Before the debate was adjourned, I referred to the public servants involved in the preparation of the legislation. I compliment public servants on the way they deal with representations made by public representatives on tax matters. It is easier to deal with PAYE offices as the PAYE sector is the paymaster for all services and tax is deducted at source, unlike other sectors which have various arrangements with the tax office, for example, self-assessment.
There is a lack of flexibility under some arrangements, particularly when genuine errors are made. Although the Bill provides in Part 3, Chapter 2, section 39 for relief in cases where errors are made, there is inflexibility in some cases. In a recent case a company which employs many people agreed to pay the outstanding tax immediately it was brought to its attention. However, it was cautioned that it would be included in a future list of companies which failed or refused to pay their taxes. I do not understand the reason for this as the company agreed to pay the tax once the error was discovered.
The arrangement under which publicans must meet certain tax requirements before their licences are renewed is generally acceptable but there are exceptions. I am aware of a case where a publican who was ill could not renew his licence because his tax was not paid by the due date. He applied to have his licence renewed and made an effort to pay his tax but there was a strict interpretation of the time factors involved. Although he agreed to enter into a tax arrangement he has been unable to reopen his premises to help pay the tax bill which he has agreed to pay.
While there is a need for more flexibility in some areas we must be careful not to be too flexible in other areas. The PAYE sector has been very annoyed by recent cases involving former Members of the House in which no taxes were apparently paid or pursued. I would like the Revenue Commissioners to adopt a fair play attitude to people who genuinely want to pay their taxes and stay in business.
There are inequalities in the taxation system, for example, the tax on second hand clothing sold by charities. These charities which collect clothing, repair and clean it before selling it are required to pay VAT. However, VAT was already paid on this clothing when it was sold initially. In addition the profits made by these charities are taxable.
I have made direct representations on this matter but have not made any progress. I asked the Minister's predecessor to examine tax relief on corporate donations to charities. The Minister should consider using the tax code as an incentive to trigger off additional income for legitimate charities by corporate donations and perhaps put a cap on the figure so that it would be possible to quantify how much it would cost the Exchequer by way of loss of tax income.
Last night Deputy Perry in his maiden speech referred to urban renewal. I agree with him on the importance of this type of tax incentive to towns and villages that must compete with larger towns which already have urban renewal status. For example, the town of Tipperary is caught between two stools, with on the one hand Clonmel benefiting extraordinarily well from the urban renewal scheme, which is welcome, and on the other Limerick city which also benefits from that scheme. Those two areas receive special incentives and suck the life blood from the town of Tipperary which is unable to compete in the competitive world of industrialisation and the service industry. The town of Tipperary has great difficulties surviving and that is a major source of concern to the town's newly reformed chamber of commerce.
I put down questions to the Minister for Finance on the new scheme of urban renewal — there are no proposals for an extension of the scheme even though that was an election promise — and to the Minister for the Environment who has responsibility in this area. If towns such as Tipperary do not receive additional incentives by way of tax relief they will be unable to compete and will become dormitory towns. As an elected representative in that area I, with my parliamentary colleagues from south Tipperary, will fight against that. I would not agree with a regime such as that predicted by Deputy Deenihan who said that only towns of 6,000 people or more would get urban renewal status. Towns should be judged on their projects and plans for survival. That aspect, rather than the population, should be the deciding factor.
There are other anomalies in the area of taxation such as in the transfer of agricultural property. Under the farm retirement scheme a farmer who decides to transfer land to his son is taxed on every pound he receives from the transfer whereas if the property is transferred to any other relative the first £6,000 of income would be tax free. Transactions between fathers and sons, which are registered in the tax office, the land registry and solicitors' offices, are bona fide transactions and there is no reason parents should be penalised for transferring land to their sons.
