Financial Resolution No. 4: Income Tax, Corporation Tax and Capital Gains Tax.

The Taoiseach

I move Financial Resolution No. 4:

(1) THAT in this Resolution, other than in paragraph (2)—

"allowable investor company" means, in relation to a qualifying company, a company which is not connected (within the meaning of section 157 of the Corporation Tax Act, 1976 (No. 7 of 1976)) with the qualifying company;

"film" means a film which is produced—

(a) on a commercial basis with a view to the realisation of profit, and

(b) wholly or principally for exhibition to the public in cinemas or by way of television broadcasting,

but does not include a film made for exhibition as an advertising programme or as a commercial;

"the Minister" means the Minister for Arts, Culture and the Gaeltacht;

"qualifying company" means a company which—

(a) is incorporated in the State, and

(b) is resident in the State and is not resident elsewhere, and

"qualifying film" means a film in respect of which the Minister has given a certificate under the provisions of section 35 of the Finance Act, 1987 (No. 10 of 1987), which were in force before the 23rd day of January, 1996;

"qualifying individual" means, in relation to a qualifying company, an individual who is not connected (within the meaning of section 157 of the Corporation Tax Act, 1976) with the company;

"relevant investment" means a sum of money which is—

(a) paid to a qualifying company in respect of shares in the company by an allowable investor company on its own behalf or by a qualifying individual on that individual's own behalf, and

(b) paid by the allowable investor company or the qualifying individual, as the case may be, for the purpose of enabling the qualifying company to produce a qualifying film, and

(2) THAT, subject to paragraph (3) of this Resolution, the Finance Act, 1987, be amended by the substitution of the following section for section 35:

"35.—(1) In this section—

`allowable investor company' means, in relation to a qualifying company, a company which is not connected with the qualifying company;

`authorised officer' means an officer of the Revenue Commissioners authorised by them in writing for the purposes of this section;

`film' means a film which is produced—

(a) on a commercial basis with a view to the realisation of profit, and

(b) wholly or principally for exhibition to the public in cinemas or by way of television broadcasting,

but does not include a film made for exhibition as an advertising programme or as a commercial;

`the Minister' means the Minister for Arts, Culture and the Gaeltacht;

`qualifying company' means a company which—

(a) is incorporated in the State, and

(b) is resident in the State and is not resident elsewhere, and

`qualifying film' means a film in respect of which the Minister has given a certificate under subsection (2) which certificate has not been revoked under that subsection;

`qualifying individual' means, in relation to a qualifying company, an individual who is not connected with the company;

`qualifying period' means—

(a) in relation to an allowable investor company, the period commencing on the 23rd day of January, 1996, and ending on the 22nd day of January, 1999, and

(b) in relation to a qualifying individual, the period commencing on the 23rd day of January, 1996, and ending on the 5th day of April, 1999;

`relevant deduction' means a deduction of an amount equal to 80 per cent. of a relevant investment;

`relevant investment' means a sum of money which is—

(a) paid in the qualifying period to a qualifying company in respect of shares in the company by an allowable investor company on its own behalf or by a qualifying individual on that individual's own behalf, and is paid by the allowable investor company or by the qualifying individual, as the case may be, directly to the qualifying company, and

(b) paid by the allowable investor company or the qualifying individual, as the case may be, for the purpose of enabling the qualifying company to produce a film in respect of which, at the time the sum of money as aforesaid is paid, the Minister has given notice in writing to the qualifying company that the Minister is satisfied, for the time being, that an application in writing containing such information as may be specified in the guidelines referred to in subsection (2) has been made to enable the Minister to consider whether a certificate should be given to that company under that subsection, and

but does not include a sum of money paid to the qualifying company on terms which provide that it will be repaid, other than a provision for its repayment in the event of the Minister not giving a certificate under subsection (2), and a reference to the making of a relevant investment shall be construed as a reference to the payment of such a sum to a qualifying company.

(2) (a) The Minister may, in accordance with guidelines laid down by the Minister with the consent of the Minister for Finance, give a certificate to a qualifying company stating, in relation to a film to be produced by the company, that the film may be treated as a qualifying film for the purposes of this section.

(b) A certificate given by the Minister under paragraph (a) shall—

(i) without prejudice to the generality of subparagraph (ii), be subject to the following conditions, that is to say—

(A) not less than—

(I) 75 per cent., or

(II) such lower percentage, not being less than 10 per cent., which, in accordance with guidelines laid down under paragraph (a), the Minister specifies in the certificate,

of the work on the production of the film is carried out in the State,

(B) where the total cost of production of the film does not exceed £4,000,000, not more than 60 per cent. of that cost is met by relevant investments,

(C) where the total cost of production of the film exceeds £4,000,000 and does not exceed £5,000,000, not more than the allowable percentage is met by relevant investments where the amount per cent. of the allowable percentage is determined by the formula—

60 — E / £100,000

where E is the excess of the total cost of production of the film over £4,000,000, and

(D) where the total cost of production of the film exceeds £5,000,000, not more than 50 per cent. of that cost is met by relevant investments:

Provided that, in any case, the total cost of production of the film which is met by relevant investments shall not exceed £7,500,000:

Provided that where the percentage of the work on the production of the film carried out in the State (in this proviso referred to as the `specified percentage') is less than 50 per cent., paragraph (b) shall be construed as if the reference to 60 per cent., the reference to the allowable percentage and the reference to 50 per cent. were a reference to the specified percentage,

and

(ii) be subject to such conditions as the Minister may consider proper and specifies therein including a requirement that the qualifying company shall, in respect of the qualifying film concerned, notify the Minister in writing of when the principal photography has commenced, the first animation drawings have commenced or the first model movement has commenced, as appropriate:

Provided that the Minister may amend or revoke any such condition (including a condition added by virtue of this proviso) specified in the certificate, or add to such conditions, by giving notice in writing to the qualifying company concerned of the amendment, revocation or addition, and the provisions of this section shall apply as if—

(I) a condition as so amended or added by the notice was specified in the certificate, and

(II) a condition as so revoked was not specified in the certificate.

(c) Where a company fails to comply with any of the conditions to which a certificate given to it under paragraph (a) is subject by virtue of paragraph (b)—

(i) that failure shall constitute the failure of an event to happen by reason of which relief falls to be withdrawn under subsection (11), and

(ii) the Minister may, by notice in writing served by registered post on the company, revoke the certificate.

(3) Subject to the provisions of this section, where, in an accounting period, an allowable investor company makes a relevant investment, it shall, on making a claim in that behalf, be given a relevant deduction from its total profits for the accounting period:

Provided that, where the amount of the relevant deduction to which the allowable investor company is entitled under this section in an accounting period exceeds its profits for that accounting period, an amount equal to ten-eighths of the amount of that excess shall be carried forward to the succeeding accounting period and the amount so carried forward shall be treated for the purposes of this section as if it were a relevant investment made in that succeeding accounting period.

(4) Where in any period of 12 months ending on an anniversary of the 22nd day of January, 1996, the amount, or the aggregate amount, of the relevant investments made, or treated as made, by an allowable investor company, or by such company and all companies (which other companies are referred to hereafter in this section as `connected companies') which, at any time in that period, would be regarded as connected with such company, exceeds £2,000,000, no relief shall be given under this section in respect of the amount of the excess and, where there is more than one relevant investment, the inspector, or, on appeal, the Appeal Commissioners, shall make such apportionment of the relief available as shall be just and reasonable to allocate to each relevant investment a due proportion of the relief available and, where necessary, to grant to each allowable investor company concerned an amount of relief proportionate to the amount of the relevant investment or the aggregate amount of the relevant investments made by it in the period.

