Vol. 289 No. 2
asked the Minister for Finance whether any estimate has been made by his Department as to the amount that will be extracted from the co-operative movement and its processing industry as a result of the extension of taxation to them; and whether he has considered the deterrent effect that this will have on agricultural expansion.
12.
asked the Minister for Finance whether he has received representations from the agricultural co-operative movement regarding the taxation of co-operative societies; and, if so, if he will make a statement on the matter.
With the permission of the Ceann Comhairle, I propose to take Questions Nos. 11 and 12 together.
As indicated in my financial statement on 28th January last, while the termination of the tax exemption enjoyed by agricultural and fishery co-operatives will not be reflected in tax receipts in 1976, the revenue gain thereafter could be up to about £3 million a year.
I have received representations from co-operatives in the matter and I am giving careful consideration to the points raised.
The implication in the second part of Deputy Gibbons's question is not accepted.
In the light of the current redundancies in the meat processing industry and, indeed, in the dairy processing industry as well, and in the light of the need there is to foster more than any other industry in the country the food processing industry which is, as yet, in a state of development, does the Minister not recognise that this is the time when the exemption from company tax of these industries is of even more vital importance than the tax holiday that will presumably be enjoyed by the phantom industries that the Taoiseach has been announcing in the last couple of days which if they do materialise will presumably warrant a tax holiday of 20 years, whereas the industries that really require fostering are going to be taxed although they are under-capitalised?
The industries are real; it is the Opposition that is phantom. I do not agree that a proposal which involves no tax being paid this year and £3 million being paid next year through the co-operative movement is one which could have a significant adverse effect on a sector of the economy whose income has increased and is increasing so rapidly as a result of the measures taken by this Government.
Does the Minister seriously suggest that the profits to the shareholders from the co-operative meat processing and dairy processing industries have any reality at all, and does he not accept that both in the case of the very seriously threatened meat processing industry and in the case of the diary processing industry as well there is a very serious lack of capital that is at present leading to redundancies and that they will continue to lead to redundancies in the future?
I do not accept that proposition at all.
A number of Deputies are offering. If they are to be facilitated, the question must be very brief.
Does the Minister consider it equitable that co-operative societies should be taxed seeing that they are providing long-term credit facilities for farmers and providing educational facilities in the shape of fully qualified agricultural instructors to try to improve production and the wealth of the country?
I believe that the taxation of co-operatives in an appropriate way, with a special provision for transitional arrangements, is entirely equitable and that failure to impose a measure of taxation of this kind upon them would merely maintain an increasingly serious inequity with private traders.
Is the Minister aware that if he proceeds with this tax it will be impossible for co-operative groups to build up financial reserves? Would the Parliamentary Secretary inform the House whether the money from the EEC Regional Fund which co-operatives may get will be assessed as trading for the year and if profits are made if half of that money will go back to the State?
I am not clear about the significance of the latter part of the Deputy's question. If grants are paid from the regional fund, they will normally be in relation to capital activity rather than current.
If the money comes either through the IDA or through FEOGA, the various accountants in the co-operative movement have instructed all TD's that, if this tax comes in this money will be assessed as trade dealings for the year, and if that co-operative group show a profit half of it goes back to the State plus half the grant.
If there is a genuine problem in respect of this it is something which will be discussed in the negotiations at present going on between the co-operative movement and the Revenue Commissioners. A number of issues have been raised in those discussions, and in respect of one important matter two alternatives have been put to the co-operatives and they are considering which of these they would prefer. I am sure there will be many transitional matter which will have to be discussed to ensure that this new scheme is introduced equitably, and these discussions are proceeding.
I have three supplementaries to put to the Minister. First, does the Minister not regard it as anomalous that when these co-operatives are in the process of receiving large grants from FEOGA in an endeavour to help them to adopt to modern conditions, at the same time this Government should be taking from them by way of taxation funds which would go to supplement this process of modernisation on their part? Secondly, is he aware that since Horace Plunkett first launched the agricultural co-operative movement in this country, this exemption has been afforded to these agricultural co-operatives and that, in fact, it is bad taxation law——
May I ask the Deputy to help the Chair to make some progress?
——to tax farmers who come together in a co-operative society to sell their own produce, that it is unjustifiable by any canons of taxation? Thirdly, is he aware that at a time when this Government are dealing this serious blow to our food processing industry, the French Government, much more enlightened I suggest, have appointed a full-time Minister to promote, encourage and develop their food processing industry?
I do not agree that there is any anomaly involved in normalising the situation which has been anomalous in the past. The anomaly was justified in the past, possibly, because of the small scale of the activities of co-operatives at an early stage in their development. They have, however, been developing for a very long time and, as the Minister in his budget speech pointed out, in the last decade their activities have expanded enormously. They now include some of the largest businesses in the country and the scale of operations is now such that the continuance of the exemption would be difficult to justify and inequitable to the general body of taxpayers.
Would the Minister slow down?
I am sorry if the Deputy's mind does not move as fast as mine.
I want to dissuade members from attempting to debate this matter. I am calling on Deputy Callanan for a final supplementary.
The Minister is quoting, and if you are going to enforce the rules of order would you please enforce them universally? The Minister is quoting from the budget speech of the Minister for Finance.
The Minister is entitled to reply in his own fashion.
My understanding is that quotations at Question Time are not in order.
The Minister may reply in his own fashion, even to the extent of quoting. Deputy Callanan for a final supplementary.
Would the Minister—
I wish to protest. The Minister acting on behalf of the Minister for Finance is anxious to answer my questions and I ask the Chair to give him permission to do so.
The Deputy asked two questions.
Three.
He asked whether it was not bad law to tax farmers who come together in a co-operative. I could not agree if that was the case. It would be quite wrong if people by coming together should be able to avoid normal taxation.
That is not why they came together.
My third question was if the Minister was aware of the fact that in their anxiety to promote their food processing industry the French Government have appointed a Minister specially charged to encourage and develop that industry while, at the same time, this hapless Government are inflicting this mortal blow on our food processing industry.
The French and other Governments have their own ways of handling their business. Some Governments are not constitutionally restricted on the numbers of Ministers and some of them chose to appoint ministers for specific purposes. There is a Minister for the Feminine Condition in France. There is also a special Secretary of State for the Condition of Manual Workers. These things are desirable in themselves, but we handle them here by different administrative arrangements more appropriate to a country of 3 million people than to that of a much larger country.
Does the Minister understand the co-operative movement? Does he realise the amount of voluntary effort which has gone into setting up these co-operatives in the interests of farm production? I am speaking particularly about the west. I am a member of a number of these small co-operatives and did not get a dividend from any of them. They do not pay dividends because they have huge overdrafts.
The Deputy must ask a question.
Is the Minister aware that these co-operatives have very large overdrafts? If this tax is implemented it will sound the death knell on these small co-operatives in the west. If the Minister does not understand co-operatives, he should ask people who have been associated with co-operatives all over the country. I am one of these people.
I am aware that some co-operatives have overdrafts and being a collection of individuals working together, they share that disability with individuals who also have overdrafts. Having an overdraft does not of itself mean that we do not pay tax, although it may to a limited extent, following the reform of the present Minister for Finance, limit the amount of tax to be paid. There is no relationship between the two other than the provision that in respect of interest up to £2,000 for the individual there is a tax exemption. An overdraft running beyond that amount does not affect an individual's taxable capacity and should not in logic affect the tax of the co-operatives.
Arising out of the Minister's reply——
I have allowed a series of questions.
In view of the unsatisfactory nature of the Minister's reply, I wish to raise this matter on the Adjournment.
I will communicate with the Deputy in the matter.
