Amendment Nos. 33 and 34 are being taken together.
SECTION 22.
Chairman
I move amendment No. 33:
In page 49, subsection (1), between lines 21 and 22, to insert the following:
"Provided that, for the purposes of this section, all such cattle shall be regarded as compulsorily disposed of where, in the case of any disease eradication scheme relating to the eradication or control of brucellosis in livestock, all eligible cattle for the purposes of any such scheme, together with such other cattle as are required to be disposed of, are disposed of;".
These amendments relate to brucellosis. They relate to section 22, which, the committee will be aware, provides special tax treatment for farmers with regard to profits resulting from compulsory disposal of livestock as a result of statutory disease eradication measures. One of the conditions in section 22 is that there must be a total herd disposal if the special treatment is to apply. Where brucellosis is concerned, this will not necessarily happen in every case because, as I understand it, while all female stock from breeding bulls have to be disposed of, bullocks may be retained. I am anxious that farmers whose stock is affected by brucellosis and who consequently are faced with compulsory disposal of their stock should benefit from this measure and these amendments will achieve this result.
Under the section as it stood, all cattle would have to be disposed of. Is it the case that under this amendment, in the case of brucellosis, the cattle which the Department of Agriculture says must be disposed of are the eligible cattle and the whole herd would not have to be disposed of?
Exactly.
One does not have to lose all one's herd.
I support what the Minister is doing.
Amendment agreed to.
I move amendment No. 34:
In page 49, subsection (2), line 27, after "section" to insert "and such election shall be made in such form and contain such information as the Revenue Commissioners may require".
Amendment agreed to.
I move amendment No. 35:
In page 50, subsection (5), line 14, to delete "30th day of September, 1995" and substitute "29th day of February, 1996".
This relates to the timescale in which claims must be made. The Minister has selected 30 September 1995 as the date. I propose 29 February 1996. The Minister recognises in the section that the date must be stipulated even though one will not claim this relief, which relates to compulsory disposal of livestock by farmers as a result of a disease scheme, on that date. The farmer who can claim the relief need not bring forward his profits in the accounting period. He can bring it forward in either of the next two years. However, if he intends to do that he must make the claim in the year in which the disposal is made. That might create problems for certain farmers. They generally do not send in their tax returns until some date before 31 January even though their accounts might be completed some time before. The date I suggest would be better than the one proposed in the Bill. A person might lose out as a result of not having the election made in writing and the period to 30 September 1995 is too short.
There is merit in what the Deputy proposes; we can move the date. We will consider the proposal and come back on Report Stage. The concession is there but we must select the right date.
My date might not necessarily be the right date either.
Amendment, by leave, withdrawn.
Section 22, as amended, agreed to.
SECTION 23.
Question proposed: "That section 23 stand part of the Bill."
It took a long time to increase the upper limit of the capital value of a car which could be taken into account for either capital allowances or for motor expenses relating to same. This section raises it from £13,000 to £14,000, which is more realistic than it was years ago. Perhaps the Minister could do us all a favour in the next couple of years by raising it to even more realistic limits.
I must declare an interest. I avail of this section a great deal in my personal tax affairs. When one sets out to buy a car one has a figure in the back of one's mind which one considers the most sensible. In terms of providing employment for people, it drives me away from ever buying a new car. I buy a secondhand car. SIMI must feel badly let down by this provision.
Car sales are continuing to increase substantially. We had discussions with SIMI prior to the budget about a number of its proposals which we incorporated in the budget. This deals with capital allowance in respect of new cars.
Only new cars?
Yes. The Deputy must have good tax advice.
I better take a look at this. Are one's motoring expenses calculated by reference to the same figure in the case of a secondhand car?
It is a lower figure, £10,000.
It is still £10,000. I better ring up my garage.
As we will not get an opportunity to discuss the capital value of motor cars under any other section, I will avail of this opportunity to make a few remarks on the subject. The changes made in benefit-in-kind legislation some years ago, even though they have been improved and modified somewhat in the meantime, were certainly suggested by people who do not have a grip on what really goes on in business and the necessity for a car of reasonable value. Ministers of all parties will have been told that this section was the most widely abused section of income tax legislation. With due respect to my friends in the Department of Finance and the Revenue Commissioners, the advice originated from civil servants who do not have the use of a motor vehicle. As I said in the Dáil on a previous occasion, it would appear that the original modification to the benefit-in-kind legislation was made by a civil servant who, when passed one cold morning by some high powered business man on his way to work, decided to get these people.
