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Dáil Éireann debate -
Wednesday, 7 Feb 1996

Vol. 461 No. 2

Written Answers. - Dividend Relief.

Batt O'Keeffe

Question:

15 Mr. B. O'Keeffe asked the Minister for Finance the justification, if any, he would envisage in restoring the 10 per cent dividend, abolished in the Finance Act, 1992, and restricting it to private companies. [18402/95]

I do not consider that restoring manufacturing dividend relief, even on a restricted basis, would be justified in the circumstances. Previous experience with this type of relief has shown that it is of limited value in generating additional equity investment, that it is prone to widespread abuse and that, at best, anti-avoidance safeguards may only be partially effective. Also, the provision of dividend relief, even on a restricted basis, could be very costly. Revenue estimate that its reintroduction for the manufacturing sector would cost a minimum £14 million in a full year, but the cost could be substantially higher due to tax avoidance.

In any case, in addition to the wide range of direct grant assistance for businesses, there are already significant tax incentives available to encourage enterprise development. In this respect, my recent budget introduced a new lower rate of corporation tax on the first tranche of profits, relaxed the rules relating to the 27 per cent rate of capital gains tax on equity gains, renewed the business expansion scheme for a further period and increased the capital acquisitions tax relief on the transfer of a business.

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