This effects no significant change in the law, only such changes as are necessary to conform with corporation tax.
SECTION 56.
Question proposed: " That section 56 stand part of the Bill."
This section is more relevant to the whole problem that arises in relation to intervention than section 54. While intervention or the EEC is not mentioned here, the net problem is the same in relation to this section as it is in relation to intervention. Special provision has been made here in relation to An Bord Bainne and the Pigs and Bacon Commission, while the procedure broadly is that the producer sells to the board or sells to the commission, and the commission then make arrangement to sell abroad. The net effect of the section is to say that although the producer does not sell abroad, if the commission or the board subsequently sell abroad then the producer can claim export tax relief. We have a position in relation to intervention which is totally analogous to that. The meat, milk powder, butter or whatever else goes into intervention does not in the normal way ever come back into this country for consumption. It might in certain very limited circumstances come back; there is this pound-of-butter-a-month scheme, but that is minute. The beef does not come back for consumption in this country. If the principle is established in section 56 in relation to sales to Bord Bainne and the Pigs and Bacon Commission, why therefore cannot the same principle apply to sales into intervention? Intervention is a glorified Bord Bainne or glorified Pigs and Bacon Commission. It covers more items than they do, and more importantly for us, it covers beef, which we had no way of getting rid of before except to the British and other very limited markets.
I have a recollection that Bord Bainne and the Pigs and Bacon Commission, apparently marketing organisations, had a past history of difficulty in trying to canalise Irish exports into a properly-operating export section. It certainly arose in relation to pigs. We nearly wrecked ourselves on what was originally the British market. The same thing was happening in relation to butter. We had so many agents operating there that our marketing system was in a deplorable state. These two bodies were set up for the prime purpose of dealing with this difficult situation. There might be an exception arising in relation to these two that would not be comparable with others.
That is not quite the point.
I appreciate the point the Deputy was making, but I was going back to what the history was. The Minister may be able to throw some light on this.
We got a great deal of detail on the operations. The Pigs and Bacon Commission and Bord Bainne are fundamentally marketing organisations, as the Chairman says. That is the basis of their existence and they are orientated to finding markets abroad. If there were to be any benefits flowing for the export of bacon there would have to be a provision like this, because the Pigs and Bacon Commission are not a profit-making organisation and would not be enjoying tax reliefs, whereas tax reliefs are available to the producers.
Again, in relation to intervention, I agree that the Pigs and Bacon Commission and Bord Bainne act merely as agents. The principle laid down in respect of export tax relief has not been very helpful to factories. There has been reliance on this very narrow definition to suit Brussels. The intervention board is merely an intervention board for products similar to those of the Pigs and Bacon Commission for which subsidy is needed. I do not think it is very constructive from the State's point of view to deny this benefit to factories.
I am sure the Committee accepts that even if there was a will here, this could not be done without the sanction of the commission, which I think would not be forthcoming having regard to the fact that the commission have complained on innumerable occasions in the last year or so about the readiness of people to sell into intervention instead of going out and finding export markets. Where the State now can make it more attractive to sell into intervention, there would be bound to be opposition from the commission.
I am sorry to take exception to the Minister's statement but the factories merely sold into intervention because there was no better market available. The intervention mechanism saved farmers quite an amount of money in the costs of selling their cattle.
I am not justifying the view of the commission. The commission are able to speak for themselves, as the Deputy is aware. I am just saying what their attitude is.
The Minister suggests that Bord Bainne and the Pigs and Bacon Commission are no more than agents for the producers of milk and bacon respectively. I suggest that that is not correct. The terms of the section show this, because subsections (2) (a) and (3) (a) state:
(2) Where—
(a) a company produces a pigmeat product and sells it to the Commission, and
(3) Where—
(a) a company manufactures a milk product and sells it to the Board, and. . .
There is no question of the commission and the board being simply agents in the sense of trying to find a market for the producers' product. What happens is that the producer sells it to the board or the commission, as the case may be, and it is for the board or the commission to sell it after that. The producer is paid for the product and is no longer worried. Even if the board or commission have to dump the product because they cannot sell it, it is not then his concern. In that sense it is incorrect to say that they are merely agents and that this is a marketing board set up to help producers to market. They are purchasing boards which in turn resell but once the sale by the producer to the board or commission has been completed the producer is no longer concerned whether the board has been able to resell the product or whether a profit has been made.
