When we adjourned the debate I was adverting to an aspect of section 23 other than the matters on which Deputy Brugha and I have expressed considerable misgivings, namely, the provision in section 119 (3) of the Income Tax Act, 1967. It seems to provide that a benefit in kind shall not arise under Chapter 3 of that Act in any case where the emoluments of an employee do not exceed £1,500 per annum. I understand that limit was set in 1958 and that to up-date it to current money terms it would have to rise to a figure of approximately £5,000 per annum. Will the Minister indicate if he has given any thought to the question of increasing that limit and, if so, with what result?
Finance Bill, 1976: Committee Stage (Resumed).
Question again proposed: "That section 23 stand part of the Bill."
It seems to me that a benefit in kind is a benefit in kind irrespective of the level of salary of the recipient. It should be measured according to its value to the person in receipt of it. The figure of £1,500 was discussed in the seventh report of the Commission on Income Taxation which was published in 1962. If we are to apply provisions in an even-handed manner to all taxpayers there should be no specific limit. We should not say that we will not look at benefits in kind if they are under a certain figure. Benefits in kind could be so inflated as to be of far greater value than the nominal income received by people. The proper thing to do is to look at the benefits in kind, to see what value they have and, putting all those things together, to see if a person is within a certain tax bracket and to tax him accordingly.
If that is so, logically should the Minister not propose the deletion of section 119 (3) of the Income Tax Act, 1967, to ensure that anyone in receipt of a benefit in kind is assessed with it whatever his income? Is that not the logic of the Minister's position?
I am being asked to comment on a matter of logic and I saw that recently commentators spoke of me as being a logician. One does not want to burden the administration with small cases, de minimis non curat lex. That is the only argument in favour of a cut-off point. As has been argued here, there is the danger if arbitrary limits are fixed that difficulties may be created. At the moment the system is not overburdened with trivia and we have no reason to adjust the level at present.
I presume we can take it from what the Minister has said that not alone has he no intention of increasing the £1,500 limit but that to the extent that the abolition or reduction of the figure would not create administrative problems he would favour the abolition or the reduction of that figure. Is that a fair summary of the Minister's attitude?
The commission recommended that the £1,500 limit be abolished. The provision should apply even-handedly to all taxpayers and that is what I have urged.
In regard to the operation of the section as drafted, I think the Minister received some submissions suggesting that where an inspector of taxes has come to an agreement with a person in relation to the benefit arising from the private use of a car supplied by the employer that such an agreement should be allowed to run its course, at least for the duration of the period of possession of the car in question. May I ask what view the Minister takes of this matter?
Once this Bill is passed the new provisions will apply, not anything that might have been arranged beforehand. It is true that many compromises were reached in the past that were not to the entire satisfaction of the Revenue Commissioners. They were reached because the burden of proof of the actual position did not justify any further labour in that direction but once the Bill is passed these new provisions will be applicable.
I take it that the Minister does not entertain the suggestion that an existing agreement in relation to an existing car should be allowed to run its course?
Any existing agreement would relate to accounts that were previously furnished. Each one would come up for reconsideration when new accounts were furnished and new rules would apply. It would be wrong to assume that because £X was allowed in 1974 that that would be the appropriate figure for 1975-76.
There might be arrangements in terms other than £X. There might be arrangements in terms of a certain percentage being agreed as attributable to private use. Are we to take it that all such agreements and understandings are to be regarded as gone by the board?
The new rules will apply. It would be wrong to assume that because a certain mileage was allowed in a previous year that it would be the appropriate figure for future years. I know that it was a not uncommon practice to accept certain rules of thumb and to leave them unchanged for a long time but they were always open to challenge. From time to time they were challenged and when this happened there tended to be a certain amount of disputation. We will be avoiding all of this by applying these formulae.
Does the Minister not see that if the existing arrangements are to go by the board and if new rules are to be applied it reinforces the case we were making earlier that there is no administrative advantage in this section, that the demands that will be made on the staff of the Revenue Commissioners will almost certainly be increased if, in fact, all existing rules are gone by the board and new ones will now have to be worked out?
I am not saying that this is going to end all controversy or all debate. It will not and of that there is no doubt. All we are doing is laying down certain minima which must apply. There may still be arguments as to the percentage use attributable to company use and that attributable to private use. I anticipate that there would be less disputation once the minima are fixed in this Bill than operating a system which had no rules at all.
Does the Minister not see that it is the introduction of minima that is, perhaps, the most questionable aspect of the entire section both in theory and in practice? It is impossible, in theory certainly, to justify the introduction of minima in a case like this irrespective of the circumstances of an individual taxpayer's position. The only possible justification for doing so, and I do not regard it as a justification, is that there would be considerable benefit administratively but the Minister has just confirmed that, in fact, there cannot be an administrative benefit, certainly in the short term. Therefore, we are thrown back on the theoretical basis for the introduction of minima which would apply irrespective of the circumstances of a particular taxpayer. Does the Minister not see that in those circumstances the most objectionable feature of the section is being introduced without justification? The only justification the Minister has claimed for it is that it will ease the burden and get rid of prolonged and protracted correspondence but it is now clear from what the Minister has told us that that will not happen. What is the justification for applying to any taxpayer, no matter what the circumstances, the statutory minima laid down in this section?
I was saying that the figures that have often been arrived at in the past are unrealistic in relation to the present day costs of motoring, including the cost of the capital acquisition of a car, its depreciation, insurance and tax.
They can be stepped up under the existing law?
Yes, but, in practice, the figures have kept well behind what would be the true value of the private use of a car. Having regard to the fact that, by and large, the maximum use of a car on business purposes seldom exceeds ten hours per day—perhaps that is even too much in many cases— the small portion which we are attributing to private use is well below what I believe is the normal private use, even of a company car. When one compares that with the colossal cost which is borne by people who have not a company car in relation to the provision of what they now have come to accept as a necessary facility for themselves and their families, it will be seen that this benefit in kind which we are charging in relation to company cars is comparatively small. The person who has not a company car has to provide the total cost of motoring out of his post-tax income. His income has to bear tax and it is only the residue which is available for these colossal costs. The figure we have arrived at when one considers the cost of motoring today is considerably less than one-third of the average cost of motoring.
We have pointed out ad nauseam that the circumstances differ with different taxpayers. In some cases the position may be as the Minister outlined but in other cases the usage would be less while in other cases it would be more. If one reasonable request can be made in regard to taxation of this kind, it is that the taxation being imposed should be related to the actual benefit in kind that is being obtained. By definition, this section cannot achieve that because it applies minima. To that extent it is a defective section. We have made the point as clearly as possible to the Minister and he seems determined to go ahead with the provision. He should certainly not regard this section as adding to the achievement of equity in taxation because it is doing the direct opposite.
