The Culliton report has been mentioned very often during this debate. We were even talking about it when the Minister was talking about the Commission on Social Welfare. The Culliton report recommended ending section 84 loans. We have not done so. The first part of section 38 tightens the situation up further and the Minister tightened it up a great deal last year. It was the greatest rip off of all. Is it possible for us to take sections 38 and 39 together because they deal with the same issue?
SECTION 38.
Question proposed: "That section 38 stand part of the Bill."
It would be better to take section 38 on its own.
The latter part of section 38 is, to some extent, going in the opposite direction of the tightening up that has taken place in respect of section 84 based lending in recent years. There may be good reasons for it. I would like to hear the Minister speak on paragraph (b).
Paragraph (b) of subsection (3B) provides for exceptions to the rule. Section 84 loans may continue to be advanced after the date to certain new manufacturing projects specified in a list prepared by the Industrial Development Authority and approved by the Minister for Enterprise and Employment and the Minister for Finance. One of the conditions which must be satisfied before a new section 84A loan may be made is that the borrower, or a company connected with the borrower, does not carry on a trade in the International Finance Services Centre. The section removes the requirement that a company connected with the borrower may not be carrying on such a trade while retaining the condition that the borrower itself may not carry on an IFSC trade.
Over the past few years, Culliton, and others indicated that section 84 loans had to cease. A few days before Christmas 1991, I effectively abolished section 84 in its entirety except for two lists of companies that the IDA had given guarantees to. They are the only companies that can now use section 84. A number of those companies will probably cease using section 84 loans anyway.
There was some discussion yesterday in the House about the Sligo media company Saehan, and the fact that they would be unfairly hit. It would place an extra cost on a company that is still in its early years and losing money. They employ 666 people and hope to employ 1,000. Due to a technicality they were being caught for tax of about £660,000 which seems unfair. It was not so much the money; they were just sensitive about it.
That is fair enough.
I may introduce a technical amendment on Report Stage.
If a special case can be advanced in the case of that company——
We are only working off those two lists which is really honouring what the IDA committed themselves to.
The amendment is designed to get this multinational out of a situation that it might not have fully appreciated — though I greatly doubt that multinationals do now know what they are heading into, I suspect they knew very well. I am not objecting to that but does the amendment not have universal application now that we are enacting it? What concerns me is the phenomenon of transfer pricing, where it is very easy for a multinational company to present an artificial loss situation and we bail them out. We are not questioning their bona fides.
The reason for the amendment is to allow one IDA listed company, which is entitled to a section 84 loan by virtue of being listed, not to be debarred from getting the loan because it has an IFSC connected company.
That will apply to any other company.
The Deputy's concern is that other companies on the list could use the same technical device to get around the matter. There was an anomaly in the way the provision worked. It could now apply generally but the anomaly had to be removed because it was considered to be unfair. It was removed for those companies on the list.
Is the anomaly we are correcting in the case of the Sligo company related to the IFSC connection or is it an entirely different point?
No, it is for a separate purpose.
Is the amendment framed specifically so that it only applies to the Sligo company or could any multinational come to us next year and say: "the turnout in profits was not as expected; we entered into a package of section 84 loans which cost us rather than benefited us and under the amendment passed last year that is now the law and we are looking for relief under it"?
The Minister referred to lists of companies that retained section 84 loan status. Does this list pertain to particular companies or to sectors of trade? I would be concerned if the IDA was deciding tax policy. It would be inappropriate if the IDA was doing the work of the Revenue Commissioners. Is it the case that new approvals are issuing under section 84 to new companies or is it just existing companies that had existing loans?
There are no new approvals. They are existing named companies that were on two IDA lists and nobody else can get on the list. Deputy Rabbitte is correct in so far as this is not tight enough just to cover the Sligo company. The fact is another company could look for relief under it. It was done solely for the Sligo company. The anomaly had to be removed.
