about, since clearly one of the great assets of the Shannon airport is the shop and the access of passengers to the shop is important from our point of view. Indeed, the evidence available to us is that an increased number of transatlantic passengers are asking their travel agents to route them on flights passing through Shannon; and, of course, that is the type of development which the airport authority is specially designed to encourage.
As Deputy Sweetman said, the Bills are agreed in principle and they are mainly for consideration in committee. Therefore, I do not propose to say anything further at this stage, as, of course, each section of the Bill will be subject to meticulous examination in the House on Committee Stage.
Question put and agreed to.
Committee Stage ordered for Wednesday, 12th November, 1958.