In Britain, for instance, the figure for what I would regard as the normal company car here, this would be in the lower bracket, is £480 and not the £300 which we are suggesting. That is on the basis of the cylinder capacity of the car and in relation to price it is something like £575. Therefore, we are well below what has been fixed across the water.
With due deference to the Minister, and the British Chancellor of the Exchequer, that is totally irrelevant. What is relevant is, should the taxpayer be taxed in relation to what he is receiving or should he not? Under this he cannot be taxed on the basis of what he is receiving and that is the whole point we have been making.
Question put and agreed to.
SECTION 24.
Question proposed: "That section 24 stand part of the Bill."
The purpose of this section is to bring into the tax charge credits applicable to British dividends which are now payable under the agreement between this country and the United Kingdom which was signed on 3rd June, 1975, and which extended for a further year the arrangements concerning dividends provided by the earlier agreement of 2nd May, 1973. The credits will be those in respect of dividends payable on or after 6th April, 1975, and before 5th April, 1976. As Deputies are aware, our double taxation arrangements with the United Kingdom required to be renegotiated following the introduction of the system of corporation tax here. It is expected that the new convention will be signed shortly on behalf of both Governments. The necessary draft order, for statutory confirmation of the convention, will be laid before this House for approval in due course. Because the convention has not yet been signed it would be inappropriate to include the necessary consequential amending provisions in this year's Finance Bill although the revised arrangements will, in general, have effect as and from the current year. The necessary amending legislation arising from the introduction of the new convention will be included in next year's Finance Bill to have effect as from 6th April, 1976, except in relation to remuneration where the operative date will be 6th April, 1977.
I should like to ask the Minister whether the effect of this section will be the same as the effect of the double taxation agreement, when operative, in relation to similar taxation situations?
Broadly, yes.
I take it that there will be no substantive difference?
No.
Question put and agreed to.
NEW SECTION.
The acceptance of amendment No. 17 involves the deletion of section 25 of the Bill.
I move amendment No. 17:
In page 24, before section 25, to insert the following section:
"25.—Payments by the Minister for Labour under the Employment Premium Act, 1975, whether made before or after the commencement of this Part, shall be disregarded for all the purposes of the Tax Acts and the enactments relating to corporation profits tax."
This amendment is consequential on the enactment of the Corporation Tax Act. The rewriting of the section in the proposed form also serves to put beyond any doubt the fact that payments already made under the Employment Premium Act will be disregarded for tax purposes. Acceptance of this amendment will, as the Chair has stated, involve the deletion of the existing section 25.
Could I ask whether when the employment premium scheme was being introduced, consideration was given to the question of whether or not the premiums should be subjected to income tax? If it were thought that they should not be subjected to tax I do not think that that was announced at the time.
It was, actually.
Was it?
Yes.
Was it announced when the scheme was announced?
Yes.
If the Minister says so I accept that it was so, but it is not my recollection.
I have a distinct recollection.
Was it in the budget speech?
Yes. I remember personally referring to this possibility.
May I inquire whether the Minister can throw any light on the value of these payments, having regard to the fact that they are free of tax?
Is the Deputy asking what the grossed-up value would be?
Yes. I know it would vary, depending on the rates being paid, but in general the Minister might be able to give some idea. I am asking because it seems that the value is enhanced and that it should be known that the real value of the employment premium is considerably more than the £12 a week announced.
I refer to my financial statement of 26th June when I said in relation to premium employment payments: "Employers will not be chargeable to tax in respect of premium payments and legislation to provide for this will be introduced in good time". This is now a good time.
From which statement is the Minister quoting?
My financial statement of 26th June, 1975, when I announced the employment premium scheme. It is very hard to put a figure on all these. To take the case of companies, the value would be double that as stated in the scheme itself.
Could we take it that in the case of a company the actual employment premium is £24 a week?
Yes.
That should have been made known as widely as possible because the Minister would acknowledge that the scheme has not been as successful as anybody would like it to be. If it is worth to many companies £24 a week per employee employed under the scheme as against £12 a week it might be more attractive. To that extent, anyway, it is worthwhile drawing attention to the value of the tax-free nature of the premium. Whether this is the right way to do it is another matter as is whether the premium ought not to be fixed at £24 a week and then tax charged. It could be argued, certainly on the basis of the arguments frequently put forward by the Minister, that it is better that the cost of all these things be seen and that people should pay tax on the basis of what they receive, and that one should get rid as far as possible of tax-free arrangements. On that basis the correct approach should be to pay the gross and to charge tax. However, I am not quarrelling with it. I merely point out a certain inconsistency on the part of the Minister in approaching the treatment of these employment premiums in the way envisaged in this amendment which is to provide them tax-free.
I appreciate what the Deputy said. We might have got a better return from it if we had given payments of £24 and subjected them to tax. The £24 might have looked more attractive than £12, but I would say most employers would be sensible enough to appreciate that after tax is taken into account these contributions are worth £24. If we had given £24 and taken back £12 it would have led to a certain amount of irritation. However, the Deputy is right to draw attention to it and I am grateful to him for doing so if it helps to make more people interested in the operation of the scheme.
Amendment agreed to.
Section 25 deleted.
NEW SECTION.
The acceptance of this amendment involves the deletion of section 26.
I move amendment No. 18:
In page 24, before section 26, to insert the following section:
"26.—(1) The Finance Act, 1975, is hereby amended—
(a) in section 31—
(i) by the substitution in subsection (1) in the definition of `accounting period' of `1976' for `1975',
(ii) by the insertion in subsection (1) after the definition of `company' of: ` "period of account" has the meaning assigned to it by paragraph 6 (1) of the Third Schedule;' and
(iii) by the addition thereto of the following subsections:
`(7) (a) Where a company has acquired or disposed of trading stock otherwise than in the normal conduct of the trade in question, the company shall be treated, for the purposes of this section and the Third Schedule, as having, at the beginning or end of the relevant period of account, trading stock of such value as appears to the inspector (or, on appeal, to the Appeal Commissioners) to be reasonable and just having regard to all the circumstances of the case.
(b) Where the value of a company's trading stock at the beginning of a period of account is not calculated on the basis used for the calculation of the value of the trading stock at the end of that period, the value of the trading stock at the beginning of that period shall, for the purposes of this section and the Third Schedule, be treated as being what it would have been if it had been calculated on that basis.
