asked the Minister for Finance if farmers who receive financial compensation under EC schemes for giving up milk production will have to pay income tax on the money; if not, the reason; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Financial Compensation Under EC Schemes.
8.
I am advised by the Revenue Commissioners that farmers would not be liable to income tax on such payments. The compensation received would be treated as the proceeds of the sale of an asset rather than as income. As such, the payments would be subject to capital gains tax, not to income tax.
Now that Deputy Bruton has gone perhaps I might be able to get through some supplementaries.
(Limerick East): That is a very offensive remark to make about a well behaved Deputy in this House.
I just want to make the point that my own questions were dominated by another Deputy.
The Chair has been expressing concern about the lack of progress in Questions today. I am surprised that any Deputy should feel aggrieved——
(Interruptions.)
I believe I have every right to be aggrieved. However, I am proceeding with this question now. What I want to ask the Minister is if the payments made to farmers to get out of milk production are based on so much per gallon, something like 27p per gallon, of milk not produced? If this is so, would the Minister not agree that that should be regarded as income and, therefore, it should be taxable as income? Is it not also true that there are two reliefs available in relation to this, £2,000 in the case of a single person and £4,000 in the case of a married couple?
I am told that the amount paid per gallon is 22.97p per gallon. It is not regarded as income by the Revenue Commissioners but as the sale of an asset, and then there is the question of whether capital gains tax would apply.
Is it not a tax relief?
There is tax relief in so far as capital gains tax is concerned of £2,000 for a single person and £4,000 for a married couple.
In view of the efforts of many Ministers for Finance to have a fair and equitable tax system does the Minister think it is fair and equitable that farmers who are paid to get out of milk production can get into horticulture, into the production of beef or grow grain? Is it not inequitable that no tax is payable on the money paid over to farmers on getting out of producing something, apart from capital gains tax which is a miserable payment? Does the Minister not think this adds to the inequities in the tax system and will be seen as such?
I do not accept that at all. As I have said, this money is not treated as income for tax purposes. It is looked on as the sale of an asset and, therefore, is treated under the capital gains tax.
Could the Minister tell us how these sums could possibly be subject to capital gains tax? Could he indicate how there will be any cost of the acquisition of the asset to be set off against the disposal amount? How could it be held by any court or appeals commissioner that a farmer had acquired his milk quota for value and how could it possibly be dealt with as the disposal of an asset and liable to capital gains tax? I cannot for one moment think of how one could compute any gain when the farmer in question would not have laid out anything to get it unless he purchased it. How could it possibly be a gain?
(Limerick East): It is a notional system.
That is the advice which has been given to me by the Revenue Commissioners.