Vol. 438 No. 5
114 Mr. Rabbitte asked the Minister for Finance if, in view of the differences of scale between large manufacturing co-operatives and small distributive co-operatives on offshore islands, he will reduce the level of tax on the latter; and if he will make a statement on the matter.
The general reform of the corporation tax system which has taken place over the past few years has had among its objectives, reducing the bias in favour of capital intensive investment and bringing down the standard rate of corporation tax to the lowest level possible. Such a policy necessarily requires the removal of sectoral reliefs and exemptions, and broadening of the tax base through this has facilitated a reduction in the standard rate of corporation tax from 50 per cent to 40 per cent in the period since 1988.
The abolition of the corporation tax exemption for the co-operative sector in 1992 such that the profits of co-operatives are liable to taxation in the same manner as the profits of any other enterprise, must be seen as an integral part of this effort to broaden the tax base. This change has resulted in the profits from the manufacturing activities of co-ops being taxed at the special 10 per cent rate and profits from other activities being taxed at the standard 40 per cent corporation tax rate. The special needs of those co-ops liable for tax at 40 per cent under the new regime was recognised in the 1992 Finance Act and in order to assist such co-ops in preparing for the transition to full liability to tax, provision was made for the phasing in of the change from exemption to taxation at the standard rate over a three-year period from 1992-94. In addition, co-ops were permitted to offset losses incurred before 1 April 1992 against profits arising after that date.