(8) In any case where a company is entitled by virtue of this section to a deduction which has effect for an accounting period which ends on a date in the period from the 6th day of April, 1975, to the 5th day of April, 1976, the value of its trading stock at the beginning of the period of account immediately following the period of account the end of which coincides with the end of that accounting period or which is current at the end of that accounting period shall, for all the purposes of the Income Tax Acts and of the enactments relating to corporation profits tax, other than this section, be treated as reduced by the amount of the said deduction.';
(b) by the insertion after the said section 31 of the following section:
`31A—(1) In this section—" `accounting period' ", in relation to a company, means an accounting period determined in accordance with the provisions of section 9 of the Corporation Tax Act, 1976, which ends on a date in the period from the 6th day of April, 1975, to the 5th day of April, 1976;
" `trade' " means a trade which is carried on in the State and which during an accounting period consists wholly or mainly of any of the following classes of trading operations—
(a) the manufacture of goods,
(b) the carrying out of construction operations within the meaning of section 17 of the Finance Act, 1970.
(c) farming, or
(d) the sale of machinery or plant (excluding vehicles suitable for the conveyance by road of persons) or goods to a person engaged in a trade consisting wholly or mainly of trading operations of a class specified in paragraph (a), (b) or (c) for use for the purpose of that trade;
" `trading income' ", in relation to any trade, means the income from the trade computed in accordance with the rules applicable to Case I of Schedule D before any setoff or reduction of income by virtue of section 16 or 18 of the Corporation Tax Act, 1976, and before any deduction or addition by virtue of section 14 of that Act;
" `trading stock' ", in relation to any trade, has the same meaning as in section 62 of the Income Tax Act, 1967, and in determining the value of a company's trading stock at any time for the purposes of a deduction under this section, to the extent that, at or before that time, any payments on account have been received by the company in respect of any trading stock, the value of that stock shall be reduced accordingly.
(2) Subject to the following provisions of this section, if—
(a) a company which is resident in the State carries on in an accounting period a trade in respect of which it is within the charge to corporation tax under Case I of Schedule D, and
(b) the value of the company's trading stock at the end of the accounting period (in this section referred to as its " `closing stock value' ") exceeds the value of its trading stock at the beginning of the accounting period (in this section referred to as its " `opening stock value' "),
the company shall, in the computation for the purposes of corporation tax of its trading income, be entitled to a deduction under this section by reference to the amount of that excess as if the deduction were a trading expense incurred in the accounting period; and in the following provisions of this section the amount of that excess is referred to as the company's " `increase in stock value' ".
(3) The Fifth Schedule shall have effect for the purpose of supplementing this section.
(4) (a) In any case where a company is entitled to a deduction under this section, that deduction shall be an amount equal to its increase in stock value in an accounting period less 20 per cent of its trading income for that period:
Provided that—
(i) in no case shall the amount of the deduction as so computed exceed the amount of the company's trading income for that period, and
(ii) the company's trading income to be taken into account in computing a deduction shall be that income before any deduction is made under this section or the Fifth Schedule.
(b) There shall be made such reductions of assessments or repayments of tax as may in any case be required in order to give effect to this section.
(5) A company shall not be entitled to a deduction by virtue of this section in computing its trading income for an accounting period unless it makes a claim for the deduction before—
(a) the date on which the assessment for the accounting period becomes final and conclusive, or
(b) the expiry of the period of six months beginning with the date of the passing of the Finance Act, 1976,
whichever is the later.
(6) (a) Where a company has acquired or disposed of trading stock otherwise than in the normal conduct of the trade in question, the company shall be treated, for the purposes of this section and the Fifth Schedule, as having, at the beginning or end of the relevant period of account, trading stock of such value as appears to the inspector (or, on appeal, to the Appeal Commissioners) to be reasonable and just having regard to all the circumstances of the case.
(b) Where the value of a company's trading stock at the beginning of a period of account is not calculated on the basis used for the calculation of the value of the trading stock at the end of that period, the value of the trading stock at the beginning of that period shall, for the purposes of this section and the Fifth Schedule, be treated as what it would have been if it had been calculated on that basis.
(7) Where a company is entitled by virtue of this section to a deduction for any accounting period the value of its trading stock at the beginning of the period of account immediately following the period of account the end of which coincides with the end of that accounting period or which is current at the end of that accounting period shall for all the purposes of the Tax Acts, other than this section, be treated as reduced by the amount of the said deduction.' and
(c) by the insertion of the following Schedule:
`FIFTH SCHEDULE INCREASE IN STOCK VALUES: SUPPLEMENTARY PROVISIONS
1. (1) In any case where a company's accounting period does not coincide with a period of account or with two or more consecutive periods of account the company's increase in stock value in the accounting period shall be determined for the purposes of section 31A not in accordance with subsection (2) of that section but by reference to a period (in this Schedule referred to as the reference period) determined in accordance with this paragraph.
(2) In any case where the beginning of a company's accounting period does not coincide with the beginning of a period of account, the reference period shall begin at the beginning of the period of account which is current at the beginning of the company's accounting period.
(3) In any case where the end of a company's accounting period does not coincide with the end of a period of account, the reference period shall end at the end of the period of account which is current at the end of the company's accounting period.
(4) In any case where subparagraph (2) does not apply, the reference period shall begin at the beginning of the company's accounting period and, in any case where subparagraph (3) does not apply, the reference period shall end at the end of the company's accounting period.
2. (1) In any case where paragraph 1 (1) applies, a company's increase in stock value in the accounting period shall be determined for the purposes of section 31A by the formula
|
A (C–O)———N |
where—
" `A' " is the number of months in the company's accounting period;
" `C' " is the value of the company's trading stock at the end of the reference period;
" `O' " is the value of the company's stock at the beginning of the reference period; and
" `N' " is the number of months in the reference period.
(2) In any case where a company's increase in stock value in an accounting period falls to be determined in accordance with subparagraph (1), then, in section 31A and in the following provisions of this Schedule any reference to the company's closing stock value shall be construed as a reference to the value of the company's trading stock at the end of the reference period.
3. (1) The provisions of this paragraph shall have effect for the purposes of section 31A and the preceding provisions of this Schedule in any case where—
(a) there are two companies one of which is engaged in a trade consisting wholly or mainly of the manufacture of goods (in this paragraph referred to as the transferor company) and the other of which (in this paragraph referred to as the transferee company) acquires those goods as trading stock; and
(b) the acquisition occurs during an accounting period of the transferee company or, if paragraph 1 (1) applies in relation to that company, during a reference period; and
(c) the acquisition referred to in paragraph (a) results in a reduction in the trading stock held by the transferor company and a corresponding increase in the trading stock held by the transferee company; and
(d) the business of the transferee company consists wholly or mainly of the sale of goods manufactured by the transferor company; and
(e) the transferee company is not entitled to a deduction under section 31A otherwise than by virtue of this paragraph.
