Dáil Éireann debate -
Tuesday, 24 Mar 1992

Vol. 417 No. 5

Written Answers. - Cost of Tax Reliefs.

Proinsias De Rossa

Question:

133 Proinsias De Rossa asked the Minister for Finance if he will give details of the total cost to the Exchequer in terms of tax foregone in the years, (1) 1980-81, (2) 1985-86, (3) 1989-90 and (4) 1990-91 for the following tax reliefs, (a) ESR, (b) Shannon relief, (c) 10 per cent manufacturing tax relief, (d) section 84 lending, (e) accelerated capital allowances and tax based lending, (f) reduced rate of corporation tax for small firms and (g) BES.

Minister for Finance (Mr. B. Ahern)

The following table sets out the information requested:

Estimated cost to the Exchequer

Allowance or Relief	1980/81	1985/86	1989/90	1990/91
	£m	£m	£m	£m
Export sales relief	93	423	812.5	—
Shannon relief	10	57	Not available	—
Manufacturing profits** (10% tax rate)	—	124 (1985	296 (1989)	489 (1990)
“Section 84” loans**	5	76.5	120	140
	(1980)	(1985)	(1989)	(1990)
Accelerated capital** allowances/tax based leasing	91	182	115	Not available
Reduced rate of** corporation tax for small companies	5.5	7.5	11	—
	(1980)	(1985)	(1989)
BES	—	2.4	41	31

**These estimates are very tentative and are subject to a wide margin of error.

The figures for 1989-90 and 1990-91 are provisional and subject to revision.

Some of the cost figures now provided differ from those given previously. This is due to more accurate information becoming available in the meantime.

In regard to the estimates above relating to the cost to the Exchequer of Export Sales Relief, "Shannon" relief and the reduced rate of tax for manufacturing profits, no account is taken of the fact that without these incentives, many enterprises might not have set up here. To the extent that profits earned by such enterprises would not have been available for Irish tax purposes, part of each cost figure shown might be regarded as notional.

Notes on Table

Export sales relief and "Shannon" relief

The cost estimates relating to export sales relief and "Shannon" relief are based on the assumption that the profits involved would have been charged at the standard rate of corporation tax, which varied from 50 per cent to 43 per cent for the years in question, were it not for the reliefs. These reliefs were terminated from 5 April 1990, with the profits becoming chargeable to tax at the 10 per cent rate where they qualify under the appropriate provisions.

The figures for each year include the tax relief relevant to accounting periods which ended in that year and to earlier accounting periods in so far as such relief was allowed in that year.

Manufacturing profits

These figures represent the estimated loss to the Exchequer arising from the charging of manufacturing and other qualifying profits at reduced rates of corporation tax instead of at the standard rate.

Reduced rate of corporation tax for small companies

The reduced rate of tax was terminated as respects profits and interest arising after 1 April, 1989.

"Section 84" loans

These figures include preference share financing which is a minor element in the total. The figures are gross figures, and do not take account of the yield from the levy on section 84 loan interest which was introduced in 1986. This levy yielded £24.9 million in 1989, and £27 million in 1990.

Capital Allowances

The cost figure included for each year in respect of income tax is estimated by reference to accounting periods ending in the year to 5 April immediately preceding each of the years in question, eg year ended 5 April 1980 relates to the column headed 1980-81. For corporation tax the cost figures relate to accounting periods ending during each of the years in question.