(5) Subject to the provisions of this section, where, in any year of assessment, a qualifying individual makes a relevant investment, the individual shall, on making a claim in that behalf, be given a relevant deduction from the individual's total income for that year of assessment.

(6) A relevant deduction shall not be given under this section in respect of any relevant investment made by a qualifying individual in a qualifying company in any year of assessment unless the amount of that relevant investment, or the total amount of the relevant investments, made by the individual in the qualifying company in that year is £200 or more:

Provided that, in the case of a qualifying individual who is a husband assessed to tax for a year of assessment in accordance with the provisions of section 194 (inserted by section 18 of the Finance Act, 1980) of the Income Tax Act, 1967, any relevant investment made by his spouse in the qualifying company in that year of assessment shall be deemed to have been made by him.

(7) A relevant deduction shall not be given to a qualifying individual under this section for a year of assessment to the extent to which the amount of the relevant investment, or the total amount of the relevant investments (whether or not made in the same qualifying company), made, or treated as made, by the individual in that year of assessment exceeds £25,000.

(8) If, for any year of assessment, a greater relevant deduction would be given to a qualifying individual under this section but for either or both of the following reasons, that is to say—

(a) an insufficiency of total income, or

(b) the operation of subsection (7),

ten-eighths of the relevant deduction which cannot be given to the individual under this section for either or both of those reasons shall be carried forward to the next year of assessment and shall be treated for the purposes of this section as a relevant investment made by the individual in that following year:

Provided that an amount shall not be carried forward to any year of assessment after the year 1998-99.

(9) To the extent that an amount once carried forward to a year of assessment under subsection (8) (and treated as a relevant investment made by a qualifying individual in that year of assessment) gives rise to a relevant deduction which is not deducted from the qualifying individual's total income for that year of assessment, the amount shall to that extent be carried forward again to the next following year of assessment (and treated as a relevant investment made by the individual in that next following year), and so on for succeeding years of assessment:

Provided that an amount shall not be carried forward to any year of assessment after the year 1998-99.

(10) A relevant deduction under this section shall be given to a qualifying individual for any year of assessment as follows—

(a) in the first instance, in respect of an amount of relevant investment carried forward from an earlier year of assessment in accordance with the provisions of subsection (8) or (9), and, in respect of such an amount so carried forward, for an earlier year of assessment in priority to a later year of assessment, and

(b) thereafter, and only thereafter, in respect of any other amount of relevant investment in respect of which a relevant deduction is to be given in that year of assessment.

(11) (a) A claim to relief under this section may be allowed at any time after the time specified in paragraph (b) in respect of the payment of a sum to a qualifying company, which, if it is used, within two years of its being paid, by the qualifying company for the production of a qualifying film, will be a relevant investment, if all the conditions for relief are or will be satisfied, but the relief shall be withdrawn if, by reason of the happening of any subsequent event including the revocation by the Minister of a certificate under subsection (2) or the failure of an event to happen which at the time the relief was given was expected to happen, the company or the individual, as the case may be, making the claim was not entitled to the relief allowed.

(b) The time referred to in paragraph (a) is the time at which all of the following events have occurred, that is to say—

(i) the payment in respect of which relief is claimed has been made, and

(ii) in relation to the qualifying film the principal photography has commenced, the first animation drawings have commenced or the first model movement has commenced, as appropriate.

(12) A claim for relief in respect of a relevant investment in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, so far as applying to the company and the qualifying film, are or will be satisfied in relation to that investment.

(13) Before issuing a certificate for the purposes of subsection (12), a company shall furnish the authorised officer with—

(a) a statement to the effect that it satisfies or will satisfy the conditions for the relief, so far as they apply in relation to the company and a film,

(b) a copy of any notification required to be given to the Minister under subsection (2) (b) (ii),

(c) a copy of the certificate, including a copy of any notice given by the Minister amending, revoking or adding a condition to that certificate, under subsection (2) in respect of the film, and (d) such other information as the Revenue Commissioners may reasonably require.

(14) A certificate to which subsection (12) relates shall not be issued without the authority of the authorised officer.

(15) Any statement under subsection (13) shall—

(a) contain such information as the Revenue Commissioners may reasonably require,

(b) be in such form as the Revenue Commissioners may direct, and

(16) Where a company has issued a certificate for the purposes of subsection (12), or furnished a statement under subsection (13), and either—

(a) the certificate or statement was made fraudulently or negligently, or

(b) the certificate was issued in contravention of subsection (14)

then—

(i) the company shall be liable to a penalty not exceeding £500 or, in the case of fraud, not exceeding £1,000, and such penalty may, without prejudice to any other method of recovery, be proceeded for and recovered summarily in the same manner as in summary proceedings for recovery of any fine or penalty under any Act relating to the excise, and

(ii) no relief shall be given under the provisions of this section and if any such relief has been given, it shall be withdrawn.

(17) For the purpose of regulations made under section 127 of the Income Tax Act, 1967, no regard shall be had to the relief unless a claim for it has been duly made and admitted.

(18) An allowable investor company or a qualifying individual shall not be entitled to relief in respect of a relevant investment unless the relevant investment—

(a) has been made for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax,

(b) has been, or will be, used in the production of a qualifying film, and

(i) in a case where it is made by an allowable investor company, neither the company nor any person who would be regarded as connected with the company, or

(ii) in a case where it is made by a qualifying individual, neither the individual nor any person who would be regarded as connected with the individual,

is entitled to receive any payment, in money or money's worth, or other benefit directly or indirectly borne by, or attributable to, the qualifying company other than a payment made on an arm's length basis for goods or services supplied or a payment out of the proceeds of exploiting the film to which the allowable investor company or the qualifying individual, as the case may be, is entitled under the terms subject to which the relevant investment is made.

(19) Where any relief has been given under this section which is subsequently found not to have been due or is to be withdrawn by virtue of subsection (11) or (16), it shall be withdrawn by making an assessment to corporation tax or income tax, as the case may be, under Case IV of Schedule D for the accounting period or accounting periods, or the year of assessment or years of assessment, as the case may be, in which relief was given and, notwithstanding anything in the Tax Acts, such an assessment may be made at any time.

(20) (a) Subject to paragraph (c), where an allowable investor company is entitled to relief under this section in respect of any sum, or any part of a sum, or would be so entitled on making due claim, as a relevant deduction from its total profits for any accounting period, it shall not be entitled to any relief for that sum or any part of a sum, in computing its income or profits, or as a deduction from its income or profits, for any accounting period under any other provision of the Corporation Tax Acts or the Capital Gains Tax Acts.

(b) Subject to paragraph (c), where a qualifying individual is entitled to relief under this section in respect of any sum, or any part of a sum, or would be so entitled on making due claim, as a relevant deduction from the individual's total income for any year of assessment—

(i) the individual shall not be entitled to any relief for that sum or part in computing the individual's total income, or as a deduction from the individual's total income, for any year of assessment under any other provision of the Income Tax Acts, and

(ii) so much of that sum or part as is equal to the amount of the relevant deduction given in relation thereto shall be treated as a sum which, by reason of paragraph 4 of Schedule 1 to the Capital Gains Tax Act, 1975, is to be excluded from the sums allowable as a deduction in the computation of gains and losses for the purposes of the Capital Gains Tax Acts.