(2) If a claim for relief under section 31A is made by the transferor company, then that company and the transferee company, if it has the same accounting period as the transferor company, shall be treated as one company for the purpose of determining the aggregate amount of the deductions to which they are entitled under section 31A:
Provided that if paragraph 1 (1) applies in relation to the transferor company, the transferee company shall not be treated as falling within this subparagraph unless paragraph 1 (1) also applies in relation to the transferee company and both the transferee company and the transferor company have the same reference period.
(3) For the purpose specified in subparagraph (2), any reference in section 31A or in the preceding provisions of this Schedule to the value of a company's trading stock at any time or to its trading income for any period shall be construed as a reference to the aggregate of the values of trading stocks at that time or, as the case may be, the aggregate of the trading incomes for that period, of the companies which, for that purpose, are treated as one by virtue of that subparagraph.
(4) Where the aggregate amount of the deductions to which the transferor company and the transferee company are entitled under section 31A has been determined in accordance with subparagraphs (2) and (3), that amount shall be apportioned between them so that the deduction to which one of them is so entitled bears to the deduction to which the other is so entitled the same proportion as the closing stock value of that one of them bears to the closing stock value of the other.
(5) The provisions of this paragraph shall apply only where one of the two companies referred to in subparagraph (1) (a) holds throughout the relevant accounting period or reference period either in its own name or in that of a nominee all of the ordinary shares in the other company referred to in the said subparagraph or where some other company holds throughout the relevant accounting period or reference period either in its own name or in that of a nominee all of the ordinary shares in each of the two companies referred to in the said subparagraph.
(6) For the purposes of computing the aggregate amount of the deductions to which the transferor company and the transferee company treated as one by virtue of subparagraph (2) are entitled under section 31A pursuant to this paragraph and the apportionment of that amount between them, the transferee company shall be regarded as carrying on a trade.
4. (1) A company shall not be entitled to a deduction under section 31A for an accounting period if that accounting period ends by virtue of the company—
(a) ceasing to carry on a trade; or
(b) ceasing to be resident in the State; or
(c) ceasing to be within the charge to corporation tax under Case I of Schedule D.
(2) In any case where a company's increase in stock value in an accounting period falls to be determined in accordance with paragraph 2 (1), subparagraph (1) shall have effect as if the reference therein to the company's accounting period were a reference to any of the accounting periods comprised in the company's reference period.
5. (1) Subject to the following provisions of this paragraph, where a company claims a deduction under section 31A and, immediately before the beginning of an accounting period, the company was not carrying on the trade to which the claim relates, then, unless—
(a) the company acquired the initial trading stock of that trade on a sale or transfer from another person on that person's ceasing to carry on that trade, and
(b) the stock so acquired is, or is included in, the company's trading stock as valued at the beginning of the accounting period.
the company shall be treated for the purposes of section 31A and the preceding provisions of this Schedule as having at the beginning of the accounting period trading stock of such value as appears to the inspector to be reasonable and just.
(2) In determining, for the purposes specified in subparagraph (1), the value of trading stock to be attributed to a company at the beginning of the accounting period, the inspector shall have regard to all the relevant circumstances of the case and, in particular—
(a) to movements during the company's accounting period in the costs of items of a kind comprised in the company's trading stock during that period; and
(b) to changes during that period in the volume of the trade in question carried on by the company.
(3) The Appeal Commissioners dealing with an appeal from the decision of an inspector on a claim in a case where, in accordance with subparagraph (1), the inspector has attributed to a company at the beginning of an accounting period trading stock of a particular value shall, in hearing and determining the appeal, in so far as it relates to the value of the trading stock to be so attributed, determine such value as appears to them to be reasonable and just, having regard to those factors to which the inspector is required to have regard by virtue of subparagraph (2).
(4) In any case where paragraph 1 (1) applies to a company's accounting period, for any reference in subparagraphs (1) to (3) to that accounting period there shall be substituted a reference to the reference period.
6. (1) In this Schedule "trade", "trading income", and "trading stock" have the same meanings, respectively, as in section 31A.
(2) In any case where a company's accounting period or reference period consists of a number of complete months and a fraction of a month, any reference in the preceding provisions of this Schedule to the number of months in the period shall be construed as including that fraction of a month (and in any case where any such period is less than one month any such reference shall be construed as a reference to that fraction of a month of which the period consists).',
and the said definition of `accounting period', as so amended by subsection (1) (a) (i), is set out in the Table to this subsection.
TABLE.
`accounting period', in relation to a company, means an accounting period determined in accordance with the provisions of section 54 of the Finance Act, 1920, which ends on a date in the period from the 6th day of April, 1973, to the 5th day of April, 1976.
(2) A company shall not be entitled to a deduction by virtue of subsection (1) (a) in respect of an assessment unless it makes a claim before—
(a) the date on which the assessment becomes final and conclusive, or
(b) the expiry of the period of six months beginning with the date of the passing of this Act,
whichever is the later.".
This amendment is obviously rather long and technical, but its purpose is quite simple. It is to extend for an additional year the relief for companies in respect of increases in stock value which was provided by section 31 of the Finance Act, 1975. Relief was given for corporation profits tax purposes in respect of accounting periods ended on a date in the period from 6th April, 1973 to 5th April, 1975 and for income tax purposes in respect of the years 1974-75 and 1975-76.
The extension of the relief for another year means that it will apply for the accounting periods ending in the year from 6th April, 1975, to 5th April, 1976, and it is necessary therefore to apply the relief for purposes of corporation tax. This is what makes the section so complex.
Relief has also been extended for income tax and for corporation profits tax purposes so as to cater for new cases in which the commencement provisions would apply. For example, a company commencing business on, say, 1st June, 1975, which would be chargeable to income tax on the actual basis for 1975-76 and which is entitled to stock relief would so claim for income tax purposes.
It will be observed that the new subsection (8) provides in effect that the relief granted for the additional year represents a deferral of tax and not a forthright remission. This is achieved by providing that the opening stock for the following period of account or year of assessment would be the closing stock as reduced for the purposes of relief for the previous accounting period or year of assessment. The effect of this would be that if the stock relief were discontinued as from 1977-78 and no further provision made, the relief granted in 1976-77 would be recovered in 1977-78.
I am not at this stage anticipating what the policy decision may be next year, but I considered that as it is possible that we may be in a different position by then from what we are now and have been in the last few years, it would be proper to, as it were, put down a marker as to the possibility that there might be a variation. Indeed, this is in keeping with advice which has already been extended to the business community by their own tax advisers. It is the prudent thing to do in present circumstances pending consideration of the situation later on.
Can I take it that the effect of subsection (8) is that if the relief were to be terminated next year a company concerned would receive the relief for two years in the form of remission of tax and for the final year in the form of a deferral, so that in effect there would be two years' remission? Is that the correct interpretation?
