I move that the Bill be now read a Second Time. I am sure that every Deputy at some time or another has had the opportunity of hearing locally the tradition that exists in various centres of the country that there are minerals of value beneath the soil in those localities. In some cases these minerals were worked in the past and where there were commercial workings they were most fully exploited during the last century. The peak of such production was about 100 years ago. From that peak production gradually declined and many undertakings ceased operations.
Some feel they were closed because of competition or the policy of opposed interests. Others, and I think they are correct, feel that the decline of mining in Ireland came about because of the working out of the most profitable parts of the deposits and because of the discovery of fresh deposits of higher grade ores in other countries.
In any event, whatever the reason, it is clear that an incentive is necessary if we are to get business people interested in the somewhat chancy business of searching for, working and commercially developing such non-bedded ores as may be existent in Ireland. It will be appreciated that even the reopening of a long abandoned mine may be a very expensive, chancy and dangerous business. No one can tell with any certainty what lies under the soil where it cannot be seen. Exploration requires very heavy expenditure. Even after exploration has been concluded, unforeseen and unforeseeable difficulties may arise at any stage. Unexpected physical difficulties may be met and may have to be overcome. The vein of the deposits may be broken or may peter out sooner than anticipated.
In other words, capital must be committed to an enterprise involving a greater risk of failure than would be associated with a normal commercial enterprise. The house will note I have referred to non-bedded deposits which are those mentioned in the Bill. The content of bedded deposits is capable of being more readily assessed and the extraction of such deposits is more akin to a normal commercial operation. Working on non-bedded ores is, however, for the reasons I have given, a speculative and risky venture.
Mining, too, differs from an ordinary industry in another way. Every Party in this House is committed to the policy of assisting the inception of new industries by a policy of protection. Whether that protection is given by tariff or by quota or other import restriction, assistance is in that way available to industry, particularly in its infancy.
Such assistance or incentive is not available to mining. Assistance could perhaps be given under the Trade Loan (Guarantee) Acts and indeed I did sanction last year a very substantial guarantee under those Acts to an Irish mining concern; but though that might help in an individual case, such guarantees would clearly not provide the broad incentive the Government deemed necessary, if such minerals as we possess are to be raised.
It was clear to the Government therefore that the only satisfactory broad incentive was by way of tax concession. I do not wish to suggest that we were in any way unique in coming to that conclusion. The U.S.A., Canada, South Africa, Australia and, I think, Germany all afford special treatment in their tax codes to mining ventures. The concessions that these countries offer as an inducement to mining are varied both in their incidence and in their complications. I felt, however, that we have a slightly different problem perhaps from theirs and that what we required here was a solution that would be simple for would-be investors in these enterprises to grasp and yet far reaching in its effect. It is on that basis that I ask the Dáil to approve of this Bill.
The basic principles of the Bill are simple, though I confess that in drafting these principles into legislative form, the wording becomes a trifle involved. These principles are three in number: first, as the whole purpose of the Bill is to act as an incentive, the benefit is given to new mining operations for obtaining non-bedded minerals, while at the same time giving existing operators the benefit of certain provisions from now on, and it will be noted that, in order to be eligible for relief, new mining operations must begin within the next three years, thus providing an inducement not to delay development unduly; secondly, the relief is confined to Irish companies and it will, I think, be conceded that it is realistic to restrict the concession to companies since it can scarcely be expected that persons would work non-bedded deposits of minerals on a scale of any magnitude without the protection of limited liability; and thirdly, the concession takes the simple form of exemption from tax on profits, for the first four years of development and thereafter 50 per cent. exemption for four years.
Income-tax and corporation profits tax will, subject to certain modifications, be assessed in the ordinary way as if the proposed legislation had not been passed. The income-tax assessed for a year of assessment to which the legislation is to apply will, for the purpose of arriving at the amount which ranks for the total or partial relief, be reduced by income-tax on debenture interest, royalties and similar charges from which income-tax may be deducted and retained by the company in making payment of the interest, royalties, etc. to the persons entitled to receive them. Income-tax on so much of the profits as represents the amount of the interest, etc., is essentially the liability, not of the mining company, but of the persons entitled to the interest, etc., and therefore cannot properly qualify for the relief. The income-tax assessed, reduced by income-tax on the charges, is the amount of income-tax which the mining company would effectively bear were it not for the Bill; and such income-tax (called, in the Bill, the "net income-tax") is the amount which ranks for total or partial relief. The amounts of corporation profits tax assessed for periods to which the legislation is to apply are the amounts of that tax which will qualify for total or partial relief under the Bill.