I do not know the circumstances of the Sligo company and I am prepared to take the advice proffered. If we open it up I imagine there are people who would exploit it. I listened for a number of days at a different forum to a debate on whether a particular package of section 84 loans were legal. That was not the point as far as I was concerned. I do not want to re-open that debate here but if the opportunity is there to exploit it, it is likely that it will be exploited.
The advice is that it is an unlikely position. I have a long note on it but I do not think it is necessry to go into all the details. To satisfy Deputy Rabbitte and ourselves, we will look at it to make sure it cannot. For the record, where the anomaly arises is that if a profitable company pays section 84 interests, the Act credit would be at the rate of 1/18th and if it is a loss the company pays a credit at 25/75ths which is an unfair result for the company. All the section 84 interests now have to be at the 1/18th credit. If that was not done the company would pay substantial tax even though it was lossmaking. That was what arose in the case of the Sachan Media Co. The company moved into the country in 1989. It started trading in June 1990 and at this stage they have 166 employed. To be honest, Deputy, it was based on that that more than anything.
Question put and agreed to.
NEW SECTION.
I move amendment No. 123e:
In page 78, before section 39, but in Chapter V, to insert the following new section:
39.—(1) This section applies to a distribution made by a company (hereafter in this section referred to as the ‘distributing company') which carries on a specified trade (being a specified trade within the meaning assigned to it by section 84A (6) of the Corporation Tax Act, 1976) and which is a distribution by virtue only of subparagraph (ii), (iii) (I) or (v) of section 84 (2) (d) of the Corporation Tax Act, 1976.
(2) If a distribution to which this section applies, made on or after the 25th day of May, 1993, or part of such a distribution, is treated under subsection (1A) of section 45 (as amended by the Finance Act, 1989) of the Finance Act, 1980, as a distribution which has not been made for any accounting period then, notwithstanding any provision to the contrary in the said section 45, the distribution or part of it, as the case may be, shall be deemed, for the purposes of subsection (3) of that section, to be a relevant distribution.
(3) Where, on or after the 1st day of January, 1992, and before the 25th day of May, 1993, a company makes a distribution to which this section applies, the distributing company and the recipient of the distribution may, by notice in writing, jointly elect that subsection (2) shall apply to that distribution as if the reference therein to the 25th day of May, 1993, were a reference to the 1st day of January, 1992, and where such an election is made, subsection (2) shall apply to the said distribution accordingly.
(4) An election under subsection (3) shall be included with the return which is required, under section 10 of the Finance Act, 1988, to be made by the distributing company for the accounting period in which the distribution is made:
Provided that, notwithstanding that an election was not included with any return made on or before the 31st day of May, 1993, it shall be deemed to have been so included if the election is delivered to the appropriate inspector (within the meaning of section 9 of the Finance Act, 1988) within a period of two months after that date.
(5) Section 45 (7) (as amended by the Finance Act, 1989) of the Finance Act, 1980, is hereby amended by the insertion, after ‘this section', of ‘and section 39 of the Finance Act, 1993':
Provided that to the extent that an assessment under the said section 45 (7) would, apart from this proviso, have fallen to be made on a distributing company but would not have fallen to be so made if an election under subsection (3) had not been made, an assessment under the said section 45 (7) shall not be made on the company.".
I was a little surprised to learn from the official briefing the last day that a doubt existed about how gains made from foreign currency swaps in the case of section 84, which is being put in place with a favourable interest rate currency, would be treated, whether they would be regarded as a capital gains tax or at a manufacturing rate of 10 per cent. I do not want to unfairly use a comment made by one of the officials in helpfully trying to explain this phenomenon to us. A former Taoiseach told a Tribunal that he did not think there were six people in the country who understood it. Mysteriously to me, he did not count himself among the six. I believe he is one of the politicians who understands these things. The official made some comment to the effect that "it has come to our notice recently that a doubt exists". I would be curious to know where this arose and what factors gave rise to it.
