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Tax Collection

Dáil Éireann Debate, Thursday - 11 July 2013

Thursday, 11 July 2013

Questions (80, 81, 82, 83, 84, 85, 86, 87, 88)

Aodhán Ó Ríordáin

Question:

80. Deputy Aodhán Ó Ríordáin asked the Minister for Finance in July 2011, in response to a parliamentary question, in which he stated that the profits earned from the provision of stallion stud services in the income tax and corporation tax returns for 2009 were €500,000 for income tax and €4 million for corporation tax, if he will supply the corresponding profit figures for 2010, 2011 and 2012. [34162/13]

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Aodhán Ó Ríordáin

Question:

81. Deputy Aodhán Ó Ríordáin asked the Minister for Finance in July 2011, in response to a parliamentary question, in which he stated that the profits earned from the provision of stallion stud services in the income tax and corporation tax returns for 2009 were €500,000 for income tax and €4 million for corporation tax, if he will quantify the amount of tax paid to the Exchequer on these profits. [34163/13]

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Aodhán Ó Ríordáin

Question:

82. Deputy Aodhán Ó Ríordáin asked the Minister for Finance if he will quantify the income tax paid on the profits earned from the provision of stallion stud services in the years 2010, 2011 and 2012. [34164/13]

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Aodhán Ó Ríordáin

Question:

83. Deputy Aodhán Ó Ríordáin asked the Minister for Finance the amount of tax generated by the Exchequer from stallion fees for each of the years, 2008 to 2012 inclusive, since the introduction of the current scheme for taxation of stallion profits and gains on 1 August 2008. [34165/13]

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Aodhán Ó Ríordáin

Question:

84. Deputy Aodhán Ó Ríordáin asked the Minister for Finance if he will identify the amount of tax revenue to the Exchequer foregone as a result of the current scheme for the taxation of stallion profits and gains introduced on 1 August 2008. [34166/13]

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Aodhán Ó Ríordáin

Question:

85. Deputy Aodhán Ó Ríordáin asked the Minister for Finance the reason the Revenue Commissioners do not specifically identify tax collected under the current scheme for the taxation of stallion profits and gains introduced on 1 August 2008, which has enabled many stallion owners to shelter tax and, as a result, pay no tax or very little tax to the Exchequer. [34167/13]

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Aodhán Ó Ríordáin

Question:

86. Deputy Aodhán Ó Ríordáin asked the Minister for Finance the reason he has no visibility of the amount of tax collected and foregone under the current scheme for the taxation of stallion profits or gains introduced on 1 August 2008. [34168/13]

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Aodhán Ó Ríordáin

Question:

87. Deputy Aodhán Ó Ríordáin asked the Minister for Finance if he will request the Revenue Commissioners to provide a report with an analysis of the tax paid by corporate and individual stallion owners for the duration of the current scheme for the taxation of stallion profits or gains introduced on 1 August 2008. [34169/13]

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Aodhán Ó Ríordáin

Question:

88. Deputy Aodhán Ó Ríordáin asked the Minister for Finance the reason he has no visibility whatsoever of the contribution of revenues to the Exchequer as a result of taxation legislation covering stallion profits and gains, particularly in view of the scale of the horse breeding sector here. [34170/13]

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Written answers

I propose to take Questions Nos. 80 to 88, inclusive, together.

Profits or gains arising to an owner or part owner of a stallion from the sale of services of mares within the State by a stallion or from the sale of rights to such services have been taxable since 1 August 2008. Previously, these profits were exempt from income and corporation tax. Figures for the profits earned from the provision of stallion stud services were required to be returned in income tax and corporation tax returns from the year 2009 onwards. The figures thus entered are as set out in the following table for the tax years 2009 to 2011, the most recent available.

Profits earned from the provision of stallion stud services

Tax Year

Income Tax Returns

€m

Corporation Tax Returns

€m

2009

0.5

4.0

2010

0.7

2.3

2011

0.7

2.2

In interpreting these figures it is important to bear in mind that they are profits as opposed to the total of the fees earned by an owner. The fees represent turnover, as opposed to profits. Income tax and corporation tax are charged, of course, on profits or gains rather than turnover. In calculating the profits or gains, stallions are treated as stock in trade which means that income from stud fees and profits or gains on the sale of the stallions are fully taxable in the hands of both corporate and individual owners.

In computing profits, a write-off over 4 years of the “initial value” of the stallion is allowed as a deduction for tax purposes. This reflects the fact that some stallions have a short nomination life and also takes into account that the majority of stallions are unsuccessful at stud. The impact of the deduction on taxable profits during the write-off period is directly related to the success, or otherwise, of the stallion. Without this provision the cost of a stallion would, under normal rules, be allowed as a deduction upon its disposal or death.

The “initial value” of a stallion is its market value on the later of 1 August 2008 (i.e. the date the profits became taxable) or when it is purchased for, or appropriated to, stud activities. For this purpose, “market value” is the price the stallion would fetch on the open market or, where the purchaser and vendor are not connected and the transaction is at arm’s length, the price actually paid.

The Deputy has referred to the “amount of tax revenue foregone as a result of the current scheme for the taxation of stallion profits”. However, as I have outlined, the profits or gains from this activity – as opposed to the turnover- are taxable in the same way as for other activities the profits or gains of which are liable to income tax or corporation tax.

The Deputy has also asked about the contribution to tax revenues arising from the taxation of these profits or gains. However, as I advised Deputy McGrath in my reply of 11 June last (PQ Ref No. 27413/13), I am informed by the Revenue Commissioners that as statistics on income tax and corporation tax receipts do not generally distinguish between the yields from different sources of income, the figures of tax yields from stallion stud profits are not separately identifiable. All taxpayers, both individual and corporate, can have a number of sources of income, and can avail of a variety of different deductions and reliefs, all of which affect the final tax liability. In addition the profit figures shown above may themselves be reduced by capital allowances or losses to which that taxpayer may be entitled. Therefore, it is not possible to infer from these figures the amount of tax that is generated solely from the taxation of these profits or gains.

Income tax and corporation tax are self-assessed taxes. Full details of deductions claimed in calculating profits are not required when a return is being filed. Should a taxpayer be selected for audit, then these details have to be provided. It is not clear what purpose would be served by requiring a detailed analysis of the deductions made in arriving at the profits or gains from stallions.

Finally, I do not propose to ask the Revenue Commissioners to provide a report analysing the tax paid by corporate and individual stallion owners since August 2008. The Commissioners keep the general operation of the tax system under constant review using both statistical information and information gathered from audits and other interventions with taxpayers. Horse breeding and stud farming are subject to a similiar system of income tax on profits as other sectors and are subject to the same compliance programmes by the Commissioners as any other sector.

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