(c) Where an allowable investor company or a qualifying individual has made a relevant investment by way of a subscription for new ordinary shares of a qualifying company and none of those shares are disposed of by the allowable investor company or the qualifying individual, as the case may be, within one year of their acquisition by that company or that individual, as the case may be, then the sums allowable as deductions from the consideration in the computation for the purpose of capital gains tax of the gain or loss accruing to the company or the individual, as the case may be, on the disposal of those shares shall be determined without regard to any relief under this section which the company or the individual, as the case may be, has obtained, or would be entitled on due claim to obtain, except that where those sums exceed the consideration they shall be reduced by an amount equal to—

(i) the amount of the relevant deduction allowed to the allowable investor company or the qualifying individual, as the case may be, under this section in respect of the subscription for those shares, or

(ii) the amount of the excess,

whichever is the lesser amount:

Provided that, if the disposal of shares is by a qualifying individual, and the disposal falls within section 13 (5) of the Capital Gains Tax Act, 1975, the preceding provisions of this paragraph shall not apply.

(d) For the purposes of this subsection `new ordinary shares' means new ordinary shares forming part of the ordinary share capital of a qualifying company which, throughout the period of one year commencing on the date such shares are issued, carry no present or future preferential right to dividends, or to a company's assets on its winding up, and no present or future preferential right to be redeemed.

(21) Section 157 of the Corporation Tax Act, 1976, shall apply for the purposes of this section.

(22) In the case of an individual, all such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 142 of the Income Tax Act, 1967, shall, with any necessary modifications, apply in relation to relief under this section.".

(3) THAT—

(a) paragraph (2) of this Resolution shall not apply to a film to which this paragraph applies,

(b) the provisions of section 35 of the Finance Act, 1987, which were in force immediately before the 23rd day of January, 1996, shall apply to a film to which this paragraph applies, and

(i) which before the 23rd day of January, 1996,

(I) was a qualifying film, or

(II) was not a qualifying film, and was a film in respect of which—

(A) the Minister had, before that day, received from a qualifying company an application in writing to give a certificate to the company stating, in relation to the film to be produced by the company, that the film may be treated as a qualifying film, and

(B) the certificate given by the Minister to the company includes a statement that the Minister had received the said application before the 23rd day of January, 1996,

and

on or before the 31st day of March, 1996, all relevant investments paid or payable to the qualifying company to enable it to produce the qualifying film have been paid:

Provided that—

(a) where an allowable investor company has in the period of twelve months ending on the 22nd day of January, 1997, paid a relevant investment to a qualifying company to enable it to produce a film to which this paragraph applies, then the reference in subsection (4) of section 35 (inserted by paragraph (2) of this Resolution) to £2,000,000 shall, in respect of that period, be construed as a reference to £2,000,000 less the amount, or if there are more amounts than one the aggregate of such amounts, of such relevant investments, and

(b) where a qualifying individual has in the year of assessment 1995-96 paid a relevant investment to a qualifying company to enable it to produce a film to which this paragraph applies the reference in subsection (7) of section 35 (inserted by paragraph (2) of this Resolution) to £25,000 shall, in respect of that year of assessment, be construed as a reference to £25,000 less the amount or, if there are more amounts than one the aggregate of such amounts, of such relevant investments.

(4) THAT this Resolution shall have effect as on and from the 23rd day of January, 1996.

(5) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This resolution relates to a special tax relief for investment in films introduced by section 35 of the Finance Act, 1987, and amended in later Finance Acts. There has been a dramatic increase in the level of film production in Ireland in recent years, one of the major reasons being the section 35 relief. I was reading in a British newspaper today there is great jealousy expressed by people in the film industry in Britain that they do not have a facility of this nature, as a result of which, they contend they are losing certain film production to Ireland. I had the opportunity earlier in the year of meeting members of the Heritage Committee of the House of Commons, chaired by a former Labour Foreign Secretary, who were over here and were particularly interested in this matter.

Since the relief is due to terminate on 31 March next for corporate investors and on 5 April next for individual investors, a detailed study has been carried out into its operation. Following an assessment of the study, it has been decided to renew the relief in an amended form for a further three years because of its importance to the Irish film industry.

Accordingly, this Financial Resolution amends the section 35 relief with effect from today, the new arrangements to apply for a further three years. The main changes being effected in this relief are: first, there will be a reduction in the amount of expenditure on larger films which qualify for relief. At present, the relief applies to 60 per cent of the total cost of a film, irrespective of its size. This will be reduced to 50 per cent of the total cost in the case of films with a budget in excess of £4 million, with a maximum relief of £7.5 million in the case of films with a budget in excess of £15 million. Where a film budget is between £4 million and £5 million, the qualifying percentage will be between 50 per cent and 60 per cent.

These changes will considerably reduce the Exchequer cost of this tax relief while not greatly affecting the producers of smaller films as the 60 per cent limit will still apply to smaller productions. It is estimated that Irish resources are more highly concentrated by Irish film makers in smaller films. Second, only 80 per cent of investment in the film, instead of 100 per cent at present, will qualify for relief. This will also reduce Exchequer costs. Third, the annual limit for investment by a company of a corporate group will be increased to £2 million from the present level of £350,000 per annum or £1.05 million over a three year period. That will mean in the case of any particular film budget the Exchequer cost will be reduced if all the investors are corporate rather than individuals because the marginal tax rate for a company is 38 per cent as against 48 per cent for an individual making such as investment. The annual investment limit for an individual will remain £25,000, the same as for the BES.

Fourth, the holding period for investment in a film for capital gains tax purposes is being reduced from three years to one year recognising that a film is usually made within a year. Obliging investors to retain shares for three years does not serve a useful purpose. Fifth, investments must be made directly by the investor into a qualifying film company and such a company may make only one qualifying film. This change addresses a problem where money was being raised before projects were available which can result in moneys having to be returned to investors if a film project did not materialise. Sixth, tax relief will be available only from the date of commencement of what is known as principal photography. This change ensures tax relief is not given before the film-making commences, which has occurred in some instances and is not desirable.

The changes we have made will maintain the very attractive nature of this tax relief while ensuring the ordinary taxpayer, who cannot avail of tax relief to the film industry, is not exposed to undue loss of revenue.

It is important to quantify the rate of growth in film-making here. In 1987 two or three films were made here. This increased to 18 in 1992 and 33 feature films and 16 television productions in 1995. Under the BES if tax loss is compared to tax gains and additional employment created through PRSI receipts, income tax paid by employees and so on, there is no net loss to the Exchequer, but in the case of tax relief on the film industry there is a net cost to the Exchequer. The cost to the Exchequer of tax relief to the film industry in lost revenue is greater than all the taxes paid by film makers making films and employing people here. This has been established in the Indecon study, the basis for the Government's estimated changes.

The annual amount invested under section 35 is approximately £42 million which involves an annual cost of £19 million in tax relief. The increase in revenue from PAYE, PRSI and so on from extra film-making activity generated by the tax relief is between £1 million and £13.5 million. The net cost to the taxpayer after all benefits are taken into account is between £5.5 million and £8 million. Effectively this tax relief is a straight subsidy to film-making on the basis that it has other non-economic and non-financial benefits of between £5.5 million and £8 million a year.

It is argued that wider benefits are gained from making films here. Irish made films project an image of this country, make it known to people and encourage them to visit here for various reasons because of familiarity with the country through film-making. The attractions of the United States of America and of Australia are not disassociated with the fact that many more films are made in those countries than in others. It is important to recognise that this tax relief is a direct subsidy to film-making because the net benefits in terms of direct taxes paid by film makers are not as great as the tax foregone as a result of the tax relief. These taxes would otherwise be paid mostly by corporations which are well positioned to pay them; hence the need to ensure that the State does not suffer excessive Exchequer losses by the modest reining in of the scheme I announced. We have struck the right balance and we will continue to give this straight subsidy to film-making, but it will be given on a slightly less generous scale than previously.

