Section 54 has the same provision as existing law. It reproduces the provisions of section 399 of the Income Tax Act, 1967.
SECTION 54.
Question proposed: " That section 54 stand part of the Bill."
A case has been made frequently for the extension of this relief to a wider definition of goods than those defined here. Has the Minister given any consideration to that?
There are many requests for extensions of reliefs but our approach in this Bill has been to maintain existing law as far as practicable unless there was some major reason for an alteration. There are some significant reliefs for corporations in legislation but this could be regarded as a policy area which would be more pertinent to any Finance Bill rather than legislation which is primarily a consolidation measure so far as corporation profits tax is concerned, adapting the existing law to the new rules of corporation tax.
Do manufactured goods, within the meaning of this section, include meat or slaughtered cattle?
Yes, so long as it has been processed in this country but not, of course, cattle on the hoof.
This is a matter of importance due to the withdrawal of the tax concession for co-operatives.
The exporter gets the relief provided that the goods are manufactured or processed.
Could the Minister clarify the situation with regard to sales into intervention in relation to export tax relief?
No. Export tax relief is not available for goods sold into intervention.
I wonder if that is right. I heard that matter debated on the radio at great length. I understand that in certain circumstances it is available but not in others.
Our own approach to this is the same as that of the rest of the European Economic Community—if goods are put into intervention they are not deemed to be exported.
But they appear in our balance of trade figures as exports.
Not until the time of actual export.
I do not know whether the Minister is familiar with the system. When meat or meat products are sold into intervention, depending on the storage capacity available here at the time, some of them are placed in storage here and some of them are held in Britain, or possibly on the Continent, but more normally in Britain.
As I understood the position to be, as explained on a farming programme that I happened to hear on the radio, those goods which are physically held in intervention in Britain seem to qualify for export tax relief but those physically held in intervention here do not. I suggest to the Minister that intervention is intervention wherever it is. To disqualify goods which happen to be kept in cold storage in Dublin or in Foynes or anywhere else is wrong in principle. It is purely a matter of chance, so far as any meat factory is concerned, whether its sales into intervention happen to be physically held in Britain or in Ireland. If the sales of a meat firm over a period of months run into several million pounds, as is the case with several of our firms, why should there be this arbitrary distinction which would render one co-operative or meat firm liable possibly to very heavy corporation tax and another one, quite fortuitously and arbitrarily, is free of it under this section. The matter is not as simple as the Minister suggests. Hitherto sales into intervention have been recognised by the Revenue as exports in certain circumstances.
I am not so aware. Deputy O'Malley may well be right in this regard, but there is nothing we can do here in relation to intervention which would make it possible for us to give tax relief for sales to intervention without getting the sanction of the European Community. Knowing their attitude towards intervention I would anticipate a refusal to make sales into intervention more attractive than they are.
Is the decision not to allow intervention sales for export relief a Revenue decision or is it a Government decision?
Once the goods are sold into intervention then the person who sells them loses any proprietary rights in those goods. The export relief goes to the person who actually makes the export, but you are not exporting when you are selling into intervention. Intervention is a state of suspense, if you like, but it is not regarded as being foreign territory no matter where it may lie.
Possibly my understanding of intervention and its purpose and everything else is different from the Minister's. I am not suggesting that my understanding of it is necessarily any more accurate than his, but surely intervention, of its very nature, is foisting onto the European Economic Community something which the home producer cannot sell at a higher price than he can get from the Community. The Community is an entity which has an existence independent of us or any of the other individual member states. A sale to the Community, which is essentially what intervention is, is the same as a sale to some other international body of some commodity, for example, if the United Nations buy some product from us for use in their offices and so on.
We are part of the Community. When you are exporting, you are exporting to yourself.
It would appear to me that the decision not to allow sales to intervention for tax relief purposes is inimical to the farming community. If beef factories do not get export relief on these sales, then obviously they will not be able to pay as much to suppliers as they would for what you might call genuine exports. When you take into account the fact that intervention is at a lower level than what has been established as a fair market return for farming produce, you are really defeating the aim of having a support system for farming.
Remember that at all times this relief goes to the person who is disposing of an interest in some commodity such as beef. If the owner of the beef were to sell it abroad, then the relief is given. Having sold it abroad it might well be put into intervention by somebody else. The export relief would go at the time of the goods passing out of Irish ownership into foreign ownership. We are not changing the law. If we are making a case for changing the law, that is something that can only be done with the sanction of the European Community, and it is obviously not something that can be cleared up in relation to the corporation tax. The question of export tax relief is not primarily a corporations tax provision. It just happens to be by the way here. We have to deal with it in this Act so as to reflect existing provisions in the new Corporation Tax Bill.
By not allowing intervention sales for export tax relief you are doing damage to the expansion potential of a vital section of the economy, that is, the meat processing industry. You are also damaging the return on purchases of factories of intervention stock which will have its effect on the farming community. I do not think that should be our objective.
The objective of the export sales relief is to encourage people to go out and find export markets. That is why the encouragement is there, and it would defeat that purpose if export sales relief were to be available for other purposes. While accepting all that Deputy Collins says about the importance of the Irish beef industry and the promotion of the welfare of agriculture, we must also accept that if an export sales relief is to be valid it must be related to people who are deserving of the reward because they have gone out and found markets elsewhere.
I am not aware that a factory wants to sell beef at a price lower than they can realise. That is a fallacy. The profit motive is, of course, evident. The factories are not happy about having to sell into intervention because it is a reflection of the lower price available on the market. To say that they are selling into intervention on purpose is certainly a misleading statement.
If intervention was not there and if the EEC was not there. Irish beef would be going for half what it is today, and the Minister should remember that when he gets cross with the EEC.
I only get cross with the EEC when they make stupid decisions.
Although they were asked to make them for the past 18 months by the Irish Government more than anyone else.
I do not think that arises under this section.
One would have hoped that by this stage the Minister for Finance might have had second thoughts about his references to the EEC. Unhappily that is not so. I would like to reiterate something I said about the EEC at the outset, that it was a pity that, in effect, these meetings are held in secret. The matter that Deputy Collins, the Minister and I have been discussing over the last five minutes is of the most fundamental importance to a vast number of people in this country.
It is not held in secret.
I know it is not held in secret but in practice it is secret.
If the Press do not think it worth while turning up what can we do about it?
If this discussion which took place between the three of us in the last few minutes had taken place in the House—even though the House was in Committee—it is a matter that would immediately have been adverted to as being of fundamental importance. I think Deputy Collins realises that.
For the record, may I say that my interest in the matter is infinitesimal in relation to the overall problem.
What is the position with regard to the claiming of export relief by small manufacturers who are not in the export business themselves and quite often may find it impossible to get into the export business? Is it possible to channel the benefits back to them?
Indirectly one assumes that benefit is channelled back because it ought to affect the price that such a manufacturer receives for the goods when sold to a person who is exporting. It is not possible to operate this system except by conferring it on the actual exporter.
Is it the exporter who gets the relief?
Yes.
The Minister maintains that it is channelled back by virtue of better prices?
Yes.
I wonder does it always reach the right source under that system?
It is something we cannot be certain of.
The benefit is channelled back just to an exporter, whereas it is the manufacturer who should get the benefit.
Unless there is a tie-up between the export company and the manufacturer as provided under the proviso in subsection (1).
Question put and agreed to.