It is provided that dividends payable out of profits to which the Bill applies will be taxable to income-tax in the hands of the shareholders only to the extent, if any, to which income-tax has been suffered by the company for the periods out of the profits of which the dividends are payable.
So much for new mining operations. The Bill is, however, concerned also with Irish companies which are already producing non-bedded minerals and, in so far as production by these companies has commenced within the recent or comparatively recent past, the companies will be granted a measure of relief.
Perhaps I might make some reference to the sections of the Bill. Section 1 contains the main definitions which are necessary for the interpretation of the Bill. The type of mine affected by the Bill is one from which non-bedded minerals are obtained. The Schedule lists 14 such minerals; and the Minister for Finance is being given power to add to the Schedule by Order. "Existing mining operations" is defined as meaning mining operations which, at any time during the three years ending on the 5th April next, have resulted in the production, on a commercial scale, of such minerals. In fixing that period of three years, I deliberately had regard to the fact that during the emergency it was perhaps necessary first to produce minerals on what I might term an emergency rather than a commercial scale.
"New mining operations" are mining operations which (a) are not existing mining operations and (b) are, in the Revenue Commissioners' opinion, substantially distinct and separate from other mining operations.
New mining operations may be carried out either by, say, companies already engaged in mining or by companies which will be concerned solely with new mining ventures To the extent that new mining operations are carried out upon it, any mine may rank as a "qualifying mine" under the Bill, that is, qualifying for the main benefits provided.
There is provision, comparable with the normal provisions for income-tax appeals, for an appeal against an opinion of the Revenue Commissioners as to whether or not mining operations are substantially distinct and separate from any other mining operations.
Section 2 makes the Bill applicable to the profits of an Irish company from the working of a "qualifying mine", where the company commences to trade, in relation to the mine, within the period of three years beginning on the 6th April, 1956.
Section 3 provides that, for income-tax purposes, the working of the mine shall be treated as a separate trade, and makes the further technical provision that corporation profits tax which, under the Bill, is not payable, shall be deemed to have been paid.
Section 4 explains the method of computation of the "net income-tax", that is, the income-tax which is to be eligible for relief. Briefly, this will consist of the income-tax on the mining profits, including the Schedule A tax on property owned and occupied for the purpose of the trade, after reduction of tax on "charges", tax which the company can recover by deduction from the chargeants. Therefore relief will not extend to such part of the profits as is referable to the charges, and the Revenue will accordingly get the full tax on any debenture interest, bond interest, etc. payable by the company.
Section 5 and 6 define the income-tax relief and corporation profits tax relief respectively to be given in respect of the mining profits. The "net income-tax" appropriate to four complete years dating from the commencement of the trade of mining, and one-half of the "net income-tax" appropriate to the next four complete years, will not be payable and in Section 6 the same general line is followed for corporation profits tax.
Section 7 provides that, in so far as dividends are paid out of the mining profits of any period as respects which relief is given under the Bill, the tax which the company may deduct from the dividends must be modified by reference to that relief.
Section 8, 9 and 10 are technical sections, providing for an average rate of tax in computing certain repayments, for the termination of the relief after eight years and for obtaining the information necessary to administer the Bill.
Section 11, which deals with existing companies, provides that a resident Irish company working an existing mine may be given relief, computed on the lines laid down in the case of new mining operations; but the relief in any case will extend only to any balance, as at the 6th April next, of a period of eight years reckoned from the date on which the company commenced to work the mine. No relief will be given for any year or period prior to the 6th April next. Thus, where a company has begun to work an existing mine on, say, the 6th April, 1952, it may be given relief for a total period of four years from the 6th April, 1956. For those four years the company may be granted relief to the extent of one-half of the income-tax and corporation profits tax which would otherwise be effectively borne by it.