We should ensure the PAYE sector, which is taxed at source, is aware of allowances that can be claimed such as health expenses and so on. There is a problem with capital gains tax in that where people inherited land, it is valued at the date of the introduction of the tax in 1974. I can understand why it was introduced and it would be part of our party policy to ensure this would be taxed.
However, this regime is now a disincentive for the owners of such lands to sell them for development. Such action is stymied by the tax, and the index linking is not good enough to indemnify owners against the huge escalation in property prices, especially in this booming economy which now has people prepared to invest.
A point was made last night by Deputy Ardagh and supported by Deputy Rabbitte concerning the taxation of stallion fees. This was examined by my party under the chairmanship of the Minister's predecessor, the late Deputy Joe Bermingham. A committee, of which I was a member, was established to examine the bloodstock industry, its contribution to the country's economy and the employment it created. It was agreed that this tax incentive should continue. It does not exclude the taxation of the profits of the bloodstock industry and stud farms as implied by the contributors. It only exempts the fee of the stallion.
I remind those who have raised this tax as a possibility and something worth examining that the cost of some of these stallions is astronomical. They are so expensive that it takes four, five or six people to buy them. It is a huge capital investment and the largest risk capital investment of all. The capital cost of insurance and the risks involved in the possibility of infertility are beyond our reckoning. People should realise this is a special industry with a limited number of people prepared to sacrifice and risk that kind of capital for the enjoyment and benefits which will accrue to the area in which they live. My constituency is fortunate to have many of these stud farms with stallions of the highest possible international repute. This system has existed for some time and was the subject of a critical economic analysis last year which the industry commissioned to examine not only this aspect of the industry but the contribution it makes to lifestyle in rural Ireland. If people have an interest in the bloodstock industry, they should read those reports.
If we interfere with this system, nothing can stop the movement of these animals to another jurisdiction where similar facilities are available or to another hemisphere. These animals are often sent to Australia and New Zealand in the off-season. We are fortunate to have stallions in Ireland with a worldwide demand for their services. Animals attending these stallions are transported from all over Europe into Ireland, creating jobs and economic drive. The number of animals attending each of these stallions is approximately 50. Twelve men are required full-time to care for them as they are normally stabled here. There is a continuing level of economic involvement in this country as a result of stallions. If we interfere with that, the owners of these animals, which are not all Irish, will move them to a jurisdiction where similar facilities are available. That would have disastrous consequences for employment in the bloodstock industry which creates employment in the racing industry which, in turn, gives so much enjoyment, employment and tax revenue to the State. The Minister understands the implications of this suggestion and I caution him against it.
The tax incentive does not interfere with the consolidation of European tax law, unlike corporation profit tax. The argument about the previous Government's efforts and agreement with their European colleagues on a 12.5 per cent rate and a political commitment to ensure the rate remains at 10 per cent is just reopening the problem. I heard the Minister for Finance say that the current proposal of 12.5 per cent is the one the previous Government adopted. Corporation tax at 10 per cent has been an incentive in attracting and establishing industry here and it is not good to promote it as something up for discussion because our European partners do not have the same rate. We were given it because we have certain disabilities. This is an offshore island and the only member of the European Union not linked by a tunnel or land to the Continent, so we need something to attract industry to set up here. It is dangerous to open this discussion in Europe where there is now no sympathy for us because we are doing so well. Our economy is booming as evidenced by the best ever economic statistics and all Members of the House and successive Governments can claim credit for various aspects of this improvement. We should try to retain some of the incentives which make us more attractive, otherwise we, as an island on the periphery of Europe, could lose out.
I put that in the context of the stallion fees because it needs careful consideration if there is a proposal it should be changed, which I hope it is not. If it were politically suitable to have changed it, we would have suggested it many years ago. We carried out our own investigation and my party agreed unanimously to the proposal of the late Deputy Bermingham that it would remain for the reasons I have stated.
I thank the Minister for bringing this Bill to fruition. It is great work, its references are an assistance to us all and it will be appreciated by everyone involved in making the tax code user friendly.