Chairman
Deputies are another class of people similarly affected.
Did the car bump into Seán Cromien's bicycle?
As long as Mr. Cromien was not looking at seagulls or whatever other birds were around on that occasion. I am sure he will appreciate that we are only joking about this. When a section is moved and changes are put in place, it is very difficult for the Minister for Finance to change them, because the advice would be that such changes would incur a loss of revenue to the Exchequer. However, the changes and restrictions in the benefit-in-kind legislation are not in tune with modern commercial activity. I have held this view for a long number of years, both in Government and in Opposition. I therefore ask the Minister, who has an open mind on this and other areas, to consider this matter again in the context of the Finance Bill for next year, to advise the measures he proposes to undertake and to implement them.
This is an important issue. I had extended discussions with representatives of the sales representatives organisations to ascertain if we could come up with a definition which addresses the genuine problem of a sales rep who must have a car and where the mileage threshold is not adequate, but we have collectively failed in this. I therefore invite Opposition Deputies to put their creative talents to work on something which will benefit the person who has to be out and about working in a car, as distinct from somebody who gets a car as part of a remuneration package, who drives into work in the morning, parks it at work and drives it home in the evening. We invited the organisations and the reps themselves to come forward with a definition and they have admitted that, other than the mileage definition, it is hard to do so.
This is a wider and deeper debate and perhaps at some stage the committee may, following on the discussion which it had this morning with the Institute of Taxation, consider the whole question of benefits-in-kind and taxation of fringe benefits to ascertain how it is possible to separate deadweight benefits from the essential requirements which people need in order to do their work. I am not closed to the idea, but we met sympathetically with deputations and, collectively, we were not able to come up with a definition which separated the genuine case from the person who gets a car as part of a package of remuneration.
Chairman
The Minister's suggestion is interesting. I will present a draft work schedule to the committee for the rest of the year and invite suggestions. This matter can be put on the list of one of the issues which we may address.
I am pleased to hear the Minister's remarks. I spent ten years of my life travelling 35,0000 to 40,000 miles per year. It has always been felt by genuine people on the road that they were hard done by. They paid the price for those who received large cars to drive into the office. It is an issue which has never been fundamentally addressed. For a person using a car in these circumstances, his car is as important to his business as the person operating a machine or a computer in an office — he cannot do his job without it. The Minister's suggestion is an enlightened approach and we should consider the whole area of benefit in kind.
Chairman
It is on the list. We are making very slow progress. There are many sections which we will be unable to discuss, so I ask Members to move on quickly and be brief.
Question put and agreed to.
NEW SECTION.
I move amendment No. 36:
In page 50, before section 24, to insert the following new section:
"24. —Section 16 of the Finance Act, 1984 is hereby amended by the insertion of the following:
‘(vi) in respect of a subscription for eligible shares made on or after the date on which the Finance Act, 1995 comes into effect, the production and sale of horticultural produce.’.”.
The purport of the new section would be to make horticultural activity, and people who set up horticultural business as companies, qualify for BES funding. I do not know whether this has ever been considered before by the Department of Finance but it strikes me as something that may have been overlooked. A company involved in the horticultural industry does not qualify for BES funding. My amendment attempts to make the horticultural industry eligible for BES funding and I hope it succeeds.
I would like to hear the Minister's views. He was to consider this before the budget.
As Members will be aware, the overall operation of BES was rolled back considerably and made restrictive because of the perception and, indeed, the belief, that there were a lot of abuses in it. It has been curtailed to the sectors where it is now by the previous Administration. This Administration is in the process of expanding it.
It is essentially a cost item and that, to answer Deputy Cowen, is why it is not extended to horticulture. One of the areas to which we are extending it is commercial research and development. If I could get some idea as to what the possible cost would be in horticulture, what the demand would be for it — I have received representations from Deputies——
And Senators.
Indeed, and Senators from north County Dublin and I am concerned. I am not opposed to it in principle. I am not prepared to introduce it in the context of this year, quite frankly, because of our overall budgetary constraints but I would like to have further discussions in relation to it. We reckon the BES will cost about £25 million this year.