Yes.
I thank the Minister. I am somewhat mystified, and I think other people are too, as to what exactly is going on in regard to this relief. I would like to recall to the Minister that when it was introduced first I drew attention to the fact that the explanatory memorandum issued with the then Finance Bill referred to the relief as a deferral, whereas the Bill itself did not and dealt with it as an actual remission. We now find that the Minister is providing for this third year as a possible deferral, leaving the option open as to whether it will be treated in that way. Presumably the options open to the Minister would be to treat the third year as a further remission, to treat it as a deferral or to continue the scheme so that, in effect, the third year would be a remission and give a fourth year as a deferral, or keep the deferral option still open with the third and fourth years ranking as deferrals for the moment. There are a number of possibilities as to what might happen in this regard. Deputy de Valera referred to this and adverted to the difficulties being created in accounts as to how exactly the provision in this regard should be treated in the accounts.
There were some companies whose accounts were produced before it was announced that this would be a deferral provision and who treated it, in fact, as a remission as they were entitled to do until this was announced. Other companies whose accounts have been prepared since and are being prepared now have to treat it differently. This is to say the least an unsatisfactory situation. It would be appreciated not only in this House but by many people outside if the Minister could throw any light on why there is this apparent confusion about this. It occurred in the beginning when the explanatory memorandum referred to it as a deferral and the Bill treated it as a remission. Now that it has been established as a remission we are told that it is being treated as a deferral for the third year but no decision has been made as to whether it will be treated as a deferral in due course. Deputy de Valera adverted to a rumour where it was suggested that the reason for the latter confusion was that some exploitation or misuse of the relief had come to light and that the Minister was trying to cover that situation. The Minister assured us that to his knowledge no such thing had occurred. That makes the matter even more difficult to understand. I invite the Minister to throw some light on the reasons for this confusion attending the introduction of this relief and now its continuation.
I understand why the word "confusion" is applied to it. It is not really a confused situation. When it was introduced in 1975 we were dealing with a totally new situation and we responded to a plea that was made in relation to the pecuniary difficulties of 1974-75. Pending further and better consideration, it was decided to treat it as a deferral. The circumstances at that time were such that one could not seriously contemplate obtaining a refund of this deferred tax in the immediately following years. As of now we consider that the time has come to take a new look at this whole question of stock relief. The accountancy profession are concerned with devising some different way of dealing with it, and I would consider, in that fluid situation it would be wrong to continue present arrangements without looking forward to the possibility of changes in them. Because there may be a change I am not making a decision at this stage. I want to hear what the accountancy profession have to say and I want to study the position now and throughout this year. I thought the best thing to do was to indicate that we would treat this relief as a deferral. The effect of that could be that firms may not distribute the money arising out of this relief pending clarification of the position. Having regard to present circumstances that is a desirable thing.
I hope that my explanation has indicated why we had not got finality in relation to our attitude when I first announced it and considered it desirable to announce it in the budget of 1975 in order to give assurances to businesses so that they would know where they stood. The Finance Bill made it clear that the relief was even better than what was announced in the budget. I consider that the time has now come to give an indication that this position needs to be reconsidered. This may lead to a quickening of thought on the issue, not merely by the official side but also by the accountancy bodies and firms that have benefited from the relief that has already been given. We will have enough time to consider the most appropriate way to deal with it in the next Finance Bill.
Having had experience of almost two years, could the Minister give some information as to what the degree of application has been in this area? It is not easy to talk about this on this side of the House without having some knowledge.
The cost to the Exchequer of the operation of this relief for the past two years has been £24 million. I am not in a position to say the number of companies involved in that.
What will be the effect of introducing non-incorporated traders?
I gave that figure earlier. I recollect it is about £3 million or £4 million. I have not got the exact figure.
I gather that the Minister is deferring for one more year. This means, in effect, there will be one year upon one year due, legally anyway. In other words, the Revenue Commissioners will be able to call on these deferred amounts at any time.
Yes, unless we treat the matter differently in a future Finance Bill. The figure the Deputy asked for in relation to unincorporated traders is estimated at £3 million.
The Minister is continuing the deferment at present anyway, so that the question of the paying of the deferment will not arise at the present time?
No, there will be no question of payment being required this year.
Does the Minister appreciate the implication of what I said about some firms having prepared their accounts before the announcement of treating this as a deferral and in their accounts treating it as a remission and, therefore, an addition to their profits, whereas other firms, in the same line of business, perhaps competing, prepared their accounts after the announcement and so cannot treat the amount involved as part of their profits? Consequently there can be a serious difference, say, in the case of quoted companies regarding the appearance of their balance sheet and the effect on the price of their shares, all arising out of the way the accounts were prepared and prepared correctly in the light of the information available at the time but each being subject, presumably, to the same provisions ultimately of the Finance Bill. One gets a different result with a possible difference in the price of shares in the companies concerned as a direct consequence of the confusion to which I referred earlier.
There are implications in this which ought to concern the Minister. If the Minister decided that the relief should be given for a further year it would be possible to give that relief and if at the end of that year he thought sufficient had been given he could then either discontinue the relief or treat it as a deferral for another year. At that stage what was happening would be clear but now it would appear that remission has been given for two years. For the third year it may be deferral or it may be remission. In other words it is not necessary for the Minister to treat the matter as he is treating it in subsection (8) in order simply to keep open his options unless he is trying to keep open the option of charging the tax and not giving the relief for the present income tax year.
If that is one of the options he is keeping open, I would suggest that it is both unrealistic and unwise. It is unrealistic because if one has regard to the present economic situation and to the level of inflation, the need for this relief, if it ever existed, and it existed very much, will exist clearly during the present year. That is why I say it is unrealistic to think in terms of the relief not being given in this year but it is also unwise to keep open the possibility of recovering the tax for this year which, so far as I can see, is what the Minister is doing. That is unwise when he knows that there will be no such recovery but what he is doing is having an effect on the accounts of various companies apart from the effect it will have on individual traders who are being brought in by the provision. I applaud their being brought in. It is something that I urged strongly when the relief was proposed but the situation that arises now is very unsatisfactory because of the uncertainty it generates.
The Minister said that he was keeping open his options because one did not know how things would progress but I suggest that in the light of the performance of our economy this year and the level of inflation that we are enduring, an inflation rate which, as has been shown in the recent OECD report, is the highest so far this year for any developed country in the world, it does not make sense to say it is possible that the situation will change so much that for this year we might not give this relief and treat it simply as a deferral. It is not realistic to talk in those terms so why create this confusion and this problem in regard to how the sum involved is to be treated in accounts? If at the end of this year the situation had so improved that the Minister would consider seriously abolishing the relief in respect of next year, there is nothing to prevent him from doing so either by simply terminating it or by treating it as a deferral for next year. It is not realistic to contemplate either termination or deferral for the present year so that all that is being achieved is confusion and difficulty in some cases without any real basis for it.
