Dáil Éireann debate -
Tuesday, 3 Mar 1992

Vol. 416 No. 6

Written Answers. - Budgetary Tax Proposals.

Jim O'Keeffe

Question:

67 Mr. J. O'Keeffe asked the Minister for Finance his views on whether the role of farming and fishing co-ops in contributing to the development of rural Ireland will be greatly diminished if present proposals to tax them are proceeded with; and if, in the circumstances, he will reconsider these proposals.

Donal Carey

Question:

136 Mr. Carey asked the Minister for Finance if he will outline the estimated yield to the Revenue Commissioners from the removal of the co-operative societies tax exemption.

Minister for Finance (Mr. B. Ahern)

I propose to take Questions Nos. 67 and 136 together.

In relation to the budget measure on withdrawal of the exemption from corporation tax of certain trading profits of agricultural and fishery co-operatives from 1 April next, I do not consider that this will diminish their role in the rural economy. The activity of processing farm products, other than for sale into intervention, will qualify for the 10 per cent rate of corporation tax. As I explained in the budget speech, it is appropriate that the same taxation rules should apply to co-operatives as to other businesses. The current exemption cuts across the creation of a level playing field in the domestic food processing sector and is inequitable in terms of competition vis-à-vis private traders in farming supplies who have to pay at the standard rate of corporation tax.

The withdrawal of the co-operatives' exemption as with other comparable budget measures must be seen in the context of the Government's commitment to tax reform as set out in last October's review of the Programme for Government, and also in the context of the continuing process of tax reform over recent years, which has seen the top rate of tax cut from 58 per cent to 48 per cent, the standard rate cut from 35 per cent to 27 per cent and the standard rate band extended by nearly 60 per cent since 1987. We now have a simpler, fairer and less onerous tax system, which will provide better incentives for work and enterprise and all businesses and all sectors will benefit from this development.

It should also be stressed that the Government's approach, of extending the tax base by abolition/curtailment of special reliefs, has been recommended — and constantly urged on Government — by such bodies as the Commission on Taxation, the EC, the OECD and the National Economic and Social Council, and most recently by the Industrial Policy Review Group.

In relation to the yield to the Exchequer arising from the withdrawal of the exemption, as set out in the Principal Features of 1992 Budget, this has been estimated at £1.5 million in 1992, and at £6 million in a full year.