I take what the Minister has said but I know there have been representations to the Minister for Finance in this regard, particularly from public representatives in north County Dublin, not least from my good friend and colleague, Senator G.V. Wright, who brought this to my attention. He asked me to move an amendment to address this area. Maybe between now and next year's budget the Minister would have discussions in the Department of Finance with a view to including the horticultural industry as a qualifying industry for BES funding.
The Minister may have some sympathy for what I am about to say. In general, since the BES scheme was launched, I have always held the view that the principle was an excellent one. If I am not mistaken, the original idea was mooted, not by a Minister for Finance who was a member of my party, but by Deputy John Bruton, the current Taoiseach. The idea was an excellent one. It is interesting that it has shown over the years that the Irish taxpayer was willing to take a chance investing in BES funds if they received a tax break. Some tax abuse did occur. There was no idea of risk built into the initial stage even though the whole purpose was to have some element of risk. Even since the changes have been made, the success of BES funding has been shown to be a legitimate source of finance for start-up Irish business and people expanding businesses.
The idea is still an excellent one and I ask the Minister in his review of the possibility of including the horticultural industry in BES funding that he would have a study conducted by himself and his Department. He should also bring in some outside advice on this because some of the restrictions that were brought in to close off loopholes, or perceived loopholes, may have killed off some of the better ideas but I am not closing my mind to other people's opposing views about that.
Unfortunately, I am not quite as patient as Deputy McCreevy. I do not see why we should defer until the consideration of next year's budget what is a jobs-oriented proposal. The Minister outlines that the Department of Finance looking at a bottom line situation would claim costs as being the issue. We have a strategy for horticultural development which, as the Minister knows, is an indigenous industry. We are good at compiling reports but are not very good at providing the financial supports to implement their recommendations. We have targeted 4,000 extra jobs for this industry in the next five to six years. I take the Minister's point that the BES has been modified to ensure it deals with bona fide projects only. I do not know how enterprising an architect would need to be to convert a glasshouse into a family summer home but if we are discussing bona fide projects, we are talking about BES schemes which could move specifically towards increasing glasshouse acreage by between 20 and 40 acres in the coming year.
An indigenous horticulture industry cannot be built unless it is export driven. Success has been achieved in mushroom growing but not in many of the other product areas. A major amount of products are imported as a result. When the balance of payments and other factors are considered it is clear that extending the BES scheme to the horticultural industry — perhaps, specifically, to increasing glasshouse acreage to increase production for export — makes eminent sense. It would cost nothing and provide revenue to the Department in terms of increasing employment and exports. There is no reason to wait until the next budget for this accommodation to be given to an industry which is ripe for exploitation and expansion. We are simply not providing financial support to give the needed impetus. It has been given to the tourism industry and is being given to many manufacturing industries every day.
Ireland has the soil and the climate for this indigenous industry. Everyone agrees it is totally under-utilised and not achieving its potential and there is a problem with extending the tightened, modified BES scheme to it. Targets have been set for job creation and export growth but for some reason it is said that improvement of this industry will cost money. If that were the case there would not be a proposal to create a single job arising out of the provisions of this Bill because of the cost. It does not cost money but creates wealth and growth in the economy. Unfortunately there is no Minister for food at present who could insist with the Department of Finance that this sector of the economy should not be neglected further. The Minister should discuss this issue with the Minister for Agriculture, Food and Forestry and ask if a BES scheme could be devised. I am sure some official in the Department has the initiative to do so. There is an urgent need for this in the horticultural industry. I ask to Minister to return on Report Stage and show us that he — as he promised in the budget — can be innovative, enterprising and even radical.
I support Deputy Cowen on the need to provide the necessary resources to develop the horticultural industry. East Cork is a prime area for growing vegetables such as carrots and so on. The region has suffered severely from the weather conditions experienced in the past year. The Minister for Agriculture, Food and Forestry is again prevaricating with regard to giving grant aid to farmers who have been badly affected. He was quick off the mark to help the people of Wexford but did not move outside the boundaries of that county.
