Vol. 356 No. 4
asked the Minister for Finance if any schemes have yet been initiated or have become operational to take advantage of the income tax relief for venture capital provided for in the Finance Act, 1984; and, if so, if he will give details of any such proposed schemes.
4.
asked the Minister for Finance the extent to which the budget facilities dealing with venture capital have been availed of; if he will estimate the extent to which this facility was used in 1984 and is likely to be used in the current year; and if he will make a statement on the matter.
5.
asked the Minister for Finance if he will give details of investment funds set up to channel investment from individuals into industry since the introduction of taxation incentives in the 1984 Finance Act; and if he is satisfied with the rate of investment as a result of the taxation incentives introduced.
6.
asked the Minister for Finance the number of people who have availed of the scheme announced in the 1984 budget regarding benefits available to people who invest in manufacturing industries; and if he will give details of participation in the scheme.
7.
asked the Minister for Finance the number of firms benefiting from the £25,000 venture capital scheme contained in the Finance Act, 1984.
8.
asked the Minister for Finance the number of firms or companies in County Meath benefiting from £25,000 venture capital scheme contained in the Finance Act, 1984.
9.
asked the Minister for Finance how many schemes have been initiated under the income tax relief provisions for venture capital provided for in the Finance Act, 1984.
I propose to take Questions Nos. 3 to 9, inclusive, together.
The legislation in question is contained in Chapter III of Part I of the Finance Act, 1984. Such information as has come to the notice of the Revenue Commissioners to date suggests that already there have been investments by individuals in qualifying companies. However, as the legislation precludes the allowance of claims for relief under the scheme before 1 January 1985, this information can only be regarded as representing a very preliminary response to the scheme, and it would be premature to provide specific details or to come to any conclusions about the scheme at this stage.
The legislation also provides for designation of investment funds by the Revenue Commissioners. These will be a very important means of promoting this incentive. Two such funds have already been designated, but the present unit trust legislation creates difficulties for funds which would intend to seek investment from the general public. In this regard, I understand that amending legislation is being introduced by the Minister for Industry, Trade, Commerce and Tourism in this session to remove designated funds from the scope of the Unit Trust Act, 1972. This will relax certain constraints which now apply to the operation of funds and will enable them to function as envisaged under the provisions of the 1984 Finance Act.
Would the Minister not admit that this scheme, which he says is covered very extensively in the 1984 Finance Act and which we argued here for days, has been a total disaster because he did not respond to our very recent submissions? Does he not agree that it was too restrictive in terms of its application to manufacturing industry, too restrictive as to management of the fund and far too complex? Would he not agree that while two funds have been designated one can count in single figures the number of schemes which have been set up over the last 12 months? Does this not clearly show that the Minister must do something to attract future investment?
No, I would not admit any such thing.
Would the Minister——
I am calling Deputy Mervyn Taylor. I should have called him first because his questions came before Deputy O'Kennedy's on the Order Paper.
I hope I will be allowed to pursue this later.
How many applications have the Revenue Commissioners on hands and under consideration at present? Were any applications made to the Revenue Commissioners for sanction under the scheme refused and, if so, how many? What is the nature of the industries affected by the two applications which have been granted and approved?
The two applications which have been approved are, as I said in the original reply, applications for designation as designated funds. They are not, therefore, applications which relate to any specific type of industry. Under the legislation the funds have the freedom to invest in qualifying firms so that they would not necessarily be particular industries orientated to those funds. There have been applications for investment in qualifying firms. No final decisions have been made on any of these applications so far. Since the matters involved are few in number and relate to specific firms, I do not think it would be appropriate to give details of those applications.
No one is looking for the names of specific firms because that might embarrass those firms. As the Minister said, they are rather few in number and can be counted in single figures. Would the Minister acknowledge that when it was a central element of the Finance Act and when we argued for days about it here and when the submissions we made have been vindicated, it is now time for him to do what he refused to do last year, that is, to revise this scheme and take account of the proposals we then made? Surely he should at least indicate to the House that he is prepared to do that in the forthcoming Finance Bill in the interest of the national economy and not just in the interest of any party. The least the investing public would expect from the Minister is not just a one line "No, I do not admit". That is not satisfactory from any Minister.
I did not say, "No, I do not admit". In response to Deputy O'Kennedy's query I said I did not accept the things he put in the first question. The applications are not in single figures.
The scheme is launched.
As I have said, the applications are not in single figures. Since they are matters which come within the normal regime of secrecy between the Revenue Commissioners and the taxpayers, I do not intend to go into them in detail in the House. As I said in my original reply, the applications for relief under the scheme could not be admitted under the terms of the scheme until 1 January of this year at the earliest. It is far too early to make any judgment about the success of the scheme so far. Since it is far too early to make a judgment about the success of the scheme so far, it is equally far too early to talk about major changes in the scheme.
Can the Minister say how many applications there were? Obviously he has that figure. We are dealing with applications and not schemes. How many applications have been submitted?
I have here the number of applications which have been made by individuals for relief under the scheme for investments in qualifying industries. They are not, as the Deputy alleged earlier on, in single figures. I do not intend to give the number because this is a matter of proper confidentiality between the Revenue Commissioners and individual taxpayers.