In the circumstances that obtain I urge the Minister to amend the Bill, in particular subsection (8), in order to make it crystal clear that the relief will operate for this year as a remission and nothing else. The Minister will not lose anything by doing that because he will be committed to it anyway. There is nothing to be gained by his approach but there is a considerable amount to be gained generally if the position is clarified and if this question mark is not left hanging over this relief preventing the real benefit of it from being obtained.
I am sure the Deputy will accept that the benefit was intended for companies and not to enable companies to distribute larger dividends. In many cases the moneys have resulted in bigger profits and the distribution of larger dividends. Were I to accept the Deputy's suggestion, it would lead to a situation of a sudden cut-off next year without any forewarning.
Not necessarily.
This debate is itself a forewarning that there might be termination.
I indicated that there was another option open to the Minister in regard to a deferral next year but it is not realistic to talk about a deferral for this year.
At all times commentators have said that since this provision might not last it could be treated as a deferral. It would be good for companies that moneys would be kept within them pending clarification of this issue. Far from being against profits I am anxious that profits be stimulated because the more profit there is the more investors we have and since investment involves postponement of current expenditure and, therefore, sacrifice it deserves to be rewarded adequately. This relief is provided for companies with peculiar difficulties of having very high stocks at a time of recession when they were unable to dispose of them so that inflation had changed their value and caused problems relating to their replacement. Those circumstances are not quite those which operate today but by and large the situation can rectify itself during the next year and so enable a proper decision to be made in relation to the the Finance Bill of 1977. Interestingly enough, as far as I can recall, we have not received significant representations in relation to this section which seems to indicate that the business community has more or less accepted it. Of course, silence cannot be presumed to be consent, as lawyers know. I am not saying that that means that everybody is entirely happy with it but I think we are taking a reasonable course and we have given a fair indication that the situation may call to be reviewed next year.
May I take it that the principal reason for the amendment, as distinct from the section, is to apply the Corporation Profits Tax Act?
Yes.
Or is there any other reason?
No, that is the principal reason.
That the new section be there inserted, that is, in respect of amendment No. 18?
Sorry, Sir, there is one other matter about which I want to ask the Minister. It is difficult to find the reference in the amendment. Perhaps I might put it this way, the portion of the amendment appearing at the bottom of page 6 and the top of page 7 sets out the categories of business entitled to reap the benefit of this relief. Might I ask the Minister the nature of representations he may have received for the inclusion of certain categories of business not included in this and what attitude he has taken to them? My recollection is that there were some sectors which had a very strong case for inclusion but, up to now, they were not included and do not appear, from the wording of this portion of the amendment, to be included now.
I am sorry, I have not to hand any of those representations. As far as I can recollect, there was no great volume of them. I think we have not omitted any really significant sector.
I think one sector which sought it was the garage industry, as distinct from the motor assembly industry, on the basis that they carried, and do carry, very heavy stocks, heavy in the sense of the financial cost which they must pay as they draw stocks from the assemblers. Those stocks have increased very considerably in price, perhaps more so than the average increase in prices. The effect of their operations, while not exactly manufacturing in many cases, is very close to it and certainly is very much tied-up with manufacturing operations. I know they are one group who sought to be included in the relief. I know also, as indeed does the Minister, that due to the actions of the Minister himself, under the headings of tax on petrol, increases in VAT, road tax and other activities of his, they have been subjected to very severe pressure. I know they are one sector which would certainly wish to be included in this relief but who are not so included. I do not know whether the Minister recalls receiving any representations in that regard.
I did. The Deputy is correct there.
I suspected that they did make the case.
Yes, this year.
They certainly made it to me so I assumed they had made it to the Minister.
They had indeed and I should have recollected it. But, of course, car manufacturers have already received this relief. I am not making any assertion now. I am saying there is a possibility that a number of traders had cars in stock in the last year or so for which they were not required to pay cash at the time of receiving them into stock because it was a matter of convenience for the assemblers and importers of cars to have the cars distributed and held on the premises of others, as opposed to being on their own premises. Of course, they may well have been reflected in the stock of the manufacturers themselves. Here I am just making a general comment and not presuming to pass judgment.
As Deputies will recall, we deliberately tuned this relief to the categories mentioned in the new section, which were the productive sectors of the manufacturing industry, the construction industry, the farming industry and the sale of plant or machinery.
I know this arose last year and was not pursued but why did the Minister confine it to those categories only? After all, inflation was affecting those concerns carrying stocks and who needed to replace them.
Of course, there is no budgetary taxation proposal that is not looked at in relation to its cost by way of revenue foregone. Revenue may be foregone if it achieves a worthwhile economic objective which is more beneficial than the cost of revenue foregone. A number of areas were omitted because of the speed of turnover which, therefore, did not generate any great difficulty. We related it to these areas because they were areas in which we wanted to maintain production so as to avoid the possibility of bottle-necks once recession ended. We wanted industry to keep ticking over to build up stocks which could respond to demand when demand itself picked up. Of course, like any other tax relief, we would not have been in a position to extend it to all. I think we were right to choose those where it seemed to be most advantageous and necessary and not to extend it to those who were not suffering the cash flow problems to the same extent being experienced at the production end. The distributive end could, and did indeed, adjust their purchases in relation to demand, which is often more immediately and conveniently ascertained than the demand of manufacturers who have to anticipate much further ahead. They have to buy in their stocks far ahead in anticipation of demand and then produce, all of which would take much longer than the actual process of bringing finished articles into stock, and then selling them. That is the only reason. I do not say it was a perfect division. I think the areas we selected were the right ones and the others did not need relief to the same extent.
I was not thinking entirely of fair play and equal rights for all. I was thinking more of a point the Minister made, which is the benefit to the economy of continuity. The point the Minister made about distributors where it relates to internal trade is of concern and I urge him to keep an eye on that during the coming period because the cycle of inflation is still with us and the effect of lower orders from distributors can have a cyclical effect on manufacturers.
I can accept that but I do not think it desirable to give tax relief twice in relation to the same group of products. If you give it to manufacturers it would not be appropriate to give it to distributors.
The Commissioners are in a better position to know what happens to trade than we are. We can only theorise.
It is usually after the event that the Commissioners know about it.
It is the curb on employment that is important.
Stocks are rising.