In one case that I know of there was an enormous capitalised value of the package of section 84 loans that were put together on the foreign currency swap basis. In fact, it was estimated in the papers to be worth £30 million. That is of enormous benefit and I am surprised there was no rule of thumb there. I understand what the Minister is doing here, that it will be taxed in future at ten per cent, as being akin to the manufacturing rate. It certainly is an intriguing aspect of it and I would like to hear the genesis of it. Why has it arisen now? Could the Minister be more specific than his officials might have felt free to be in terms of how this came to our attention now?
As I understand it, there are always a concern about this. There was always an element of doubt, a doubt that has existed for a considerable time. Because of the number of factors involved there could be no easy rule of thumb and that is why the doubt is there. I will try to explain for the record. Foreign exchange gains fall to be taxed under general tax laws and depending on the circumstances in any given case the gains may be taxable as capital gains on the disposals of the assets, non-trading income, trading income in the case of a financial concern, or income from a trade where there are substantial dealings in foreign currency. All of those areas make it very difficult to have one simple rule of thumb. The trading income could be taxable at ten per cent or 40 depending on whether they were taxable as capital gains or disposable assets, non-trading income or trading income in the case of a financial concern, or income from a trade where there are substantial dealings in foreign currency. They were the areas that made it unclear. The appropriate treatment of such gains has caused uncertainty and tax advisers have taken different views on what the section stated.
I understand from the Revenue Commissioners that they have taken the view that in general the ten per cent rate would not apply, but the issue has never been determined by an appeals commissioner or by the courts. Under self-assessment, a company is required to make tax returns and to pay tax without being requested to do so by the commissioners. So the companies will have to be able to stand over returns if they are not subjected to the audits. It was probably picked up over the last few years on audits. The IDA have also raised it with the Department since last September. That was the first time they actually raised it. Because of the different concerns in the different areas I have mentioned there was no rule of thumb that made it clear-cut. Revenue took one view and some of the tax practitioners started to take another view and rather than test it we are moving on it now.
I wonder if the IDA would have raised it with the Revenue Commissioners if it had not been ventilated somewhere else.
We cannot refer to that. It is against our Standing Orders.
If Deputy Rabbitte ever has to seek a livelihood other than politics and being a trade union official, at both of which he is excellent, I think he would be very good on section 84 loans.
Amendment agreed to.
Section 39, as amended agreed to.
NEW SECTION.
Amendment No. 124 in the name of the Minister. This proposes a new section. Amendments Nos. 125, 126 and 127 are alternatives. Amendments Nos. 124 to 127, inclusive, may be taken together by agreement. Is that acceptable? Agreed.
Agreed?
I move amendment No. 124:
In page 79, before section 40, to insert the following new section:
40.—Section 35 of the Finance Act, 1987, is hereby amended, as respects relevant investments made on or after the 6th day of May, 1993—
(a) in subsection (1)—
(i) by the substitution of the following definition for the definition of ‘qualifying film':
‘"qualifying film" means a film in respect of which—
(a) not less than 75 per cent. of the work on the production of the film is carried out in the State, and
(b) not more than 60 per cent. of the cost of the production of the film is met by relevant investments:
Provided that where paragraph (b) is complied with in relation to a film and paragraph (a) is not but not less than 10 per cent. of the said work is carried out in the State and the Minister for Arts, Culture and the Gaeltacht gives a certificate to the qualifying company concerned stating that the film may be treated as a qualifying film for the purposes of this section, the film shall be so treated:
Provided also that where, in relation to a film referred to in the foregoing proviso, the percentage of the work aforesaid carried out in the State (referred to subsequently in this proviso as the specified percentage) is less than 60 per cent., paragraph (b) shall be construed as if the reference to 60 per cent. were a reference to the specified percentage;',
(ii) by the insertion of the following definition after the definition of ‘qualifying film':
‘"qualifying individual" means, in relation to a qualifying company, an individual who is not connected with the company;',
(iii) by the substitution of the following definition for the definition of ‘qualifying period' (as amended by section 58 of the Finance Act, 1992):
‘"qualifying period" means—