It has been suggested there is a need to pace the growth of the film industry to avoid bottle necks in particular skills. We want to ensure we can provide trained Irish people based here to avail of jobs in the industry and that we do not give tax finance subsidies to technicians and others who come over from Britain for a few weeks to make a film here and then return there. We also want to ensure that we develop the industry at a pace that enables us to fill the job vacancies being created with people who are home trained, pay taxes here, live or spend most of the year here and that they get the benefit of the tax relief on the industry rather than people who simply come here and do not pay taxes here because they have a residency for tax purposes elsewhere. The growth in the industry should be managed to the point that we get the maximum benefits from what is straight subsidy to the film industry.

Mr. McCreevy

I will confine most of my remarks to Resolution No. 3 regarding the BES and my colleague Deputy de Valera will deal with Resolution No. 4. I appreciate these matters will be dealt with again in the Finance Bill when there will be more time to debate them at length. Resolution No. 3 extends to eight pages and resolution No. 4 to 12 pages. I congratulate the officials in the Department of Finance and the Revenue Commissioners who drew up such lengthy sections, but they are incomprehensible, difficult to follow and it is not possible to decipher them in the short time available.

The Taoiseach was the originator of the idea behind the scheme which I considered an excellent one at the time. I agree with most of his comments on the business expansion scheme. As he said it has worked, with some limitations. Over the years restrictions have been imposed on the BES. I would possibly be in a minority in my party about the BES. The reasons put forward by many people for amending it over the years are the same as those put forward by the Taoiseach. The principle of the BES shows something about the Irish psyche and the Irish taxpayer which could be tapped to fruitful benefit by politicians and the system.

I know, from my business experience, that from January to March each year when the BESs were unrestricted, accountants' offices were inundated with people willing to put their money — many of whom could not afford it — into a BES rather than pay additional tax. I am aware of people who borrowed reasonable amounts of money to invest in such schemes and they never worried whether they got the money back as long as they did not have to pay tax. I argued, unsuccessfully over the years, that that matter should be tapped into. If people are anxious to invest money in a scheme in the belief of saving tax I thought it could be put to useful benefit.

Over the years business expansion schemes have been restricted and I readily recognise the reasons, some of which were given by the Taoiseach. The scheme has been restricted so much over a period and resulted in such a loss to the Exchequer in tax foregone that the principle is in danger of being lost. The Taoiseach rightly said that his original ideas in putting forward the BES were the three objectives which he set at the time, clearly he said he did not succeed in the other two.

This raises the question of banks financing and giving equity to small and medium sized enterprises. Despite the best efforts of many governments nobody has been able to crack that particular nut and I do not believe they will because banks do not wish to invest in risky undertakings. They would say their job is to protect the funds of their shareholders and depositors and that they should not engage in that type of risk business.

The successful £200 million small business loan scheme is a matter for another day and I intend to raise it with the Minister of State at his Department. We had £100 million when I was Minister for Tourism and Trade, £25 million of which went to tourism. The recently announced scheme has been over subscribed. Will the Department investigate whether all small businesses got these loans? There is anecdotal evidence to suggest that some of those moneys have been given by banks to their best customers and that they have not gone to the areas for which they were intended by the Minister and his Department. If this is the case, and this loan has been available through a wide range of banks, unlike the previous scheme which was administered strictly by the ICC, it will have to be investigated further.

This raises the question of objections which the banks have to any risk taking. They should be able to tap the BES psyche for what it is worth. The restrictions introduced today means there will have to be a certification process by the relevant agency. From my brief reading of the section, in the case of tourist undertakings Bord Fáilte will have to approve the development plan. In the case of manufacturing undertakings the development plan would have to be approved by Forbairt, the IDA or whatever.

I would be loath, even though this would be done on foot of guidelines set down by the Minister for Finance, the relevant Minister under whose aegis the agency will come, to tamper further with the scheme. I admire the work of the Department of Finance in trying to protect the public purse. That is its duty. It is the duty of the Revenue Commissioners to enact the law as set down and to protect abuses of it. I have no objections to officials in the Department of Finance or the Revenue Commissioners putting forward ideas to restrict schemes but the Minister and politicians should take a broader view of this matter. The scheme should not be restricted in such a way that the whole purpose of the BES is lost.

The most striking aspect of the business expansion scheme is the degree to which people are prepared to go to invest money in such schemes to avoid paying tax. This raises an interesting point. People prefer to save on taxes because they can see where the money is going on individual projects and if they succeed whereas when the money goes into the general maw of the Revenue they do not believe they get value for what they have done. We should not tamper further with the BES although I recognise the difficulties with it and the restrictions which various Ministers have imposed.

The film resolution is restricted in the same way as the BES began to be restricted. It went through exactly the same process. It took years for a Minister to have the courage to get a BES in operation. That Minister is now the Taoiseach, Deputy Bruton. It was so successful that restrictions had to be imposed. It took much effort on the part of many people to have section 35 amended in a way that would benefit. In fairness, the Minister for Arts, Culture and the Gaeltacht, had a hand in doing that. The restrictions has been more or less lifted and it has worked effectively. However, because of its success it will be limited. There is no denying the figures put forward by the Taoiseach. It is better to have activity in Ireland getting the name of a film place and a place for arts and culture and there is a spin off in that area. Furthermore, I held that view as Minister for Tourism and tried to put some of these into effect through my Department and Bord Fáilte.

I believe Australia's success as a tourist destination has nothing to do with marketing abroad but because of its myriad TV soaps and films. It may amuse people to know that the film which is watched most and the one which gives Ireland a better image abroad is "The Quiet Man", made many years ago. It is shown regularly on airline flights all over the world. That has a much better chance of bringing tourists to Ireland than many of the millions which I and others have spent in official tourism promotions. The section 35 scheme has worked so well that I do not like to see it tampered with. I recognise the loss that has resulted from it but a broader view must be taken of it. This is the way in which the BES was restricted. Mark my words, in three or four year's time, irrespective of who is Minister for Finance, it will be restricted even further. That would be a bad move. It has worked well and we should not tamper with it because it has been going well only for the past three years. We should let it run without restricting it further.

Mr. Dukes

I find it hard to take Deputy McCreevy seriously. The next time Deputy McCreevy takes a trip to Australia will he do so because he spends much time watching "Neighbours" or is "Crocodile Dundee" the attraction? I wish to say a few words about Resolution No. 3. As Deputy McCreevy said, the whole idea of this scheme has been through several revolutions since 1984 when it was first introduced in the Finance Act of that year. I remember it well because I was the Minister who introduced it and the then Fianna Fáil spokesman on Finance, Deputy Michael O'Kennedy, complained about the number of restrictions in the scheme. If I recall the debate correctly I remember saying to him that the scheme, as it was conceived, was like one of the bows used in archery competitions which has a series of weights built in at various points around the shaft of the bow. The then Deputy O'Kennedy was not too impressed with that and we had the usual claptrap from Fianna Fáil about signals and road signs about which Deputy O'Kennedy was so good at the time. Lo and behold in 1987, 1988, 1989 and 1990 and every year since then we have had more modifications to this scheme.