The section makes it quite clear that they are purchasing agencies in the same way as the intervention mechanism is a purchasing agency. There is a very clear analogy between these boards and the whole intervention system. The Minister, with the greatest respect, seems to misunderstand the purpose of the intervention system. From what Deputy Collins has said it would appear that he has grasped the principle of the system more clearly. The intervention system should not be regarded as merely for the benefit of producers who are too lazy to go out and sell their products. We are very fortunate that there are floor prices of that kind especially in the light of our EEC membership.
There was no floor price of any kind before and we were dependent on external factors totally outside our control. These factors frequently caused the market to fluctuate severely to the detriment of our producers. We are in a very fortunate position now but our EEC membership does not mean that beef exporters should be put at a serious disadvantage vis-�-vis, pigmeat for example, those exporting via the Pigs and Bacon Commission or producers of milk products which are not going directly into intervention but are being exported through Bord Bainne.
I do not know what the position is currently in regard to milk products and the availability of intervention but I would assume that where Bord Bainne buys up milk powder, for example, of which there is a large surplus in Europe, they would put it into intervention. If they do that, it would seem that under the terms of section 56 the producer who sold to Bord Bainne, who then put the product into intervention, would qualify for export tax relief. But the unfortunate beef producer who cannot sell to either of these two boards, because they are not appropriate to beef and who sells into intervention will not, according to the Minister, be eligible for tax relief.
It may be suggested by persons in the vicinity of the Minister that such a person will get relief but this is something which should be clarified. It is arbitrary that if milk products are put into intervention by Bord Bainne they qualify for tax relief but beef directly put into intervention by the producing factory does not qualify for this relief.
We are dealing with the matter in relation to two particular boards only. May I take it that we are agreed on what is contained in this section?
We are not agreed. This is a matter of fundamental importance to the largest industry in the country. Meat factories and other co-operatives are reeling under the shock of having had income tax imposed on them a few weeks ago for the first time. Their only hope of survival in many cases is that they will qualify for export tax relief. This must be clarified now. If these co-operatives are to be taxed in addition to all their existing profits several of them will be wiped out.
They are competing against private enterprise which has got a hammering so there must be some balancing feature. I see the Deputy's point but I also understand the other argument.
I would regard Golden Vale or Mitchelstown, for example, as private enterprises. They are owned by the farmers and if they do not constitute private enterprise I do not know what does.
My interest in the matter is mainly the export aspect of it.
That is all we are discussing.
By way of exercise, it would be very easy for the Minister to put in a third part to the section saying that " the intervention board, being the Department of Agriculture and Fisheries. . ." and add similar sentences to correlate beef to that board.
Could we put down an amendment now to that effect?
That must be done on Report Stage.
I put a certain situation before the Minister but it has been lost in all the cross-talk. The point is this, if a producer sells milk powder to Bord Bainne and they put it into intervention it is clear that under the terms of this section export tax relief is given to the producer.
No. The section says the opposite. Subsection (2) (b) provides that the product must be exported. Subsection (3) (b) provides that the product is exported out of the State——
Assuming that it goes into intervention in Britain——
If it is exported out of the State, before it goes into intervention, export sales relief takes place. What happens elsewhere is irrelevant to the export sales relief. Once it is exported the concession is granted, the law is not being changed at all.
I do not think the Minister gets the point.
I get the point completely. If the product goes into Irish intervention, it makes no difference but if it is exported then it qualifies for the export sales relief because the relief is designed to encourage exports.
Most of the beef purchased for intervention is exported within a very short time to a European destination.
The relief goes to the owner of goods at the time of export. It is to encourage people to go and get export markets. In this section we are simply providing that existing reliefs for dairy and bacon industries will continue.
The only point here, as far as I can see, is that Bord Bainne do not pay income tax?
Yes.
Since Bord Bainne do not pay income tax, no question of tax would arise in the event of products being put into intervention.
These are marketing agencies but the people dispose of their goods to these export-orientated organisations. It is because the State considers it desirable that central marketing agencies be used for the export of Irish goods so as to ensure their quality and saleability elsewhere that this is the position.
Could we come back to the fundamental question about which there is disagreement as to the availability of export tax relief on goods going into intervention? The Minister has several advisers and I am sure one of them knows precisely what the position is in relation to it. As I understand the position, as relayed in one of these farmers' programmes on radio during the past week, the Revenue Commissioners have created an arbitrary distinction on whether the goods sold into intervention are physically held here or physically held abroad. The Minister will agree, and the Committee will agree, that it is entirely a matter beyond the control of the individual producer whether his 20 tons of meat are to be held in Dublin, Waterford, Birmingham or London. He sells to the Department of Agriculture and Fisheries as agents of the European Commission in relation to intervention. It is purely a matter of convenience where there happens to be a vacant cold store on any particular day. If you sold on a Monday it might be put into intervention in Dublin, and if you sold on a Tuesday it might be put into intervention in London.