A factory in east Cork called Universal Foods — originally East Cork Foods, it became Campbells and eventually Universal Foods — provides much employment to the area. East Cork has the necessary soil and climate to provide a viable indigenous industry. Every necessary aid to develop it into a very successful industry should be given in order to reduce imports of fruit and vegetables. It is an industry which should be targeted for employment creation. I request the Minister to look seriously at this amendment which seeks to help develop what can be termed a truly indigenous industry.
Does this have European implications? Are we free to bring in horticulture?
Chairman
There is obviously a great deal of interest in this from our rural colleagues, some of whom said that we have the right soil and climate. Why, then, are we importing such quantities of potatoes, for example? My children complain bitterly about the price of chips in the "chippers". They cost 90p and we are told this is because of the cost of imported potatoes. My wife complains about the astronomical price of potatoes. Why are we not producing enough potatoes if we have the right soil and climate?
The Chairman surely does not want to tempt me into offering an answer to that? It could be argued that the price guarantees under the CAP diverted a great deal of energy away from a range of produce into high yielding, price supported, no risk activities. The changes in the CAP are beginning to remove that.
Deputy Cowen raised a very good point and made very good arguments and I will come back to that matter on Report Stage. The BES is available at present for mushroom growing. The orthodox fear in the Revenue Commissioners and the Department of Finance is that unless we could ring-fence the application of BES to non-CAP supported products there would be a double benefit. The whole ethos and philosophical underpinning of the BES was to reward risk in areas of relatively high risk and not to be asset backed. The restrictions were to curtail people from investing in property through the BES in the tourism sector. The present figures indicate that approximately 79 per cent of the total expenditure on BES is now in manufacturing, 3 per cent in internationally traded services and 18 per cent in tourism.
I do not object to anything which Deputy Cowen said, in principle, if we can get a clear definition of a qualifying BES in terms of net additional activity which would result from employment. That might address some of the issues which you, Sir, raised. I am prepared to consult with the Minister for Agriculture and possibly have a restricted horticultural regime where the companies would have to have the approval of the Department of Agriculture, or some kind of constraint.
I do not want to start making up legislation on the hoof but it seems to me that the case has been well argued by colleagues across the table. Quite frankly, there is not a terribly convincing argument as to why not on our side, other than to just curtail it. Let us look at it from that positive point of view, if we can get it into areas which would not otherwise take off, possibly glasshouse construction, although that would be related asset backed. We will certainly look at it, but from our point of view we will need some participating involvement from the Department of Agriculture in signing off in relation to both activities and bona fide companies. Otherwise, existing agricultural companies who benefit from substantial tax relief could get additional tax relief.
It would not be impossible to do that because in the tourism sector the Minister for Finance certifies, on foot of certification from the Minister for Tourism and Trade, on foot of investigations by Bord Fáilte. I am sure that the same system could be built into the provisions of the Act——
That is the model which I had in mind.
I also ask the Minister to be mindful of the fact that we live in a competitive world and that people in this business may find a competing business built, almost gratis, beside them.
That is the purpose of the amendment.
I am mindful of that. It would have to be done in such a way as not to penalise pioneers in the sectors but, if anything, to encourage them so that they would qualify for BES. They would probably, by definition, have a head start in that they could apply for BES on foot of a track record which would be less risky than someone starting from scratch, but it is a fair point.
I have some experience of this. We are living in a competitive world but the problem for many Irish growers is that produce is dumped onto the Dublin market and other markets around the country, which wipes out the price for the grower. I have seen that happen continuously over many years with certain products — for example tomatoes — and there is no return for the grower. It is very competitive, as Deputy McDowell said, but one is at a huge disadvantage if one is an Irish grower in that situation.
The BES scheme is available for mushroom growing and £40 million of its £60 million output is exported. However, when the BES scheme is not available for industries, vegetable growing for example, only £1 million of its £27 million output is exported. Some £10 million worth of vegetables are imported. Financial support is needed to build an export drive in these products. It has worked for the mushroom industry precisely because the BES scheme applies to it. The argument has been advanced by the horticultural industry to build similar strengths in other product areas, whether it be in its assets, such as glasshouses, or in its overall marketing. The figures are there to prove it, if the Department wants to look at them.
Chairman
That has been a most instructive discussion.
Amendment, by leave, withdrawn.
Sections 24 and 25 agreed to.