(Dublin Central): I had hoped the Minister would bring some type of equality into the tax code. He said that if manufacturers are allowed this concession it should not be carried into the distributive trade. They are two separate things and to my mind they would both be entitled to be put on the same basis. It is given to manufacturers because there is a build up of stock. This all came about due to massive inflation. We know there is an enormous amount of stock and this can also apply to the distributive trade. It is now worth more than 25 per cent above what it was purchased for. If there is justification for granting it to manufacturers I do not see why it should not be given to the motor trade and other distributors. We know this type of profit is fictitious. There are very large retailers in this town carrying stocks worth as much as £1 million. It is that £1 million that goes into their audit. In that kind of business there is no large cash inflow as there is in the licensed trade and in hotels where there is a turnover of goods every two months. Certain large retailers would have stock lying for 12 to 18 months.
I agree this concession is of great help to the people to whom it has been extended but I suggest it should be extended further. Deputies Colley and Brugha made points about the motor traders and such people who do not have a quick turnover. It is unfair to try to pick out a few as the Minister has done. I am not suggesting they should not be given the concession, but it should be extended to all. It is not their fault that inflation has reached its present level—it is the fault of the Minister and the Government. That is why the Minister had to come in and do something about it and what he is doing will create havoc among certain traders. Cash inflow is very important today and with inflation expected to run at 18 to 20 per cent this type of section will have to stay in the legislation for some time and it should not be confined as the Minister has done.
How many Finance Acts were there in 1975?
Two.
The reference at the beginning is to the Finance Act, 1975. Is it No. 1 or No. 2?
It is the Finance Act which was passed in 1975.
What is the correct citation, if there are two Finance Acts?
It is the Finance Act. We call the section Finance Act, the No. 2 Finance Act.
Reference has been made to subsection (8). What is the purpose of the two paragraphs in subsection (7) which are being added to the existing provision? I thought at first it was to create the framework for subsection (8) but on second thoughts I do not think so. If it is not, why are these additional provisions necessary in addition to those that have been operating?
We are dealing with the current position where the relief is available. We have to ensure that the closing and opening stocks are treated on the same basis, and that is the objective of subsection (7). When we began this relief we were dealing with closing stock as it had been on an historic date but now we are dealing with stock which is in existence and we have to ensure we have the same way of dealing with both.
Paragraph (i) of the subsection empowers the inspector to vary a claim for stock relief in whole or in part where he considers that part or all of the increase in the value of stock and work in progress has arisen by reason of acquisitions or disposals otherwise than in the normal conduct of business. The inspector can compensate for an abnormal increase or decrease by adjusting the value of the opening or closing stock to such value as appears to him to be reasonable and just having regard to all the circumstances of the case. The taxpayer has the right of appeal to the appeal commissioners against the inspector's adjustments.
Paragraph (ii) of the subsection provides that where there is a change in the basis of valuation of stock, the value of the opening stock has to be recomputed on the same basis as the value of the closing stock.
Is that where there is a change in the valuation of the stock? I am referring to the second paragraph now.
The value of the opening stock will be recomputed on the same basis as the valuation of the closing stock.
What kind of circumstances does the Minister visualise bringing about a change in the valuation basis of the stock?
A company might decide they wanted to change the basis of the valuation because it might put them in a more advantageous position for tax purposes.
Applying that change only to the closing or to the opening valuation, not to both?
Yes.
This is saying that if you change you change at both ends. Is that it?
Yes.
(Dublin Central): Is the Minister saying that the opening stock and the closing stock must be equal?
Not necessarily equal but you cannot treat them differently. You cannot have different processes of valuation.
(Dublin Central): If the closing stock was 50 per cent more than the opening stock, would you still qualify for this?
Yes.
Amendment agreed to.
Section 26 deleted.
SECTION 27.
I move amendment No. 19:
In page 25, before section 27, to insert the following section:
"27.—Section 54 of the Corporation Tax Act, 1976, is hereby amended by the addition of the following subsection:
`(4) (a) "Goods" in this section shall not include goods sold to the agency whether or not the goods are exported out of the State.
(b) "The agency" in paragraph (a) means the Minister for Agriculture and Fisheries when exercising or performing any power or function conferred on him by Regulation 3 of the European Communities (Common Agricultural Policy) (Market Intervention) Regulations, 1973, and any other person when exercising or performing any corresponding power or function in any member state of the European Economic Community.'."
This amendment disallows export sales for relief in respect of all sales into intervention. At present sales into intervention, where the goods are sold here, do not qualify for the relief since the goods are not exported out of the State by the selling company. However, some Deputies have pointed out that there can be an anomaly in relation to such sales depending on whether they are delivered into intervention here or, at the request of the intervention agencies, sent to the United Kingdom into an intervention store there. In the latter case they would fortuitously qualify as export sales. Apart from the anomaly, it would be contrary to EEC policy. The State provides an incentive for sales into intervention and such sales should, and will now, be totally excluded from the relief.
The export sales relief provisions, as now incorporated in Part IV of the Corporation Tax Act, 1976, provide for relief from tax in respect of the profits from the export sale of goods manufactured in the State. Section 58, which is the relieving section, requires the company claiming the relief to prove inter alia that goods were in the course of trade exported out of the State. Of course, the purpose of giving the relief is to provide the stimulus for effort to promote genuine exports.
Under the common agricultural policy of the European Communities provision is made by way of regulations whereby in relation to certain products the European Economic Community will purchase their products at a fixed price as and when the products are offered to the Community by the producer. In each member state an agency of the Community exists, known as the intervention agency, which purchases and stores products on behalf of the Community. In Ireland the Minister for Agriculture and Fisheries is the Community's agency for intervention purposes.
In the case of sales by companies of Irish manufactured products into intervention in the State the commissioners have ruled that the export sales relief provisions do not apply. If, however, such firms have sold into intervention to be stored abroad and if the sale is made on the footing that title to the products does not pass to the intervention agency until they have been exported out of the State, the commissioners consider that as the products would have been exported out of the State in the course of trade albeit with the intention of going into intervention elsewhere a claim to export sales relief could not be resisted.
This is clearly an anomaly. It was referred to during the course of the debate on the Corporation Tax Bill by Deputy O'Malley. In order to rectify the anomaly the law is being amended to provide that export sales relief will not apply to such sales. I think the case rests on the purpose for which the export sales relief was provided in the first instance, that is, to promote genuine sales, to encourage people to find markets abroad for Irish products. It would be quite contrary to the purpose for which relief is provided were the relief to be provided irrespective of whether or not an effort was being made to genuinely promote sales from Irish to foreign markets, hence the need for the change.
The first thing I would like to get clear on this is when will this section operate? From what date will it operate?
This year.
Only?
Yes.
Is there any danger of claims being made in respect of the export of goods of this kind in the past?
There is that possibility.
