I move amendment No. 23:
In page 13, before section 12, but in Chapter II, to insert the following new section:
12. —(1) Section 26 of the Finance Act, 1984, is hereby amended by the insertion, after subsection (1), of the following subsection:
‘(1A) (a) Notwithstanding the provisions of subsection (1), a qualifying company whose trade consists wholly or mainly of the carrying on of qualifying shipping activities within the meaning of section 26 (1) of the Finance Act, 1987, may have one or more subsidiaries which do not satisfy either of the conditions in paragraph (b) of subsection (1): Provided that the condition mentioned in paragraph (b) of this subsection is satisfied.
(b) The said condition is that the subsidiary or each subsidiary is a company which exists for the purpose of carrying on a trade consisting wholly or mainly of the carrying on of qualifying shipping activities.
(c) In paragraph (b)—
"qualifying shipping activities" has the meaning assigned to it by section 26 (1) of the Finance Act, 1987, as if, in the definition of a "qualifying ship" for the purposes of the said meaning, paragraphs (a) and (b) of that definition were deleted, and
(d) In this subsection, the question of whether a trade consists wholly or mainly of the carrying on of qualifying shipping activities shall, with any necessary modifications, be construed in accordance with the proviso to section 16 (2).'.
(2) The Second Schedule to the Finance Act, 1984, is hereby amended, by the substitution for paragraph 1 of the following paragraph:
‘1. The shares issued by the qualifying company may, instead of, or as well as, being issued for the purpose mentioned in subsection (1) (b) of section 12, be issued for the purpose of raising money for a qualifying trade which is being carried on by a subsidiary (other than a subsidiary by virtue of section 26 (1A) (inserted by the Finance Act, 1987) or which such a subsidiary intends to carry on; and where shares are so issued subsections (1) (c), (4), (5), (7) (b) and (8) of section 12 shall have effect as if references to the company were or, as the case may be, included, references to the subsidiary.'.".
The purpose of this amendment and its related one, No. 18, is to provide that the holding of a foreign shipping subsidiary will not debar Irish shipping companies, being brought within the business expansion scheme under the provisions of section 11 of the Bill, from being qualifying companies for the purpose of the scheme. At present companies wishing to avail of the provisions of the business expansion scheme are precluded under section 26 of the Finance Act, 1984 from holding foreign subsidiaries unless such subsidiaries exist solely for the purpose of carrying on any trade which consists solely of any one or more of the following trading operations: the purchase of goods or materials for use by the qualifying company or its subsidiaries, the sale of goods or materials produced by the qualifying company or its subsidiaries or the rendering of services to or on behalf of the qualifying company or its subsidiaries. This condition is considered to be too restrictive in so far as are concerned shipping activities which can be carried on on a global basis, with ships constantly traversing international sea routes. It may be necessary for a shipping company to have foreign subsidiaries carrying on qualifying shipping activities which would not meet the existing requirement of the business expansion scheme — that the shipping activities should be carried on wholly or mainly in the State. The extension of the provisions of the business expansion scheme to shipping is one of a number of incentives for the maintenance and development of a strategic shipping fleet.
In those circumstances it has been decided that the holding of a foreign shipping company, as a subsidiary, will not debar a qualifying Irish shipping company from the provisions of the business expansion scheme if that foreign shipping company would — if resident in the State and operating a qualifying ship — meet the requirements of the provisions of the business expansion scheme by reason of the fact that it carried on qualifying shipping activities. Provision is being introduced into the business expansion scheme to prevent any money raised under the scheme by a qualifying shipping company from being used directly or indirectly for the benefit of such a foreign subsidiary. This qualification is considered essential to conform to and maintain one of the basic principles of the business expansion scheme, namely, that investment should be channelled into businesses operating within the State. If this principle were not rigidly adhered to in effect the Irish taxpayer would be placed in the position of subventing the expansion of employment opportunities abroad.