asked the Minister for Finance if he will outline the basis on which co-operatives are exempted from tax; if, in view of the changing nature of many co-operatives, he has any plans to review this exemption; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Co-operatives Tax Exemption.
20.
Section 18 of the 1978 Finance Act provides for the exemption from corporation tax of certain trading profits of co-operatives if a number of conditions are fulfilled. The basic underlying condition is that the co-operative must be a society registered under the Industrial and Provident Societies Acts. In the case of an agricultural co-operative, it must also have at least 50 members and all or a majority of these must be mainly engaged in and derive the principal part of their income from farming. If these conditions apply, the co-operative qualifies automatically under section 18 for the exemption. Where an agricultural co-operative does not meet either or both of these latter two conditions, the Minister for Finance is empowered, under section 18, following a recommendation from the Minister for Agriculture and Food, to give a certificate granting the co-operative the tax exemption. The exempted trading profits are listed in the Second Schedule to the 1978 Finance Act and include profits arising from the sale by wholesale of certain farm produce, processed goods and farm inputs.
A similar exemption applies in the case of a fishery co-operative which is similarly registered. The fishery co-operative must have at least 20 members, of whom all or a majority are mainly engaged and derive the principal part of their income from fishing. Where the co-operative does not meet either or both of these latter two conditions, the Minister for Finance is empowered to give a tax exemption certificate, following a recommendation from the Minister for the Marine. The exempted trading profits include the selling by wholesale of fish and the provision of certain related services.
The tax exemption for these agricultural and fishery co-operatives has been helpful in the development of the co-operative system and in the process of restructuring and modernisation which is still underway. However, as with tax exemptions generally, the exemption for co-operatives is kept under regular review in the light of changing circumstances.
I agree with the last statement of the Minister with regard to the great benefit to the co-ops. They have uses in the future as well I agree but in the light of the changing circumstances and structures where co-ops are setting up subsidiaries and are getting involved in joint ventures with private companies and are being taken over by private companies, has this not altered the situation and can the Minister say if there is any monitoring of the co-ops being done in these circumstances? I refer particularly to the Waterford Co-op which in 1987 had a profit of £6 million and paid no tax whatever although considerable changes have taken place in the manner of their marketing, structures and so on.
I agree that quite a lot of changes have taken place and that the co-operative system is undergoing a process of restructuring and modernisation. This development is generally welcomed because of the importance of the co-operative movement for the agricultural and food industries. The tax exemption, as with all other exemptions, is kept under regular review and whatever changes are considered necessary will be made at the appropriate time in the light of all the circumstances including the economic, social and taxation factors relevant to the Deputy's question.
Has the Minister really taken into consideration the changes that have taken place? Does he now consider that the conditions laid down in section 8 are adequate or are being maintained or have a realistic basis? There could be 50 members among the shareholders who are mainly farmers but nevertheless the operation could be more a commercial business venture than a co-operative. Has the Minister taken that into consideration in deciding on the tax bases of the huge profits which these are now making?
All exemptions are kept under constant review including this one and decisions and changes will be made at the appropriate time taking all considerations into account.
Question No. 21, please.
Just one last question. Where some co-operatives have been taken over by private commercial concerns, do they cease to be co-operatives even though they retain the name "co-operative?"
If all the qualifications I read out under the various Acts are complied with, the exemption remains but, if not, other circumstances may decide that they have changed the situation.
So they can remain co-ops and get the exemption?
They can only get the exemption on two grounds, one, if they are clearly qualified under the section of the Act and secondly, special exemptions can be given by the Minister for Finance of the day on the recommendation of the Minister for Agriculture and Food.