With your permission, Mr. Chairman, I would like to take amendments No. 12 and No. 13 together. They are, as I think appears, minor drafting amendments. I move amendment No. 12:
In page 58, subsection (1), line 10, to delete " carrying " and to substitute " carries ".
I move amendment No. 13:
In page 58, subsection (1), line 13, before " all " to insert " and ".
This again reflects the existing legal provision, but there is a slight amendment to remove a doubt. Subsection (1) is designed to remove a doubt as to whether a company which could claim export sales relief apart from this section would be entitled to elect to have manufacturing services which are rendered solely to persons resident in the State treated as goods for purposes of exports relief. The doubt is removed by the insertion in the opening part of subsection (1) of a condition that all or some of the manufacturing services must be rendered to persons not resident in the State. The purpose of the section is to extend the export sales relief to profits from certain export sales or services. The relief may be claimed by a company which receives remuneration for carrying out, in the State, any manufacturing process on materials belonging to a foreign concern where the materials have been imported into the State, provided that the finished product ends up outside the State while remaining in the ownership of the foreign concerns.
What kind of services are covered by the section?
There are a number of services which could be rendered. There could be certain textiles in an uncompleted condition brought in here for processing and then re-exported. Without this extension the export sales relief would not apply to profits generated out of that processing of the goods. It would be doubtful if it would apply.
Is there any percentage laid down in regard to the manufacturing of the article, as to what it should cost to obtain full export relief?
No. It would only apply to profits generated out of the activity done here, so if it was 80 per cent the profits would be that much greater but if it was a small amount the profits would be correspondingly smaller.
It is coming in and going out again.
Yes.
Does the sort of example given by the Minister not constitute a fairly frequent type of manufacturing process here anyway, the bringing in of partly processed material, the doing of some further processing in relation to it here and the sending out of it again?
The normal practice is for the proprietary rights of the goods to pass, that the raw materials are purchased abroad; therefore the ownership lies in the processor or manufacturer in Ireland who then disposes of the goods, having processed them, at a profit. What we are dealing with here is an extension which would ensure that the export sales relief would be available though proprietary rights in the goods had not passed into the hands of the Irish operator.
Was there a doubt whether they would qualify for this before?
Yes.
This brings up the question which I raised elsewhere previously about the procedure of certain international companies in sending in goods here at an exaggeratedly low figure and re-exporting them at an unduly high figure for the purpose of trying to get all the profit that is really attributable to a number of processes, all but one of which took place outside the country, for the purpose of trying to attribute all the profit to be Irish process which may constitute perhaps only 25 per cent of the total processing. Has the Minister any thoughts on how that difficulty might be overcome? I think he referred to it the last day that I was here, when he was talking about multi-nationals. It is the obverse of the multi-national situation, and the kind of example that the Minister gave here in relation to section 59 is not likely to arise very often, because it would pay the foreign owner of the goods to establish an Irish subsidiary here to sell the Irish subsidiary the goods and to buy them back again at an abnormally high figure in order that profit would be seen to accrue to a company which is based in Ireland.
As far as the Exchequer is concerned, the course would be immaterial because whether the profit was £1 or £1 million the Exchequer would get nothing anyway once export sales relief is provided. It could be a problem for the Exchequer in the country of origin where the company is registered, but that is a matter for that country itself to take such action as it deems desirable to protect its own interest.
Is there any way of getting that to apply here? As Deputy O'Malley says, it is mostly a paper transaction, with little or no manufacturing here. Is there any way of getting the benefit of some of the money involved?
There is no way in which we could turn that kind of a transaction to the benefit of the Irish Exchequer once there is export sales relief involved, because if a thing is sold at an artificially low price to Ireland and then sold out at a very high price, there would be massive profit of the operation but if it is related to the exportation of manufactured goods it would enjoy the relief. Of course, if there is—as we hope there will be—greater international co-operation on the tax front, then many of these operations would be stopped. We are probably a long way from achieving that.
The Minister has given us a rough description of what is envisaged in this section. Would the Minister not agree that, in principle, there is no difference between the provision of that type of service—for example, perhaps bringing in some object, polishing it up and sending it out again in its polished up form—and providing, for example, an engineering service or a draughting service in relation to foreign projects? If, for example, an Arab country with its new-found wealth wants an electricity generating station designed for it and the ESB does the job, is that not every bit as much an export from our point of view as physically sending out goods?
The next section deals with that.
