Michael Bell
Question:21 Mr. Bell asked the Minister for Finance the factors which caused the substantial increase in business expansion scheme investments in the years 1988-1989 and 1989-1990; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Business Expansion Scheme.
The amounts of investment notified to the Revenue Commissioners in 1988-89 and 1989-90 as having been raised under the business expansion scheme were £25.5 million and £78 million respectively. These figures compare with totals of £0.9 million in 1984-85, £4.4 million in 1985-86, £6.9 million in 1986-87 and £9.9 million in 1987-88.
Take-up of the scheme, which was introduced in 1984, grew over time as investors and promoters became more familiar with it. The increased level of economic activity in recent years will have contributed to this trend. Thus, investment in the sectors to which the business expansion scheme applied from the beginning, manufacturing and certain internationally-traded services, rose from £8.9 million in 1987-99 to £14.7 million in 1988-89 and £26 million in 1989-90. This latter figure excludes the case of a single company raising £23 million.
Also, as the Deputy will be aware, the Finance Act, 1987, extended the coverage of the scheme to include qualifying shipping and tourist traffic undertakings and special trading houses. Investments notified to the Revenue Commissioners in these areas rose from £0.4 million in 1987-88 to £10 million in 1988-89 and £27.9 million in 1989-90.
Finally, the Deputy will be aware that in the years he mentions the scheme was made the subject of significant abuse, by way of the provision of guaranteed returns for investors in certain BES projects. As the House will be aware, I introduced measures in the 1989 and 1990 Finance Acts, not only to deal with this abuse but also to limit the scope of the scheme and put a ceiling on the amount of investment in a single company which could qualify for relief.
(Limerick East): May I ask the Minister if he would consider making a statement on the future of the BES scheme, which is up for review next April sometime in advance of the budget? I appreciate that the budget would be the normal time to do so. Is the Minister aware that budget day may be far too late for those people who manage the BES scheme to get notice of alterations? If he considers having alterations, would he consider making a statement at an earlier date?
The review has not been completed but I will bear in mind the point raised by the Deputy.
Would the Minister agree that in spite of the changes which he has made in the last two Finance Acts there are still considerable opportunities for tax evasion? Would he not agree that this scheme should be wound up with effect from this year? It has been a disaster and has cost the Revenue much money and has created very little real employment.
I cannot accept what the Deputy has said. I took action in the course of two Finance Bills to stamp out the abuses. If the Deputy is aware of any abuse of which I and the Revenue Commissioners are not aware perhaps he would contact me and I will have a look at it. I would also remind the Deputy that over 600 companies have raised money under the BES scheme since it was introduced. No scheme has ever been introduced that was not abused in some shape or form. The scheme is the subject of a review by an interdepartmental committee as to its effectiveness in the whole area of risk capital provision and job evaluations, etc. When that comes to hand the Government will make their decision in due course. If Deputy Garland has information to back up some of the wild statements he has made, he should contact me. I have stamped out every possible abuse that has been brought to my notice in relation to it.
The time for questions is almost exhausted. I will allow a brief question by Deputy Noonan.
(Limerick East): Is the Minister aware that some BES schemes were merely used to improve the balance sheets of some companies and resulted in no economic activity whatever?
BES schemes were used in the tourism area and in the asset banking to give guarantees, which was not in the spirit of the legislation when it was introduced. I have little doubt but that in certain situations what Deputy Noonan said has happened also.
(Limerick East): To wipe out——
Whatever I could do to stamp out abuses that became evident in this area has been done. The review is taking place at present and the Government will make their decision in due course.
That disposes of questions for today.