Dáil Éireann díospóireacht -
Thursday, 21 Apr 1994

Vol. 441 No. 7

Written Answers. - Effect of Tax Measure on Mushroom Growers.

Robert Molloy

Ceist:

35 Mr. Molloy asked the Minister for Finance, in respect of the removal of mushroom cultivation from the 10 per cent rate of corporation tax, the number of producers who are affected by this measure; the size of the tax base affected; and the estimate of the amount of extra taxation likely to be paid.

Minister for Finance (Mr. B. Ahern)

I an informed by the Revenue Commissioners that the most recent statistics available relate to companies with accounting periods ended between 1 April, 1991 and 31 March, 1992. For that period, approximately 70 companies engaged in mushroom cultivation and availing of the 10 per cent rate made corporation tax returns. These companies had net taxable profits of almost £4 million.

These figures would indicate that some 13 per cent of mushroom producers are incorporated. This means that the vast bulk of mushroom producers will not be directly affected by the change in corporation tax treatment at all as they are taxed under income tax rather than corporation tax. In this regard, I would like to take this opportunity to point out to the House that this estimate of 13 per cent of producers who are incorporated is based on an analysis of the latest records of the Revenue Commissioners. An earlier figure of "less than 5 per cent" of producers being incorporated quoted in the House during an Adjournment Debate on this matter on 30 March was based on a much more tentative estimate from the Department of Agriculture, Food and Forestry. The somewhat higher figure for the number of incorporated mushroom producers does not, however, alter the basic fact that the vast majority of producers will not be directly affected by the change in tax treatment.

As regards estimating the amount of extra taxation likely to be paid, as a result of the change in the tax treatment of mushroom cultivation, it is not possible to give an accurate assessment of this for a number of reasons. In the first instance, the Deputy will be aware that the Finance Bill as published applies the higher 40 per cent rate of tax to income earned in accounting periods beginning on or after 1 June 1994. This allows affected companies the flexibility to commence an accounting period on 31 May 1994 such that the higher tax rate will not apply in practice until the accounting period beginning on 31 May 1995. Assuming that all the major mushroom companies and the incorporated growers avail of this flexibility afforded by the legislation as regards arrangement of their accounting periods, it will be the net taxable profits arising in the period 31 May, 1995 to 30 May 1996 that will determine the amount of corporation tax payable under the new tax regime for mushrooms. It is clearly not possible to predict what that level of net taxable profits will be in advance. Secondly, the major mushroom companies will be sheltered from the worst affects of the change in the tax treatment of mushrooms by the fact that production of compost will now be eligible for the 10 per cent rate of corporation tax in its own right as a manufactured product. In the absence of detailed knowledge of the structure of the activities of the major mushroom companies, it is not possible to estimate the impact of this on any future tax take. Finally, it is not possible to say what, if any behavioural changes might take place among incorporated growers, such as reverting to sole trader status, as a result of the tax change.