Section 12 provides that there is a provision to meet the case of an Irish company which begins to work a mine abandoned by another such company before the end of the full period for which the outgoing company could have claimed relief under the Bill. In any such instance, the incoming company will be entitled to claim relief for any balance, reckoned from the date on which it commences to carry on the trade, of the total period for which its predecessor could have claimed relief, had it continued to trade. It should be appreciated that this provision will apply whether the predecessor company was working an existing mine or was engaged in new mining operations.
I do not propose at this stage to elaborate on the minerals specified in the Schedule to the Bill, but, of course, if any Deputy wishes to have any further details of these minerals or of their commercial uses, I will be happy to try to give the information desired. May I, however, mention that oil is not included, because, first, there is some doubt whether it, strictly speaking, comes within the geological definition of non-bedded ore deposits and, secondly, because I do not think this would be the appropriate form of tax concession, if tax concession were necessary to induce oil exploration or development. Should it happily arise that there is any prospect of such exploration or development, I will then be prepared to consider if special tax treatment is necessary or desirable.
So much for the Bill. May I now turn to the amendment in the name of Deputy Lemass and, in doing so, may I say that I do not understand its purpose? If the Deputy merely wishes to obtain information, I shall, of course, be happy to give him all proper and appropriate information that is desirable. But I would have thought that if that was his purpose there were other ways in which he could, adequately, have achieved it, such as by parliamentary question.
In the first place, it should be clearly noted, as I have already explained, that this Bill is of general application. It does not relate to any particular mining property or to any particular mining company. The company which has been incorporated to take a lease of the Avoca minerals has no better entitlement to the concessions under the Bill than has any other company. To secure any benefit under the Bill, St. Patrick's Copper Mines, Limited, as will any other company, will have to fulfil the terms and conditions that are laid down in it.
Apart from that, the amendment and its wording appear to rest on some presumption that the Government had an obligation to submit to the Dáil proposals in relation to the commercial development of the property at Avoca held under lease by Mianraí Teoranta. The provisions which deal with the making of lease on State minerals are clearly laid down by statute. The relevant legislation is, as I am sure Deputy Lemass is well aware, since he introduced it and carried it through the Oireachtas, the Minerals Development Act of 1940. Section 26 of that Act sets out clearly that if, in the opinion of the Minister, it is in the public interest that any State minerals should be granted by way of lease to any person, the Minister may demise such minerals to such person by way of lease for such term as the Minister shall think proper. The Minister, in that context, is, of course, the Minister for Industry and Commerce.
The section goes on to provide the manner in which the Minister shall exercise the power so given to him and it specifies certain conditions which are to be incorporated in every such lease and, of course, it also provides that the Minister for Finance is to be a party to such lease and shall, therefore, concur in the terms.
I have no doubt that Deputy Lemass when he was introducing this section in that Bill did so because he realised that it would be quite impossible for commercial negotiations between State Departments and private interests to be brought to a proper conclusion if they were to be conducted in the full glare of publicity before such negotiations were concluded.
In saying that, I do not suggest that the Dáil should not be given at the appropriate time all the appropriate information. That too, I may say, was also clearly envisaged by Deputy Lemass when he was introducing that same Bill, for, in Section 77, it is provided that there would be every six months a return of such mineral and prospecting leases laid on the table of the Dáil.
The fundamental weakness of the amendment, therefore, is that the terms of the mining lease have no relevance to the Bill. The Bill stands on its own legs and should be judged on its own merits as an incentive to new mining enterprise. At the same time, as I have already said, if the purpose of the amendment is to elicit information then I have no objection to enlarging on the statement made by the Tánaiste some months ago and to making available now the details that will be published in due course as provided in Section 77, and, in addition, giving other information, relevant to such statutory details, as is proper.
The lease to St. Patrick's Copper Mines, Limited, was executed on the 3rd January, 1956, and demises copper, lead, zinc, pyrites and other minerals in an area of approximately 6,900 acres in County Wicklow. It is for a term of 21 years from 1st October, 1955, and provides for rights to surrender in certain circumstances together with an option of renewal for a further period of 21 years.