(a) in relation to an allowable investor company, the period commencing on the 9th day of July, 1987, and ending on the 31st day of March, 1996, and
(b) in relation to a qualifying individual, the period commencing on the 6th day of May, 1993, and ending on the 5th day of April, 1996;',
and
(iv) by the substitution of the following paragraphs for paragraphs (a) and (b) of the definition of ‘relevant investment':
‘(a) paid in the qualifying period to a qualifying company, whether in respect of shares in the company or otherwise, by an allowable investor company on its own behalf or by a qualifying individual on his 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',
(b) in subsection (2), by the substitution of ‘on making a claim in that behalf' for ‘on due claim and on proof of the facts',
(c) in subsection (3) (inserted by section 28 of the Finance Act, 1989), by the substitution of ‘£350,000' for ‘£200,000', in each place where it occurs, and of ‘£1,050,000' for ‘£600,000', in both places where it occurs,
(d) by the insertion of the following subsections after subsection (3):
‘(3A) Subject to the provisions of this section, where, in any year of assessment, a qualifying individual makes a relevant investment, he shall, on making a claim in that behalf, be given a deduction of the amount of that investment from his total income for that year of assessment. (3B) A 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 relvant investments, made by him 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.
(3C) A 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 by him in that year of assessment exceeds £25,000.
(3D) If, for any year of assessment, a greater 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 (3C),
the amount of the deduction which would be given to him under this section but for either or both of those reasons, less the amount of the deduction which is given to him under this section for that year of assessment 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 him in that following year:
Provided that this subsection shall not apply or have effect for any year of assessment after the year 1995-96.
(3E) If, and so far as, an amount once carried forward to a year of assessment under subsection (3D) (and treated as a relevant investment made by a qualifying individual in that year of assessment) is not deducted from the qualifying individual's total income for that year of assessment, it shall be carried forward again to the next following year of assessment (and treated as a relevant investment made by him in that next following year), and so on for succeeding years of assessment:
Provided that this subsection shall not apply or have effect for any year of assessment after the year 1995-96.
(3F) A deduction under this section shall be given to a qualifying individual for any year of assessment as follows:
(a) firstly, in respect of an amount carried forward from an earlier year of assessment in accordance with the provisions of subsection (3D) or (3E), 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) then, and only then, in respect of any other amount for which a deduction is to be given in that year of assessment.',
(e) in subsection (4)—
(i) by the deletion of ‘the inspector is satisfied that', and
(ii) by the substitution of ‘the company or the individual, as the case may be, making the claim' for ‘it appears that the company making the claim',
(f) by the substitution of the following subsection for subsection (5):
‘(5) 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 fidecommercial 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
(c) is made at the risk of the allowable investor company or the qualifying individual, as the case may be, 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 him,
is entitled to receive directly or indirectly, any payment from 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.',
(g) in subsection (6), by the substitution for ‘by making an assessment to corporation tax under Case IV of Schedule D for the accounting period or accounting periods in which relief was given,' of ‘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',
(h) in subsection (7)—
(i) by the insertion after paragraph (a) of the following paragraph:
‘(aa) Subject to paragraph (b), 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 deduction from his total income for any year of assessment—
(i) he shall not be entitled to any relief for that sum or part in computing his total income, or as a deduction from his total income, for any year of assessment under any other provision of the Income Tax Acts, and
(ii) that sum or part 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.',
and
(ii) by the substitution of the following paragraphs for paragraph (b) and paragraph (bb) (inserted by section 28 of the Finance Act, 1989):
‘(b) 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 three years 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 in respect of which the allowable investor company or the qualifying individual, as the case may be, has obtained relief under this section in respect of the subscription for those shares, or
(ii) the amount of the excess, whichever is the less:
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.
