Dáil Éireann debate -
Thursday, 8 Oct 1992

Vol. 423 No. 2

Written Answers. - Cost of Tax Relief.

Proinsias De Rossa

Question:

67 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) 1980-1981 (2) 1985-1986 (3) 1989-1990 (4) 1990-1991 and (5) 1991-1992 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)

Following is the information requested in so far as it is available as estimated by the Revenue Commissioners:

Estimated cost to the Exchequer

Allowance or Relief	1980/81	1985/86	1989/90	1990/91	1991/92
	£m	£m	£m	£m	£m
Export sales relief	93	423	812.5	202.1	—
Shannon relief	10	57	Not available	Not available	—
Manufacturing profits(10% tax rate)	—	124 (1985)	296 (1989)	489 (1990)	689 (1991)
“Section 84” loans*	5 (1980)	76.5(1985)	120 (1989)	140 (1990)	131 (1991)
Accelerated allowances/tax based leasing	108.1	194	126	88	Not available
Reduced rate of* corporation tax for small companies	5.5(1980)	7.5(1985)	11 (1989)	—	—
BES	—	2.4	41	31	31

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

The figures for 1990-91 and 1991-92 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

(1)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 40 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.

(2)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.

The cost increased in 1991 because the relief became available to companies which formerly qualified for Export Sales Relief.

(3)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.

(4)“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, £27 million in 1990, and £20.2 million in 1991.

(5)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, e.g. 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.