The company under the lease is bound to do all necessary and proper work for the proper exploration and development of the minerals and for that purpose to expend at least £180,000 or such further sums as the company considers necessary up to £450,000 within a period of one year from 1st October, 1955, or as soon thereafter as may be reasonable. I might add that both the Minister for Industry and Commerce and I were satisfied before the lease was signed that the company had available the necessary finances to enable it to honour this commitment.
If the result of such exploration and development work so warrants, the company has bound itself by the terms of the lease to build a concentrator of a capacity of 3,000 tons daily on the site and to expend on such erection a sum of approximately £1,500,000 and, further, to install plant and apparatus and to do works for the effective development and exploitation of the said minerals at an approximate cost of £750,000—these two items, therefore, making a total of £2,250,000. The company has further bound itself in such working to employ approximately 500 men.
When the company goes into commercial production, it is bound to recoup in full to the State, subject to a small offset in respect of stamp duty liability, the sum of £542,966. That sum is the amount expended by Mianraí Teoranta on exploration and development at Avoca up to the 1st October last, as certified for the purposes of the lease by the Comptroller and Auditor-General in his capacity as auditor of the accounts of Mianraí. This amount is to be paid by means of an annual payment of 25 per cent. of operating profits and such payment is to be a first charge on such profits.
The company is bound during the currency of the lease to pay, in addition, by way of royalty, an annual charge on the operating profits computed at 4 per cent. up to £350,000 and rising to 9 per cent. on profits in excess of £1,750,000. These percentages which will accrue to the State are likewise a first charge on the profits.
The company has bound itself to sell the products of the mine at the best price obtainable—for the ascertainment of which an elaborate formula is included in the lease—and to bring all the proceeds of sale to credit in the company's Irish bank. If the working of the deposits becomes unprofitable and a temporary stoppage of commercial working therefore becomes necessary, the company is bound to pay a dead rent of £3,500 per annum.
There is a further provision in the lease by virtue of which the company is bound to sell to the State, at the option of the Minister at prevailing market prices, up to 50 per cent. of the finished metallic products. The lease contains a provision that any default of agreement between the parties as to whether the erection of the concentrator is warranted or whether a stoppage of commercial working if such unfortunately occurs, has been justified—that these points, in particular, and indeed any other points of difference in the interpretation of the lease shall be submitted to an impartial arbitrator. There are, of course, as well, the usual technical details with which it is, I think, unnecessary to burden the House.
It is clear from the details that I have given to the House that the agreement made with this company is one of advantage to the country. We have arranged by this deal that further exploration and development work, which will, undoubtedly, be very costly, will be carried out at no expense to the Exchequer, that it will be carried out expeditiously and efficiently by people experienced in this class of work and I may add that, in doing that, they will be employing more Irish labour than was employed by Mianraí in their exploration and development work.
If, as we all hope, exploration by the new company shows that subsequent exploitation would be a commercial proposition (in the opinion —in the last analysis—of an independent arbitrator) then we will have recovered all the money which, through Mianraí, the State has spent on exploration at Avoca. We will have obtained a substantial income through the percentage charge in lieu of royalty which I have mentioned; we have provided that we can get 50% of the finished minerals, should we need these minerals, and very substantial employment indeed which has been estimated to reach a figure of about 500 men will be given in the Avoca area. There will obviously also be the additional subsidiary employment which will be given in transport, etc., arriving out of these activities.
As I have said this Bill lays down the principles on which the concessions will be given. They will be given to any company which qualifies within the terms of the Bill. The amendment appears to me entirely irrelevant to the purpose of the Bill which is to provide in a general way, and not merely for any single mining development, such an inducement as will bring private enterprise into this speculative field.
If it is successful in doing that and if as a result it is found possible to raise minerals in commercial quantities, I suggest to the Dáil that the increase in our production that will follow, the aid that will be given to our balance of payments problem particularly in respect of our dollar payments and the employment that will be available at home will be all well worth while.