The matter was not very important until now because many of the exporting companies were free of tax. Now none of them is to be free of tax. It is a matter of vital concern to them whether sales into intervention, which, in effect, is the only place to which they can sell 95 per cent of their produce, are to be free of corporation tax. As the matter was related on the radio, and as I understood it, the position appeared to be that the Revenue Commissioners make this arbitrary distinction. The point was made in the course of that programme that it was arbitrary and that it was unfair and that the whole thing should be rationalised, that intervention was intervention and that it should not matter where the meat was physically placed. That was the opinion of, I think, a chartered accountant speaking on the radio as an expert on the matter. I would like, through the Minister, or from the Revenue Commissioners now, a precise statement of what the position is in relation to export tax relief of beef going into intervention.
I have explained this fully. The putting of beef into intervention does not qualify for the export sales relief. If the view is held by anybody that that is a wrong interpretation of the law, let that view be challenged, let it be appealed against. This matter does not lie entirely with the Irish Revenue Commissioners.
I accept that as the Minister's expression of what he understands the position to be and for the purposes of the argument I accept that to be the position. But if the sale into intervention means the immediate physical transportation of the meat to a cold storage warehouse in Birmingham and it goes directly from the factory in Limerick or Waterford or wherever into a cold store warehouse in Birmingham, would the Minister agree that for the purposes of the Bill, that is the export of that meat?
If it is exported to a private contractor or purchaser say, in Britain, it would qualify for the export sales relief. If it is put into intervention it does not so qualify.
And if it is subsequently sold out of intervention in Britain to some private individual, does it then attract export tax relief?
No. Intervention is an institution of the Community. It is not an export market and the relief is for the promotion of export markets. Intervention is not an export market.
Is it not only a delayed process for the export market?
It may or may not be. There have been cases of goods being sold out of intervention in Ireland into the Irish market.
I agree, but surely that can be tightened up, as Deputy O'Malley says, or it can be proved conclusively that it has gone direct to a cold store in Birmingham? In such a situation should there not be some tax relief?
If it is not an intervention agency that is concerned it qualifies. That is clear.
But why do our sales of beef into intervention appear in our balance of trade figures as exports
At the moment I am telling the Committee what the legal position is in relation to the granting of export sales relief. I am not briefed at present as to why they may appear statistically under various heads at different times.
It seems to me that the position is that if it suits the Government of the day, whoever may be in power, they can claim credit for exports in our general economic picture and in our balance of trade and balance of payment figures in respect of sales into intervention, but those who actually do that exporting—the producing factories in Ireland—cannot claim in relation to tax relief which is available to exporters of manufactured goods. Is that not an instance of the Government of the day having it both ways?
I can only say that the Government have not got it all to their own liking but they have to finance beef in intervention to the tune of more than £100 million a year awaiting payment from the EEC. It is not something that operates to the entire benefit of the Government. We are dealing here in the Corporation Tax Bill with the tax position and I have explained that we are including existing provisions of the law.
By not giving the benefit of export tax relief to the meat factories there is no net benefit to the Government, because the Government or the Department of Agriculture and Fisheries will recoup its intervention expenses from Brussels. There is no such thing as export tax relief for the Government, so there is nothing in it for us. However, we are denying a vital industry funds for expansion, and this is the argument I am making.
I am not doing anything in this section to deny relief which is already there. This section is simply a continuation——
The point we have been making is why should the relief be there in relation to sales to An Bord Bainne and the Pigs and Bacon Commission and not to a completely analogous body, the EEC Intervention Board?
Because it is not an analogous body.
I for one do not accept that it is not an analogous body and I dare say there are others around this table who do not. This is a matter of fundamental importance. I do not want to delay on the section but it is one of these sections which at least is not too technical as these go. It is currently of particular importance because tax changes were made recently or are in the process of being made in relation to co-operatives, and it is of particular importance now because of the tremendous value of the intervention system to this country which has brought hundreds of millions of pounds into this country over the last three years that would not otherwise have come in and guaranteed us a market for a product that we had been selling for half or less than half the figure that we are now able to get for it due to the system that is operated by the EEC. I want to give notice that I propose to put down an amendment in relation to this on Report Stage.
Question put and agreed to.