Every time the scheme has been broadened, it galloped ahead an we had holiday homes being built in Ballsbridge and Sandymount. Every time a Minister for Finance imposes a restriction on the scheme the whole "investing community" rise up in a body and say the scheme has been totally destroyed and robbed of all meaning and, lo and behold, the following year the total amount of investment going through the scheme is increased. I suspect this is partly due to the propensity of many people to believe that it is much better to invest money in something regardless of whether it is good or bad value than to pay income tax. As long as we have a BES type scheme in operation we will have this kind of alternation between years of slackening and years of tightening-up. It is in the nature of the scheme that that kind of thing should happen.

Financial Resolution No. 4 deals with relief for investment in films. I am delighted some of the most interested parties are present, as rumours have been going around the House thick and fast today that Deputy O'Keeffe is very disappointed with this measure because he has been offered the contract to star in "Babe II" or "The Son of Babe"— they have not yet decided on the title — but he feels it is not as good as it might otherwise have been. It is interesting that the Taoiseach should have pointed out that although there is a gain of between £11 million-£13.5 million to the State from the activities covered by this resolution the gross tax cost is approximately £19 million per year, giving a net cost to the State of between £5.5 million-£8 million per year. We might all decide that this is not a bad thing to do and it is worthwhile having a net subsidy of between £5.5 million-£8 million a year for this activity but that was not the choice we had to make.

If the Government said that starting from scratch this year it would make £8 million available as a subsidy for film making I wonder if we could choose to write the scheme in such a way that we would make assistance available to a company set up to make one film only. The same principals can be involved in several companies but under the terms of the scheme the company has to be set up to make one film only. If we decided to spend money to promote the making of films would we decide to spend it that way? I am not sure it is obvious that we would. For example, instead of attracting in the mixture of films which happenstance produces with a scheme like this — some big, others small, some popular blockbusters, others made for a more restricted audience, some made for people like me who like to have escapism but do not want to work too hard at it and others made for the devotees of the more intellectually demanding films which unfortunately are shown at times when Members cannot see them — we might try to build a different quality of film industry if we deliberately decided what we would do with £5.5 million-£8 million per year. If the Government put the proposition to us that we should make an extra £8 million a year available for the arts I am not sure we would necessarily decide to make it available exclusively to the film industry.

It is worthwhile reviewing this type of scheme from time to time. We are all greatly pleased that particular parts of the country are seen on film. However, I often wonder what effect this has. It is nice to look at a film and to recognise some of the places in it. I have not yet seen "Braveheart" but when I do I will look out for the parts of the Curragh with which I am familiar and wonder if the actors had to jump over the same ruts I would jump over if I was riding across those areas. I wonder if the average filmgoer in the United State pays much attention to such detail. If that theory worked, all of us would flock to the United States or Australia on our holidays every year because we liked the look of the background scenery in films we had seen. I am not persuaded this aspect of films has a huge effect on people.

The recent report carried out on these issues was very illuminating. It is useful for us to see these results. While I agree with this measure for all the reasons outlined by the Taoiseach I have always found it somewhat curious that the Minister for Arts, Culture and the Gaeltacht should be so fond of the scheme. I can understand why Fianna Fáil and some members of my party are fond of it, but it is anomalous that a Minister who is probably the only real Marxist left in Government should be a devotee of giving substantial amounts of taxpayers money to what is arguably the most exploitative industry in the world, an industry which employs nobody on a permanent basis and which gives everyone a one film contract. I remember the consternation — Deputies Ahern and O'Keeffe tried their best to crank it up — when a certain film came to a dead stop in Ballycotton. It was very instructive to watch the interviews with some of the people involved in that film. For example, I watched the interview with technicians after they had received the bad news and they said not only would they not get paid after that day but they would have to find their own way home. These people who were domiciled elsewhere for tax purposes came here to make the film — I am sure they carried out the job expertly — and when the contract came to an end they had to go away again. However, because there was no money to pay them they had to pay their own way back.

If the Minister and some of his party colleagues found an industry which operated exclusively on that basis they would be very upset to think we were giving it a subsidy. I am thinking of the indignation rightly expressed about a large retail chain which employs people on what are called contracts, but which really amount to day-to-day employment where even on days they are not working people have to stand by the phone and be available to come into work at short notice. If they do not come into work on short notice that day they are told they have broken their contract and will no longer be employed. The film industry seems to be almost 100 per cent casualised in terms of the people who work in it. I am not sure that there are many people who would say "yes, we want to spend between £5.5 million-£8 million a year subsidising a 100 per cent casualised industry".

This is a timely measure which, by providing that the provisions of section 35 will continue in modified form for another three years, gives us an opportunity to see the value for money we get out of this expenditure of taxpayers' money. I hope at the end of three years we will have another examination on which to base our verdict of the expenditure like the one which led to the measure before us this evening.

An Leas-Cheann Comhairle

The debate on these resolutions must be brought to a conclusion at 10.15 p.m. and I am sure the Minister would like to respond before the question is put. I also wish to facilitate all the Deputies offering.

Mr. O'Dea

I will bear that in mind. Financial Resolution No. 3 extends the BES scheme until 1999 and retains the individual investment limitation of £25,000 and the global investment limitation of £1 million. I welcome the extension of the scheme until 1999. It is stated in the Principal Features of the Budget, however, that a certification scheme will be introduced for investments in excess of £250,000 to "ensure that the money raised is intended to or has the potential to create a reasonable level of additional sustainable employment". In other words, the Government intends to target the larger BES investments more properly to ensure the maxmum benefit is gained by way of extra employment, but I am not sure this Resolution has been properly thought out and that, as drafted, it will achieve that, admittedly desirable end. It seems another layer of bureaucracy will be inserted into the BES process by getting the relevant agency, defined in the basic legislation, depending on which business one is talking about, to issue a certificate to the effect that this criterion has been met.

It is not clear from the Resolution that guidelines will have to be drafted. Although it is envisaged they may at some stage be drafted as I understand it, there will be no absolute requirement to do so. If we do not see the guidelines we will not be in a position to judge whether the insertion of an extra layer of bureaucracy will achieve the Government's goal of targeting the larger BES investments more properly. Am I interpreting the Resolution correctly in stating that guidelines will have to be drafted before the certification process commences and, if so, why can we not see them? That is not an unreasonable request.

I am not familiar with the terms of section 35 which deals with film industry reliefs — I have not come across it much in practice — but I note Financial Resolution No. 4 states that the Minister may amend or revoke any conditions specified in a certificate. This seems to imply that in certain circumstances he will be able to revoke a certificate which enables a person to claim tax relief. How will this operate in practice and under what conditions will the Minister revoke a certificate? If the Minister revokes a certificate, as well as losing their money, bona fide investors in a film project which collapses will also lose their tax breaks. In other words, they will be punished on the double so as to teach some of the film production companies a lesson. Frankly, I do not understand the logic behind that and require clarification.

Miss de Valera

Having listened to the Taoiseach and Deputy Dukes I can see how the Minister for Arts, Culture and the Gaeltacht lost the battle in Cabinet on this issue. He cannot be happy with what has been proposed in Resolution No. 4. If I understood him correctly, Deputy Dukes suggested it would be more beneficial to give £8 million to the arts rather than as a subsidy to the film industry. I was amused by that because, as anyone who has followed the debate on the arts plan in this House will be aware, there was a shortfall of £3 million alone in 1995. The period of the plan has now been extended to five years. In advancing that argument the Deputy was being disingenuous.

Section 35 which deals with film industry reliefs and was initiated by Fianna Fáil, needs certain improvements. There is a need to accelerate the provision of infrastructure and expertise in the industry. This can only be done by attracting blockbuster films. Indigenous productions can tap into this expertise and avail of the infrastructure provided.