(bb) Notwithstanding paragraph (b), where, on or after the 6th day of May, 1993, an allowable investor company or a qualifying individual has made a relevant investment (hereafter in this paragraph referred to as "the first relevant investment") by way of a subscription for new ordinary shares of a qualifying company and those shares are disposed of by the allowable investor company or the qualifying individual, as the case may be, on a day which is not earlier than 12 months after the date of their acquisition by the allowable investor company or the qualifying individual, as the case may be, and—
(i) the consideration upon such disposal is used, and used only, by the allowable investor company or the qualifying individual, as the case may be, within the period of 12 months commencing on that day for the purpose of making a further relevant investment by way of a subscription for new ordinary shares of a qualifying company, and
(ii) the qualifying company uses the sum invested to produce a qualifying film other than a qualifying film on the production of which the first relevant investment was expended,
then, the provisions of paragraph (b) regarding the determination, in respect of the computation of a gain or loss for the purpose of capital gains tax, of sums allowable as deductions from a consideration to which paragraph (b) relates shall apply in respect of the consideration used for the purpose of making the further relevant investment as they apply in respect of the consideration to which paragraph (b) relates:
Provided that where an allowable investor company has made a relevant investment by way of a subscription for new ordinary shares of a qualifying company and that relevant investment is one to which paragraph (b) of subsection (3) refers, then, if those shares are disposed of by the allowable investor company not earlier than 12 months after the date of their acquisition by that company, this paragraph (other than so much thereof as would require the consideration upon the disposal to be used for making a further relevent investment) shall apply—
(I) in case the relevant investment, or the aggregate of that investment and any other relevant investment made by the allowable investor company for the purposes of enabling the qualifying company to make the qualifying film concerned, is not less than £1,050,000, in respect of the consideration upon such disposal, or
(II) in case the relevant investment, or the aggregate of that investment and any other relevant investment made by the allowable investor company for the purposes of enabling the qualifying company to make the qualifying film concerned, is less than £1,050,000, in respect of such part of the consideration upon such disposal as bears to the total consideration on disposal the same proportion as the excess of the relevant investment, or the excess of the aggregate of that investment and any other relevant investment made by the allowable investor company for the purposes aforesaid, over £350,000 bears to the total amount of the relevant investment, or the aggregate of the total amount of that investment and the total amount of any other relevant investments made by the allowable investor company for the purposes aforesaid.',
and
(i) by the insertion, after subsection (8), of the following subsections:
‘(9) 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.
(10) Section 198 (inserted by section 18 of the Finance Act, 1980) of the Income Tax Act, 1967, is hereby amended, in subsection (1) (a), by the insertion of the following subparagraph after subparagraph (xii) (inserted by section 4 of the Finance Act, 1989):
"(xiii) so far as it flows from relief under section 35 of the Finance Act, 1987, in the proportions in which they made the relevant investment giving rise to the relief,".'.".
I will deal with amendments Nos. 124 and 127. These amendments relate to section 40 which amends section 35 of the Finance Act, 1987 under which relief from tax is available in respect of corporate investment in the Irish film making companies. At present in order to qualify for the relief not less than 75 per cent of the production work on the film must be carried out in the State and not more than 60 per cent of the cost of producing the film may be met by section 35 investments. In order to facilitate the making of films under co-production agreements with other countries, section 40 of the Bill provides, subject to certain conditions, for the waiving of the 75 per cent Irish production test. The conditions that allow for that are that at least ten per cent of production work on the film must be carried out within the State. The approval of the Minister for Arts, Culture and the Gaeltacht must be obtained and the percentage of the cost the producing the film that may be met by section 35 investments cannot be in excess of the percentage of the production work carried out in the State, subject to the overriding ceiling which provides that in any case not more than 60 per cent of production costs may be met by section 35 investments.
For example, if 50 per cent of a film's production work is carried out in the State not more than 50 per cent of the cost of the production may be met by section 35 investments. Amendments Nos. 124, 125 and 126 deal with this matter but maybe the Deputies might like to contribute before we go on to them.
Amendment No. 126 relates back to section 35 of the Finance Act, 1987 in which there are definitions of what constitutes an allowable investor company and what is a film. It has two criteria for what is a film. It must be 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. . . .