Is the position not that the export sales relief is available subject to the special exception in the case of certain professional services and so on, that leaving them aside it is available only in the case of manufactured goods? If that is so, how do these particular exports into intervention qualify in that category? Are they regarded as manufactured goods?
Processed foodstuffs and so on are regarded as eligible.
I see. If those were not being sold into intervention, if they were being sold in the normal way, say in the United States, would they qualify for export sales relief?
Yes. What is happening is that a person selling the goods may arrange for an agent in Britain to accept title to the goods and then immediately put them into intervention. As the materials left this country, it was known by all concerned that they were going into intervention. The only reason they were going into store elsewhere was that they had not enough storage accommodation here but by putting in an intermediary they were able to claim export sales relief although it was not genuine export to a market which would be available to this country. It was simply abusing the convenience of intervention.
Unfortunately, I was unable to be present at the discussion on the Corporation Tax Bill in the course of which I think Deputy O'Malley referred to this matter. I heard a little about it and I have some recollection that Deputy O'Malley made the point that the position the Minister is correcting is now the position. I thought the Minister was, in order to support the case he was then making, denying that this was so. I may be wronging the Minister but I thought he was denying that sales of this kind would qualify for export sales relief. Would he be able to indicate whether or not that is correct?
I am not aware that I denied that because I am aware that the position is as I outlined today. The matter was discussed also, when I think Deputy Colley was present, during the Second Stage of the Finance Bill.
In any event, we are not opposed to what the Minister is doing. Technically, what is provided in this amendment may be in breach of the letter of the export sales relief provisions but it is certainly in accordance with the spirit of it. I agree with the Minister that alleged sales of this kind to an agent, in effect, abroad who in turn places the goods in intervention is not the kind of thing that should be entitled to export sales relief. For that reason we accept this amendment.
(Dublin Central): I remember reading that meat was put into intervention in a cold storage ship off Bantry. Will that now qualify for export relief?
No.
(Dublin Central): How far does it have to go?
If it goes into intervention anywhere now it will not get export sales relief.
(Dublin Central): If it is not in Ireland? I am not saying it is in Ireland but say it is in a cold storage ship?
Intervention is intervention. It is not a foreign market. The purpose of the export sales relief is to encourage people to locate foreign markets. Intervention is not a foreign market. What we are providing here is that no matter where the intervention store is, it will not qualify for export sales relief which is a reward for people finding external markets for Irish products.
(Dublin Central): If they cannot get intervention storage on the Continent and have to do this as a temporary measure, surely it will be detrimental and will probably affect the farmers in the long run?
Meat in intervention could, in fact, find its way back here.
(Dublin Central): Is it finding its way back?
It could. Intervention is one might say, cold storage literally and metaphorically and is not an export market.
Heretofore, the position, I think, was that a sale into intervention which resulted in the goods being stored in, say, Bantry Bay was regarded as not being an export whereas a sale to Britain which ended up in intervention cold storage in Britain was regarded as an export. Is that the position that obtains?
No, it was regarded as exported simply because it had gone to a middleman.
But if it had gone direct to intervention abroad?
It would not have been treated as an export. I am assuming that what was out in Bantry Bay went direct to the intervention ship. If ownership of the goods had been transferred to a third party and then to the intervention ship in Bantry Bay or wherever it might be, technically under the law as it stood—we are out to amend it now—it would have been treated as an export.
How do you know it has gone into intervention if it goes through an agent?
(Dublin Central): If it was genuinely put into intervention with a view to exporting it in the next six or eight months? I think much of it was put into intervention because there was no proper storage space on the Continent. The Minister is talking about finding markets for such things as dairy products which is a different thing. You cannot go into the open market in Europe and look for intervention. This is an EEC regulation. The Minister is talking of encouraging people in this line to sell agricultural produce such as beef on the open market which is a most difficult thing to do. If there is a glut of cattle on the market, they cannot be sold and we cannot find retail outlets in Europe. Will it not then be necessary to put it into intervention? Otherwise, the price would drop completely unless there is some provision here—perhaps I am wrong. I remember Deputy O'Malley arguing along these lines— that export relief should be allowed to these people.
The Deputy could recall statements highly critical of those who had taken the convenient way of disposing of their goods into intervention instead of finding markets.
(Dublin Central): Where do you find them? Where do you find a market for butter, say, at the moment?
The purpose of export sales relief is to encourage people to find markets. That is its function and from Arabia to China there are markets to be found and the reward should be given to those who find markets, not to those who put goods into intervention which is not an export market.
(Dublin Central): If you put goods into intervention in England or Belgium or France, would that qualify? The case Deputy O'Malley was making was that it should because it is an export in that sense.
No. Technically it is not. The export agent is the Irish Minister for Agriculture and Fisheries. He may have stores somewhere or other but the intervention agency of the EEC as far as these goods are concerned is the Irish Minister for Agriculture and Fisheries.
(Dublin Central): Does it not go through any process that could qualify as a manufacturing process?
The more you talk about it the more you identify that where Irish goods have gone into intervention agencies they have not been genuine exports.
When the goods are sold out of intervention, who sells them?
The EEC.
No question of export sales relief arises there, presumably?
No, no matter where they are sold.
What about Deputy Brugha's question as to how you know what will happen in the case of goods like these being sold to some agent in Britain? At least, the ownership transfers to somebody in Britain and the goods eventually go into intervention. How do you know when you look at the transaction between the exporter here and the agent in Britain that ultimately the goods will end up in intervention so that the relief should not apply?
In order to get relief the applicant has to produce an auditor's certificate as to the destination of the goods and on that the Revenue Commissioners make their determination.
If he has an agent in Britain, can he not then produce a certificate that the destination of the goods is a certain address in Britain?
That, I agree, may be difficult to trace but the Revenue Commissioners have their own ways of ascertaining the actual exporter and the ultimate destination.
The Minister told us what was intended but looking at the amendment I am not sure that it is being achieved. It appears that the effect of the amendment is to define that goods to which the relief will attach will not include goods sold to the intervention agency whether or not they are exported outside the State, but if the kind of situation arises that the Minister has described, where there is an agent in Britain to whom ownership of the goods is transferred, it seems that this amendment will not prevent that person operating in that way and the relief being obtained.
We look at the destination of the goods leaving Ireland. The relief goes to the exporter of goods. If he is exporting them to what prima facie is a foreign market he gets relief. If he is exporting to intervention he does not. There may be a weakness in the chain of events in that he uses some intermediary elsewhere but, as of now, once the exporter is sending them physically out of the country even though into intervention, a claim is made that he is entitled to relief simply because they are physically going out of the country. That was never intended and that is why we are moving the amendment.
Debate adjourned.
The Dáil adjourned at 5 p.m. until 2.30 p.m. on Tuesday, 18th May, 1976.