If the argument was that we would be in a position to support indigenous productions by doing away with the blockbusters it would be worthy of acceptance, but, sadly, there is no evidence of this. It is unfortunate for the Minister that if there is a reduction in the number of blockbuster films as a result of this Resolution, he will not have the same number of photocall opportunities he has had to date with stars such as Mel Gibson. Instead of meeting them in the House he may have to go further afield.

Everyone would agree in relation to section 35 that there has been a net benefit and that it would not be a positive move to create any disincentives in attracting blockbuster films because of the economic benefits that accrue to local communities. I hoped the Government would be in a position to address the matter of seasonality in film production. Filming usually takes place between the months of May and September. Measures should be introduced to ensure Irish workers in particular are given an opportunity to work throughout the year.

The proposed increase in the limit on corporate investment is not significant. It is important to point out that the bulk of investment has not been made by the corporate sector but by individual investors. This provision will not change anything substantially.

I welcome the proposal to continue the section 35 reliefs for a further three years. That section has been the driving force in ensuring a net benefit. It has to be accepted, however, that this is marginal. By restricting relief to 80 per cent of the investment we could chip away at the attractiveness of the section. It will be appreciated that the film industry has yet to reach its full potential and is in a period of transition. It would be most unwise, therefore, to accept this proposal.

I agree with Deputy Dukes that many countries look on the section with envy and are considering the implementation of a similar provision. This would lead to greater competition. I question whether we would be able to withstand this given that we are chipping away at the attractiveness of the section, the benefit of which has been marginal.

I would have thought the Government would address some of the problems facing the film industry. I refer specifically to the Ballycotton incident — the film "Divine Rapture" has now become known as the "Divine Rupture". Because of the problems encountered many individuals and service industries find themselves in difficulty.

Last July I outlined three issues that should be examined and I am disappointed none of them was incorporated in the Taoiseach's proposals for the film industry. They would have a much more positive effect on our film industry than the negative proposals he put forward. I proposed that section 35 certificates should not be granted unless there is proof that the necessary funding is in place for a film to be made and that the Minister should also make it a condition that disputes over contracts should be settled in this jurisdiction. I also proposed that film producers should be required to present a bond that would guarantee all moneys due to Irish workers and suppliers and that he should consider new measures to encourage the establishment of a truly Irish film industry, with Irish script writers, producers and directors. Our objective should be to build an indigenous film industry, but that can be done only with the infrastructure created by large blockbuster films.

Mr. M. Ahern

I welcome the extension to 1996 of the business expansion scheme. Since its introduction some loopholes have been identified. For example, it covered asset back schemes for which it was not originally intended and as time elapsed money was not invested in risk industry which is necessary for job creation.

It is proposed to introduce a system of certification, but delays in getting certificates would discourage people from investing in industry. What are the Minister's plans to ensure rapid processing of certificates? People should be advised of the conditions that apply when investing their money. Will the Minister expand on these matters?

Mr. E. O'Keeffe

While it may have taken some time to get off the ground, the business expansion scheme is excellent and Fianna Fáil has always supported it. It represents innovative thinking by the then Minister for Finance. While I welcome its extension to 1996, it will be impeded by bureaucracy and red tape. Having to consult with Bord Fáilte, Forbairt and so on will involve additional costs and make the scheme less attractive.

The scheme is ideal for medium to long-term capital but in general the money has to be repaid within five years. Given the risks involved in some projects, in many cases the money is not paid back within five years. The scheme is ideal for the hotel industry and helped alleviate a crisis in the tourism industry when capital was not available from other sources. Many leisure centres have been built and heritage projects completed under the BES.

The scheme is an ideal source of funding for the food industry, particularly for small to medium sized projects.

However, the increase imposed on the price of petrol will have an adverse effect on food exports in terms of transport costs, thus creating a disincentive for development in the food sector. The banks are not interested in taking risks. Impediments will discourage investors and those who avail of the capital.

I appeal to the Minister to introduce a simple certification scheme. Some projects, for which substantial investment was secured under the BES, failed to get a Revenue certificate. Therefore, a degree of protection is in place. A project in my area failed to get the necessary certificate even though it had the necessary funding. That case is still before the Revenue.

Business expansion schemes have been successful in many other countries, particularly in New Zealand where the scheme was pioneered. It is an important source of funding for risks projects. Financial analysts and economists claim that the punt may soon be worth £1.05 against sterling. If that happens it will be difficult for people to get capital to invest in the processing area. The BES would be an ideal source of funding in those circumstances. A ceiling of £1 million is not a significant sum of money when one considers the amount of capital invested in projects. Funding under the BES is risk capital which very few people are willing to offer.

It is claimed that many people borrow money under the scheme to avail of tax relief. People do not borrow money lightly because it must be paid back. Those who avail of funding under the BES are mainly in the 48p in the pound tax bracket. I hope the guidelines proposed by the Minister will be simple, workable and will not discourage BES investment.

Mr. Cullen

I welcome the opportunity to speak on Financial Resolution No. 4 and support Deputy de Valera's comments regarding restrictions. While I may not be politically associated with the arts, I enjoy going to the theatre or cinema.

The Taoiseach spoke in a simplistic manner about subsidisation. He said if this section were not inserted in the Finance Bill and if efforts had not been made to develop the film industry, we would not talk about a contribution of £13.5 million from people directly employed in the industry. He said that in real terms the gross loss to the Exchequer would be £19 million and the actual cost would be somewhere between the two figures. It is disingenous of him to say that in such a simplistic manner.

The former Taoiseach, Charles Haughey, instigated an awareness of the arts and heritage here and since then we have endeavoured to attract investment. We promote Ireland as a suitable location for film making in terms of professional and technical expertise and encourage film producers to film here by providing tax incentives. I listened to what Deputy Dukes said on films and I totally disagree with him. I suspect he does not go to many films, judging by the way he spoke about them. I saw "Braveheart" but I did not sit watching it thinking I was on the plains of the Curragh. A person looking at any film, no matter where it is made, does not have a particular awareness of where it has been filmed. However, international awareness of that film and the publicity that promotes it creates an awareness of the place where the film is shot. It also creates an awareness within the industry of the opportunities in a particular location.

The real benefit comes from the technical people, producers and directors who come here to shoot films. It is not necessarily that the few minutes of footage seen on the screen makes everybody want to visit the location. It is not as simple as that and Deputy Dukes was wrong in the way he approached the subject.

The arts have an extremely positive effect on young children. We see a growth in small drama groups. Disadvantaged children are becoming directly involved in the arts, acquiring an awareness of what it is like to be involved with a team and learning to accept the responsibilities involved in being part of a team. I have seen a growth in youth drama in my Waterford constituency. Children who ten years ago would have had no awareness of threatre, arts or culture now find themselves not alone aware of it, but directly involved. That does not necessarily stem directly from the section 35 film making reliefs. However, the awareness of what we are doing in the arts in its widest sense, in film, in theatre, with adults or children, had had a huge impact, domestically and internationally. That is the totality of what we are talking about rather than trying to nit-pick at some of the minor points.

Deputy de Valera is right that the Minister should not reduce the large film budgets, because the larger films afford the greatest employment opportunities. Many international production companies have small units of technical staff that will always be involved in a film with them, no matter where the film is shot, so the larger the budget, the bigger the demands, the bigger the technical requirements, the more people will be employed. The Minister is wrong to restrict the limits of investment in such films, particularly as we are still at a fledgling stage when one compares the money involved in the film industry world-wide with the share this country has in that market. We should broaden our horizons and think in the context of the overall moneys available in the film industry. It is one of the biggest industries in the world, and our share of it is minuscule at the moment. We should aim for a huge increase in involvement. In terms of the money involved in the industry world-wide, our increased involvement would be not hugely significant.