The logic of that is that you do not want everybody who makes advertisements, commercials and corporate videos using it as a tax avoidance mechanism. I want to extend the definition of section 35 of the 1987 Act to include:
(c) for the ‘exclusive purpose of education, training or distance learning programmes'.
I raise that in the context of at least a number of colleges of higher education which I know are trying to pioneer that concept within the country and where in terms of the English language programming they have, they have a product that may be worth exporting elsewhere. Certainly Dublin City University has a very extensive process under way in respect of the production of distance learning material some of which would be video based. I know that the Plassey management centre in the University of Limerick also has a considerable programme in this regard. It seems to me— the words may need to be tightened and so on — that provided the purpose is bona fide and exclusive for use in the education, training or distance learning context there is a case to be stated for this. In my view, it falls within the section because you are dealing essentially with a similar means of production, pre-production, post-production and so on, similar skills but with a very applied purpose. So as to encourage those institutions of higher learning that are involved in this process, whether with private sector people or on their own, we should consider redefining the meaning of "film" to include that particular class of film which still excludes commercials, corporate videos and all the other bits.
My final point on Amendment 127 — I suppose like amendment 18 we will have to wait to see how this thing works — is that in general if it encourages the development of an independent film and video sector here it would be a welcome development.
I note that section 40 provides for the qualifying certificate in respect of the various cut-off points that have been mentioned to be vested in the Minister for Arts, Culture and the Gaeltacht. I have no particular objection to this but since it is now vesting in a Minister the ability to write off chunks of the tax base, albeit in a very defined and particular way, I have moved amendment No. 127 simply so that we might know, on an occasional basis, through Iris Oifigiúil who actually qualified. I do not wish to make any more of an issue of it than that, simply that it should have transparency built into it. It seems to me to be a reasonable request that every now and again we should be able to get an account of the stewardship of the relevant Minister who is deemed to have the ability to write off certain potential parts of the tax base.
I would like to welcome this section which is a very worthwhile section. It is very important that we create as favourable a tax regime as possible for the development of a native film industry and also facilitate coproductions, because I think the future will be about coproduction and the utilisation of personnel from elsewhere than just within the State. I broadly welcome and compliment the Minister on this initiative. There is no doubt that the medium of film can be a powerful one for promoting the country's interests on an international scale. We could achieve an awful lot more by developing the film industry, I suggest, than by funding many of the State agencies which endeavour to promote the State. One good film, with international acclaim, can do an enormous amount for the profile and the prestige of the country, with consequential beneficial knock-on effects for tourism and investment down the road.
I support the amendments put forward by Deputy Cox. They are very reasonable. I would agree with the redefining of "film" to embrace the use of education, training or distance learning programmes. I participated in one such venture recently with Dublin City University. It is very valid. I appeal to the Minister to look at this seriously. He may have to tighten up some of the wording to prevent exploitation.
We should facilitate the use of film within education as much as possible. That is linked with the whole area of film production because it can create greater activities within the colleges and educational institutions in terms of film production and so forth. That obviously is increasing your bank of human resources and skills in this area. His other amendment is quite reasonable and should also be accepted.
I have no contacts in the film production industry but they seem to be extremely well connected with this Government because not only do we not have a carrot and stick approach we have a gold carrots approach in so far as not only do we have these incentives but RTE have the obligation to actually spend money on an indigenous film producing sector. They are having money thrown at them from every direction by this Government and RTE say they could lose up to 300 jobs on the head of it.
When I see this excessively amorous embrace of any particular commercial sector I would sound a note of caution. As other Deputies have said, we will have to see what will materialise but I am very concerned about the possible politicisation of this in terms of certificates being granted by the Minister for Fun, more properly known as the Minister for Arts, Culture and the Gaeltacht. I accept the point of amendment No. 127 in the context of Iris Oifigiúil. My amendment No. 125 is to put it on the same footing as the BES extension, in other words, the same deadline date of 95-96 in relation to it. The Minister may have picked up that in his own amendments.