I appreciate the confidential aspect. I am not asking the Minister to disclose the details of any application. How many applications have been submitted? What have the Revenue Commissioners and the Minister been doing about examining these over the past number of months? How many schemes have been sanctioned? We spent two days in this House——
We have to confine ourselves to the question. The Deputy may not make a speech.
I do not intend to tell the House at this stage how many applications have been made. I have already said that applications for relief under the scheme for individuals investing in qualifying companies could be entertained only with effect from 1 January of this year. I told the House two funds have already been designated. A number of other funds have applied for designation. The obstacle in the case of the funds is the unit trust legislation which we intend to amend in order that funds will be able to operate. The funds will be an important channel on investment under the terms of the scheme. It would have been a mistake to expect that a very large number of funds would become involved. I never expected that more than a relatively small number of funds would become involved.
I say this in the spirit of the utmost constructiveness. Many of the criticisms I have seen of the scheme and many of the suggestions made about changing the scheme, relate not to anything which has happened to date, but to what people expect may arise three or four years down the line. I suggest to people who are making those kinds of suggestions that they would be far better occupied in getting their own applications off the ground now, and their own applications for designation, than in worrying about what will happen four or five years down the line when they know perfectly well that I am committed to ensuring that this scheme makes a positive contribution to the development of new enterprises.
Would the Minister not agree that people investing their money are naturally concerned about what will happen in three or five years time? That is the whole basis on which people invest their money. There is uncertainty about this scheme. Many of the things the Minister now talks about as being irrelevant were pointed out in the budget debate last year and in the budget debate this year. I welcome the change in the unit trust legislation but it is 12 months too late.
That is a speech.
Will the Minister agree that it is imperative for investors to know what the position is and whether they can get their funds out after they put them in, and what the position is in relation to capital gains tax. If they put in their money and the company never trades they get no write-off of tax. Those are the real problems which exist in the commercial world. If the Minister closes his eyes to them, this time next year this scheme will be as dismal a failure as it has been this year.
The Deputy misunderstands me.
I do not misunderstand the Minister. I know how it works.
The situation in relation to capital gains tax is perfectly clear. The situation in relation to investors who put their funds into qualifying investment is equally clear.
Every accountant is wrong and the Minister is right.
I do not intend to provide that tax relief will be available before the investment funds are made available to qualifying firms. The objective of the scheme is to get investment funds into qualifying firms so that they can start doing the job we want them to do. I do not intend to change the scheme to allow investment funds destined for qualifying firms not to be used by qualifying firms for up to three years. The Deputy knows as well as I do that our objective is to mobilise capital into productive operations.
The Minister is fooling himself if he thinks he can mobilise capital in Irish industry in that respect. If he listens to the commercial world he knows it cannot be done. It is bureaucratic nonsense.
While recognising that this is a venture risk situation so far as people investing money in these unit trusts are concerned, is there any provision or will there be any provision for supervising or monitoring the administration of these schemes to ensure that the moneys are applied in a proper manner leaving aside the risks that will be involved? My main concern, as I said a moment ago to the apparent displeasure of the gentleman opposite, is that the investment funds that are made available either through the designated funds or by direct investment in qualifying firms are immediately applied to the expansion of activity and employment in these firms. It is on this basis that the tax relief becomes available. That is a monitoring activity. The relief will be available only when the funds are invested in qualifying firms that conform to the criteria set out in the legislation, and the criteria set out in the legislation are designed——
——to ensure, in spite of all the verbiage from the opposite side——
Why has it not worked?
——that in fact the money is used——
——for productive purposes, and specifically designed to ensure that the money is not used for non-productive purposes that will not expand output and employment here.
A final question now.
I presume the Minister will accept that our proposed amendment last year was in the interests of launching the scheme effectively to maximise employment and investment. That is still our interest in the scheme. Will the Minister accept that others from other countries are handing funds out of this country because of the failure to launch this scheme?
Rubbish.
Is the Minister aware that the Isle of Man had a two day conference two weeks ago in a Dublin hotel to which potential investors in this country went in droves, to invest outside the country in projects such as this and that the Minister is closing his eyes and locking himself away from reality?
That is argument, Deputy.
It is not. I presume the Minister is aware of that reality. In the national interest would the Minister consult with accountancy houses who were talking to us——
That is advice, not a question.
——12 months ago? Perhaps the advice will be taken up——
The Deputy will have to find another Chamber in which to give it.
In the light of these facts, where there is more investment out of this country to the Isle of Man than there is in this scheme, would the Minister please assure us and the House, perhaps even in the interests of this Government, that he will amend the scheme in the Finance Bill to help attract funds for investment through the scheme?
To the extent that Deputy O'Kennedy is giving advice that I should speak to the accountancy profession or to those who would want to be involved in promoting either designated funds or investment his advice is unnecessary because I suspect that I have talked more to those people in the last 12 months, than the Deputy has. To the extent that the Deputy is making allegations without foundation, I suggest to Deputies on the other side——
——that when they meet the various individuals who are provoking them into giving this advice they should ask those individuals if they have been in contact with me and they will find the answer to that very instructive. The scheme has not failed——
It has not started.
The scheme came into operation from 1 January of this year.