In the financial resolution the Minister is quite specific in excluding films made for exhibition, as advertising programmes or as commercials. The world has changed much, particularly in the area of producing videos for the music industry. Staggering amounts of money are involved in some of those productions today. Anything from $1 million to $25 million dollars can be spent. I believe $25 million was the most spent on a music industry video. Some of these videos are not three minutes long, they are a whole production with a film or with a music album and can last up to 30 minutes. Is that sort of involvement excluded from the definition under financial resolution No. 4? Some of the world's leading film directors, who make the most successful blockbuster films, also shoot videos for mega stars on incredibly large budgets. It would be a mistake to exclude that sort of filming under this section.

It is stated that the BES will also be extended under the Finance Bill to the music industry to apply to investment in the production, marketing and promotion of new artist's studio recordings and associated videos, subject to the detailed certification system. There is confusion. We are defining the requirement differently in two different sections when this should be simple and understandable under section 35 for the reasons I have outlined. If the Minister includes this under the financial resolution No. 3 dealing with the BES he is wrong to negate the opportunity that exists for very serious, expensive and technical filming in the world of commercial advertising, were we are talking about substantial budgets, technical requirements and numbers of people.

It seems that non-commercial advertising videos are automatically excluded. That does not make sense. It is incorrect to include that in financial resolution No. 4. We will come back to this during the definitions in the Finance Bill. The provision is very short-sighted, and too narrow. It should be broadened to include the type of film production that accompanies many major musical videos. I suspect this part of the industry has grown from quite a small base to a very substantial size world-wide and this country could fruitfully get involved in it. It would be a very terrible shame if because of this oversight in the way this financial resolution is drafted, we excluded a whole area of opportunity. I will be interested to hear the Minister's comments in that regard.

Minister of State at the Department of Enterprise and Employment (Mr. Rabbitte)

I do not know that the criticism which Deputy McCreevy made in respect of the small business loan scheme applies. I will seek to establish if it does. The information we have is to the contrary, that in fact it is oversubscribed at this point in terms of the projections for it. Our information is that it is working as intended and it is greatly appreciated by SME's up and down the country. However, if Deputy McCreevy has a point to make I will be very happy to look at it.

On resolution No. 3, there seems to be general approval in the House for the extension of the scheme for another three years. It is perfectly normal to examine a scheme like this from time to time. The first examination I recall was by the Comptroller and Auditor General who examined the efficacy of the scheme as it applied at that time and identified certain weaknesses in it. Subsequent examinations have identified further weaknesses, attempted to counter the facility for abuse and attempted to ensure that changes were introduced in the House commensurate with getting the maximum value added for this economy.

None of us can complain about schemes like this, the central idea of which might be a very good one. However, the efficacy of the operation of the scheme should be examined from time to time.

Virtually all the organisations which commented on it requested that the focus of the scheme be on smaller projects. The irony of the studies done is that they show the smaller schemes have generated the optimum employment, while larger ones which have used an amount of the funds available have not been nearly as good in terms of the generation of employment, which is critical.

Deputies O'Dea and O'Keeffe raised the question of the certification process by the development agencies. That is a prudent provision as the development agencies are in a position to look at the employment content which is, after all, the purpose of the exercise. It is not devised as a financial instrument to avoid paying tax but to create wealth in the economy and generate employment. I assure Deputies O'Dea and O'Keeffe that the certification process will not be unduly difficult. Draft guidelines have already been prepared and the final version should be available in a week or two. The fears both Deputies raised can be assuaged.

I again refer to the review carried out of the number of jobs created in manufacturing and international services from 1984 to 1994. According to the review by the Department of Enterprise and Employment, the number of additional jobs created was just short of 5,000 — 4,979. The 1991 review indicated that 3,138 jobs had been created. This indicates that BES investment per job has risen from £11,790 to £16,200. The principal reason identified for the increased investment per job is that a significant number of companies raised substantial funding under the BES in recent years and provided few, if any, jobs. There have been a few remarkable examples of that.

Significantly, however, the current review has identified that a number of companies raising funds of the order £20,000 to £100,000 — in other words, at the lower end of the scale — created significant new jobs. The importance of the BES to these companies tends to be overshadowed by a number of larger companies which raised amounts between £0.5 million and the ceiling of £1 million and created few jobs in the process. I do not believe any Deputy would consider a Government responsible if it did not review the lessons of those studies.

The BES investment cost per job of £16,200 for the ten year period to which I referred implies a cost to the Exchequer, in terms of tax foregone at say the marginal rate, of £7,776. We must not forget that many of these projects would also have qualified for IDA assistance. It was incumbent on us to take on board the lessons pointed up. Grants would further increase the average Exchequer cost per job by about £12,000 so we are talking of a figure of about £20,000 per job. The corresponding total Exchequer cost per job was calculated at £14,300 in the 1991 review, which was at the time roughly the IDA's average per job created.

In addition to the current review a random survey by the Revenue Commissioners from their files of 100 cases tended to reinforce the findings of the Department of Enterprise and Employment. The companies chosen accounted for some £17 million of the total £52 million investment. The result of the survey confirms the findings of the Peat Marwick study of the UK's scheme that the smaller investment projects account for the greatest increase in jobs. At the time of application, the company seeking investments of up to £50,000 and representing a total investment of £1.08 million expected to take on 550 additional employees. Applicants at the other end of the scale, representing investments of over £500,000 and a total investment of £11.5 million, expected to take on 190 additional employees. The lesson is clear and there is no great dispute in the House about the wisdom of the measures proposed in the resolution.

I refer to the involvement of the tax strategy group which supported changes in the tax relief designed to refocus this scheme on the provision of employment generating risk capital to small and medium sized firms unable to secure ready funding in the market place. In particular, the group recommended a certification system to be operated by the industrial development agencies which would be based on agreed ministerial guidelines and would set out satisfactory business and employment targets, which we are doing.

Mr. E. O'Keeffe

Make the ceiling £0.5 million, which is a small amount in any development today.

Mr. Rabbitte

The thrust of the studies on this clearly show that the value added is in the smaller projects and, therefore, it is proper to refocus it on them. I accept that £0.5 million may not be a great amount of money in 1996. Nonetheless, if all the lessons point up that the real value added is in the smaller projects then without applying a ceiling, we will not get that voluntarily. The funds have been used up by a small number of large projects and the net additional employment created has been small.

Mr. E. O'Keeffe

I do not want to argue, but some are capital intensive. I appeal to the Minister who is innovative, although a member of a party with which we would not always agree, to further look at this and to raise the ceiling to £0.5 million.

Mr. Rabbitte

I do not believe the statistics bear out Deputy O'Keeffe's point. In 1994 only 16 out of 100 companies raised more than £0.5 million. The merit of what we are doing will be wasted if we do not attempt to refocus it on the smaller projects where the jobs are and we would not be taking the lessons of the reviews done by the Department of Enterprise and Employment and others on board.

I refer to resolution 4 on section 35 relief. It is important to put it into perspective which Deputy de Valera, in particular, seems to forget. The genesis of this measure was in the abolition of the Film Board and this was put forward as a type of alternative. The performance, until the present Minister for Arts, Culture and the Gaeltacht took office, was weak. The Taoiseach said two to three films on average were made in 1992 compared to 33 feature length films and 16 television productions in 1995. It is only the impetus given to the industry by the present Minister for Arts, Culture and the Gaeltacht that has generated the kind of economic activity referred to by Deputies on the other side of the House. I note that Deputy McCreevy implied that the net cost to the Exchequer was well worth while. Deputy Cullen went on to say, if I have his words correctly, that the Taoiseach dealt with this simplistically and disingenuously. We are all aware from Irish history of the phenomenon of Ipsis Hibernicus Hiberniore, but Deputy Cullen has become more Fianna Fáil than Fianna Fáil themselves.