I would like the Minister to clarify exactly what level of production work must be carried out in this country to avail of these benefits. It has been put to me, for example, that if 30 per cent of the production work on the film was carried out in the State, and that seems a very low figure, then it would be possible to make an application under this heading for this relief. Then there are the constraints about the level of investment. I will not oppose this but I just want to ask the Minister how do these incentives compare with other countries and what level of jobs is it anticipated will be created. I would imagine that this is potentially a very profitable business. Does he have any idea what revenue he may be forsaking in this area? I would not like to see a form of cultural terrorism whereby we are all politically incorrect if we do not embrace all of this. I will reserve judgment on some aspects of it. It must be seen in the context of the obligations being put on RTE in the removal of the cap that they must spend millions of pounds on the Irish film production sector. It remains to be seen if some individuals will not become enormously wealthy out of a combination of these tax incentives and changes in the Broadcasting Act.
I would ask the Minister to look sympathetically at paragraph (c) of amendment No. 126 in particular. There is a considerable potential there to develop these videos and to try to get in on the game when it is still in its infancy. We have great education resources in this country. We have an expertise that we should build on. That is a good amendment and I hope the Minister will give it sympathetic consideration. I cannot see any problem at all with it.
Many people find the Finance Bill so negative that it is wonderful we have a positive section here. It is not every Minister who has a monument to himself in a Finance Act. It is a worthwhile section, notwithstanding the remarks Deputy Yates has made, which have a degree of validity. This will happen for three years. We will then see what will happen in the fourth year. There may be an enormous change in the approach when we see the results of this very favourable section.
I believe it is time for acknowledgment of the role of film and video in the area of education, training and distance learning. It is something that is in its infancy and is being developed at present. It needs encouragement. It would send out all the right signals from the Minister were he to accept paragraph (c) of that amendment, particularly in view of the incentive for the film sector in section 40.
I should like to acknowledge the amount of work and commitment that has been put into this by the Minister for Arts, Culture and the Gaeltacht. He has researched an area that has been underfunded for years. I will not get into the political argument of the good or the bad. We had a position where people trying to produce films could not raise money within the State and had to go elsewhere. There is an employment concept in this. We will have to wait to see how it develops. A few films have been made around this city over the last year or two and the employment content can be quite high. Certainly, in the case of the one being shot in Kilmainham and other centres around the city at present, there is a very big employment content.
In order to facilitate the making of films under co-production agreements with other countries, section 40 of the Bill provides subject to certain conditions, for the waiving of the 75 per cent rule. Normally the procedure is that 75 per cent of the work must be carried out in the State. That can be to 10 per cent with the approval of the Minister for Arts, Culture and the Gaeltacht. That is a minimum of 10 per cent. The reason domestic production can be as low as 10 per cent is to allow for co-production projects under agreements under the Council of Europe co-production facility. Their producers are required under the agreement to provide a minimum of 10 per cent. There is also a similar agreement with Canada. We have a co-production agreement with the Canadians and in that case it is 20 per cent. Otherwise you could lose out from the point of view of trying to be in on the circuit. I am no expert on films but obviously the people involved work together across frontiers. That is the benefit achieved there.
In relation to amendment No. 125, we have picked up on Deputy Yates' point. In regard to Deputy Cox's point in regard to films for training and educational purposes, when we were restructuring what we did is — and I think this is probably more appropriate — that we put the high risk sector into the section 35 category and removed them from the BES. In cases which could not be considered high risk, we have allowed the BES to still apply. In the case of DCU, the Bolton Trust or Limerick City University or others — as Minister for Labour I have been involved in one of the training films for Plassey Park — what they can do is set up a BES company, or be involved in a BES company, because they are still entitled to the BES. The changes we have made in the BES, both for research and development and in respect of the lifetime limit and investment, will assist them. If the Deputy needs information on how that can be structured I would be glad to provide that. Limerick University spoke to me about the research and development aspect prior to the introduction of the Finance Bill. They are covered and can avail of the BES.