Mr. Cullen

Is that a compliment?

Mr. Rabbitte

How the comments of the Taoiseach could be considered simplistic when he merely——

Mr. Cullen

I explained.

Mr. Rabbitte

He was merely quoting from the study by Indecon which showed, when all measurable factors were taken into account, that there was what could be described as a subsidy of somewhere between £6.1 million and £8 million. I am surprised that, since Deputy Cullen has been lecturing us all day on the exigencies of the public finances, etc., he seems to be saying that the studies that have been carried out on the efficacy of section 35 ought to be ignored and that we should go on as before.

Mr. Cullen

That is not what I said. If the Minister is going to quote me, he should quote me correctly.

Miss de Valera

That is a real smoke screen.

Mr. Cullen

The point is that if section 35 did not exist we would not have the money in the first place.

An Ceann Comhairle

The time available to the Minister is nearly exhausted. He ought to be allowed to utilise it without interruption. If a Member is to be quoted he ought to be quoted correctly.

Mr. Cullen

I was quite supportive of the Minister for Arts, Culture and the Gaeltacht, if the Minister of State listened to what I said.

An Ceann Comhairle

Let us hear the Minister without further interruption.

Mr. Rabbitte

I was going to make the point, Sir, that just as the present Minister for Arts, Culture and the Gaeltacht was the impetus for the success of the scheme as it has operated over the last couple of years, it is similarly the case that the operation of the scheme ought to be assessed in the light of experience. The total spent between the years Deputy de Valera referred to, 1987 and 1993, was negligible by comparison — some £12 million. In the last 20 months alone the spend has been of the order of £217 million and, on the focus that we have just been discussing in respect of the BES generally, similarly it is the case here that the effect of what we are trying to do in Resolution No. 4 is to focus the development on the indigenous sector. I have no doubt but that that, again, is where the benefit to this economy is greatest.

Miss de Valera

Of course it is, but it is being undermined by this proposal.

Mr. Cullen

Ask the people of Trim.

Mr. Rabbitte

There is no question of restrictions being introduced undermining the operation of section 35. It is entirely correct that this ought to be concentrated and focused on the indigenous sector where the jobs are and the optimum benefit to this economy is.

Mr. Cullen

Would the Minister answer specifically the question I asked before his time is up?

Mr. Rabbitte

It is important to recall that, without this resolution, section 35 would be determined under the terms of the 1993 Finance Act. The extension by the Government here is welcome. It is clear that there are spin-offs to this country that cannot be calculated in terms of a straightforward comparison of the kind of statistical work that is being done by Indecon. That alone does not tell the whole story. There is a spinoff to this country from the point of view of tourism, culture and jobs created here.

An Ceann Comhairle

I am sorry to interrupt the Minister of State but as it is now 10.15 p.m. I am required to put the following question in accordance with an order of the Dáil of this day: "That Financial Resolution Nos. 3 and 4 are hereby agreed to."

Question put.

The Dáil divided: Tá, 79; Níl, 68.

Tá

Ahearn, Theresa.
Allen, Bernard.
Barrett, Seán.
Barry, Peter.
Bell, Michael.
Bhamjee, Moosajee.
Boylan, Andrew.
Bradford, Paul.
Bhreathnach, Niamh.
Bree, Declan.
Broughan, Tommy.
Browne, John (Carlow-Kilkenny).
Bruton, Richard.
Burke, Liam.
Burton, Joan.
Byrne, Eric.
Carey, Donal.
Connaughton, Paul.
Connor, John.
Costello, Joe.
Crawford, Seymour.
Creed, Michael.
Crowley, Frank.
Currie, Austin.
Deasy, Austin.
De Rossa, Proinsias.
Doyle, Avril.
Dukes, Alan M.
Durkan, Bernard J.
Ferris, Michael.
Finucane, Michael.
Fitzgerald, Brian.
Fitzgerald, Eithne.
Fitzgerald, Frances.
Flaherty, Mary.
Flanagan, Charles.
Gallagher, Pat.
Gilmore, Eamon.
Harte, Paddy.
Higgins, Jim.
Higgins, Michael D.
Hogan, Philip.
Howlin, Brendan.
Kavanagh, Liam.
Kemmy, Jim.
Kenny, Enda.
Kenny, Seán.
Lowry, Michael.
Lynch, Kathleen.
McCormack, Pádraic.
McDowell, Derek.
McGahon, Brendan.
McGinley, Dinny.
McGrath, Paul.
McManus, Liz.
Mitchell, Gay.
Mitchell, Jim.
Mulvihill, John.
Nealon, Ted.
Noonan, Michael (Limerick East).
O'Keeffe, Jim.
O'Shea, Brian.
O'Sullivan, Toddy.
Owen, Nora.
Pattison, Séamus.
Penrose, William.
Rabbitte, Pat.
Ring, Michael.
Ryan, Seán.
Shatter, Alan.
Sheehan, P. J.
Shortall, Róisín.
Spring, Dick.
Stagg, Emmet.
Taylor, Mervyn.
Timmins, Godfrey.
Upton, Pat.
Walsh, Eamon.
Yates, Ivan.

Níl

Ahern, Bertie.
Ahern, Dermot.
Ahern, Michael.
Ahern, Noel.
Andrews, David.
Aylward, Liam.
Brennan, Matt.
Coughlan, Mary.
Cowen, Brian.
Cullen, Martin.
Dempsey, Noel.
de Valera, Síle.
Doherty, Seán.
Ellis, John.
Fitzgerald, Liam.
Flood, Chris.
Foley, Denis.
Fox, Mildred.
Gallagher, Pat the Cope.
Harney, Mary.
Haughey, Seán.
Hilliard, Colm M.
Hughes, Séamus.
Hyland, Liam.
Jacob, Joe.
Kenneally, Brendan.
Keogh, Helen.
Killeen, Tony.
Kirk, Séamus.
Kitt, Michael P.
Kitt, Tom.
Lawlor, Liam.
Leonard, Jimmy.
Martin, Micheál.
Brennan, Séamus.
Browne, John (Wexford).
Burke, Raphael P.
Byrne, Hugh.
Callely, Ivor.
Clohessy, Peadar.
Collins, Gerard.
McDaid, James.
McDowell, Michael.
Moffatt, Tom.
Molloy, Robert.
Morley, P. J.
Moynihan, Donal.
Nolan, M. J.
Ó Cuív, Éamon.
O'Dea, Willie.
O'Donnell, Liz.
O'Donoghue, John.
O'Hanlon, Rory.
O'Keeffe, Batt.
O'Keeffe, Ned.
O'Malley, Desmond J.
O'Rourke, Mary.
Power, Seán.
Quill, Máirín.
Reynolds, Albert.
Ryan, Eoin.
Smith, Brendan.
Smith, Michael.
Treacy, Noel.
Wallace, Dan.
Wallace, Mary.
Walsh, Joe.
Woods, Michael.

Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.

Question declared carried.

Dáil Éireann debate - Tuesday, 23 Jan 1996

Financial Resolution No. 4: Income Tax, Corporation Tax and Capital Gains Tax.

Tá

Níl

Dáil Éireann debate -
Tuesday, 23 Jan 1996