I appreciate the intention behind Deputy Cox's amendment No. 127. Perhaps he will allow me to examine the precise wording. I take it that what he is trying to achieve is some form of transparency in regard to the waiving of the 75 per cent. I will look at that from a positive viewpoint. I have no difficulty with it.
Broadly speaking, I welcome this provision. There has been, as the Minister mentioned, a lot of activity in regard to films in recent times, but overall these would be films made in Ireland rather than Irish films as such. I hope this will help out home production creativity. In that respect I believe — and this is also relevant as far as the Minister is concerned — that the revival or resuscitation of the Film Board, which should never have been abolished, could have a greater impact on Irish film production rather then outside companies coming in and using facilities here. What we want to encourage is the making of films in Ireland. The Minister could have a huge impact here by giving reasonably generous funding in future years to provide the seed money. That is the missing link as far as Irish films are concerned. Seed money enables pre-production work to be done, enables scripts to be got which can subsequently be followed up. Unless you have that, the ideas are no good. This should be a help overall and I welcome it.
I suggested a short while ago in the Dáil that perhaps some consideration might be given to providing some of the set-aside money such as that now available in RTE for independent film producers and programme producers, to the revived Film Board so that it could have generous funding. If the Minister is to attain the results he anticipates from this — I am not so sure if these provisions will bring the results, but at least they are a step in the right direction — and get not only films made in Ireland but Irish films using all the creativity available here, he will have to consider providing generous funding for the Film Board. That is where it will all start.
I was a bit disappointed with Deputy Yates's contribution in the sense that I think the 75 per cent limit is probably too high. I hope people become wealthy as a result of this initiative because if they do it will mean they will have employed people producing good product and will have made a profit. We need more successes in this area where, comparatively speaking, we are at a very low base. We need to encourage greater interaction with other countries and film producers abroad who have greater expertise. We need to attract greater resources. If that, in turn, leads to the proper development of a native film industry with more Irish people involved and more Irish made films so much the better. There is very little revenue accruing from profits so we cannot lose anything at this stage. We should adopt a more optimistic and positive view on this initiative.
In regard to the question of rendering this process transparent by whatever means, I am pleased with the Minister's response. In raising this I am not presuming to question the integrity of purpose of the Minister for Arts, Culture and the Gaeltacht. It seemed to me that if we are giving a Minister the power to write off the tax base it was proper to seek public accountability. I was not presuming that one would expect anything untoward to emerge in the absence of such a system. On the question on how we define a film and so on, I would welcome before Report Stage a note from the Department of Finance to advise me on how the BES would operate and how it will differ from this scheme. I will withdraw my amendments on that basis and, perhaps resubmit them on Report Stage.
I think Deputy Nealon for his supportive remarks. The amount of funding available for the film board this year is £1.5 million and as a result it will get off to a good start to carry out its work.
I have had discussions with the Minister for Arts, Culture and the Gaeltacht, about this issue. He has a great knowledge about this area having been involved in it for many years. Most people involved in the film-making industry can lose a great deal of money. It is high risk investment. The Minister for Arts, Culture and the Gaeltacht has given me many examples of productions that seemed viable but incurred massive losses. This is a high employment sector. It may not be permanent in that film makers cannot always guarantee that there will be a film on the line. We give tax breaks for safer investments but the film industry is clearly high risk. The BES is probably more appropriate for the other end of the industry which is more definite. I will certainly arrange to get a note on that aspect for Deputy Cox.
I regard this as an imaginative measure. From what I know of it the film production industry has reacted very positively to it and, as Deputy Nealon said, taken with the initiative on the film board, it is one tax break that is likely to prove worthwhile. It is a mirror to the country of the number of people that could be employed indigenously in Ireland.
Amendment agreed to.
Amendments Nos. 125, 126 and 127, inclusive, not moved.