Amendments Nos. 33 and 34 are related to amendment No. 30 and all may be taken together. Is that agreed? Agreed.
Finance Bill, 1999: Report Stage (Resumed).
Amendment No. 29 not moved.
I move amendment No. 30:
In page 69, line 26, after "territories" to insert the following:
"or on such other stock exchange as may be approved of by the Minister for Finance for the purposes of this Chapter".
These amendments relate to sections 24 and 25. Section 24 provides for the introduction of a scheme of dividend withholding tax, or DWT, on distributions made by Irish resident companies. Section 25 provides that those non-resident persons who are to be exempt from DWT are also to be exempt from the basic charge to Irish income tax in respect of such distributions.
There are a number of categories of non-resident persons who are to be exempt from DWT and the charge to Irish income tax in respect of distributions made by Irish resident companies. One such category is non-resident companies where the principal class of the shares of the non-resident company or of its parent company is substantially and regularly traded on a recognised stock exchange in a relevant territory. A relevant territory is another EU member state or a country with which Ireland has a double tax treaty.
The purpose of the amendments before the House is to extend the exemptions so as to include companies which are quoted on such other stock exchange, not located in a relevant territory, as may be approved of by the Minister for Finance. This will enable the exemption from DWT and the charge of income tax on distributions to be granted, where appropriate, to bona fide quoted companies not covered by the existing provisions.
Amendment agreed to.
Amendment No. 32 is related to amendment No. 31 and both may be taken together. Is that agreed? Agreed.
I move amendment No. 31:
In page 71, to delete lines 43 to 49 and substitute the following:
"(f) to provide to the Revenue Commissioners an annual report on the intermediary's compliance with the agreement, which report shall be signed by –".
These amendments relate to section 24 which provides for the introduction of a scheme of dividend withholding tax, DWT, on distributions made by Irish resident companies. At present the Bill requires persons who, for the purposes of the DWT scheme, have entered into a qualifying intermediary agreement or an authorised withholding agent agreement with Revenue to provide an annual certificate from their auditors certifying their compliance with the terms of the agreement.
I received representation from the Institute of Chartered Accountants on this issue. In essence, the representations were to the effect that the proposed certification requirement is impracticable because only the courts have the authority to determine what constitutes compliance and certification involves a statement of absolute certainty whereas auditors are trained to form opinions based on persuasive evidence gathered on a sample basis. I considered the points made by the institute to be reasonable and, following consultation between my officials and the institute, decided to bring forward these amendments.
The purpose of the amendments is to change the certification requirement to a requirement that the auditor provide an annual report on the intermediary's or the withholding agent's compliance with the agreement entered into with Revenue. I consider this is a reasonable approach bearing in mind that, apart altogether from the auditor's report, the Revenue will still have the right to make its own inquiries on the question of compliance with the agreement by the intermediary or withholding agent. I commend the amendments to the House.
Amendment agreed to.
I move amendment No. 32:
In page 83, to delete lines 12 to 18 and substitute the following:
"(g) to provide to the Revenue Com missioners an annual report on the intermediary's compliance with the agreement, which report shall be signed by –".
Amendment agreed to.
I move amendment No. 33:
In page 98, line 30, after "territories" to insert the following:
"or on such other stock exchange as may be approved of by the Minister for Finance for the purposes of Chapter 8A of Part 6".
Amendment agreed to.
I move amendment No. 34:
In page 99, line 28, after "territories" to insert the following:
"or on such other stock exchange as may be approved of by the Minister for Finance for the purposes of this section".
Amendment agreed to.
Amendment No. 35 is a drafting amendment. Amendments Nos. 35 and 37 are consequential on amendment No. 36 and all may be taken together. Is that agreed? Agreed.
I move amendment No. 35:
In page 100, line 20, to delete "tax.'." and substitute "tax.".
These amendments are concerned with the charge to income tax in respect of dividends or other distributions received from an Irish resident company by certain non-resident persons. As a general rule, a dividend paid by an Irish resident is taxable on the recipient. The dividend withholding tax provided for in section 24 is designed to collect part of the tax liability at source. The balance of tax is collected after the making of a return by the taxpayer.
As Deputies are aware, there are exemptions from the dividend withholding tax for certain non-resident taxpayers. These include, for example, certain shareholders resident in tax treaty countries. Section 25 ensures that non-resident taxpayers who are exempted by section 24 from withholding tax are exempt from the general charge to tax in respect of the dividend.
Section 26 gives effect to the EU Parent-Subsidiaries Directive which requires Ireland to give an exemption from dividend withholding tax where an Irish resident company makes a distribution to its parent company which is resident in another member state. However, no corresponding exemption from the general charge to tax exists under section 25. Amendment No. 36 aligns the provisions of sections 25 and 26 so that, where dividend by an Irish subsidiary company to its EU parent is exempted from withholding tax under section 26, it will also be exempt from the general charter to tax under section 25. Amendments Nos. 35 and 37 are consequential drafting amendments.
Amendment agreed to.
I move amendment No. 36:
In page 100, between lines 20 and 21, to insert the following:
"(5) Where, by virtue of section 831(5), Chapter 8A of Part 6 (other than section 172K) does not apply to a distribution made to a parent company (within the meaning of section 831) which is not resident in the State by its subsidiary (within the meaning of that section) which is a company resident in the State –
(a) income tax shall not be chargeable in respect of that distribution, and
(b) the amount or value of the distribution shall be treated for the purposes of sections 237 and 238 as not brought into charge to income tax.'.".
Amendment agreed to.
I move amendment No. 37:
In page 100, lines 21 and 22, to delete "by the substitution of '153(4)' for '153(1)"' and substitute the following:
"by the substitution of ‘Section 129 and subsections (4) and (5) of section 153' for ‘Sections 129 and 153(1)"'.
Amendment agreed to.
Amendment No. 38 in the name of Deputy Noonan and Deputy Deenihan has been ruled out of order as it involves a potential charge.
May I get a fuller explanation from the Ceann Comhairle's office on why this amendment was ruled out of order? I got a partial explanation on Committee Stage. I know the ruling is that it is a charge, but on the basis of my limited knowledge, it looks as if I am proposing relief, not imposing a charge.
On a point of information, there is a charge. There is a 20 per cent DIRT tax, which is a new charge. That is why it was ruled out of order.
Yes, but it is a new charge in lieu of a heavier charge, so it is a relief.
No, there is a new charge.
Is it because we are changing the tax head from income tax to DIRT?
No. As I understand it, the credit union does not have a charge.
It is only a charge on the credit unions which the credit unions apply to individual account holders who are having their charge reduced from 46 per cent to 20 per cent.
No.
It is more when one takes the exemption limits into account, but we have already discussed it. I would like the Ceann Comhairle's office to communicate to me fully, in writing, the reasons for that.
I understand the Ceann Comhairle's office has written to the Deputy on this matter.
I received a letter on Committee Stage but it has not illuminated the situation for me.
I will bring it to the attention of the Ceann Comhairle's office.
Amendment No. 38 not moved.
Deputy McDowell's amendment No. 39 is out of order for the same reason – that it involves a potential charge on the people.
I will not make a great issue of it now, but the amendment is phrased in a form with which the Leas-Cheann Comhairle will be familiar. It asks the Minister to bring a report before the House, specifically to make the amendment in order. I know that discussions are under way with the Ceann Comhairle's office, but I would appreciate it if we could clarify exactly whether this class of amendment will be in order in future.
I will bring it to the attention of the Ceann Comhairle's office. I understand the same amendment was ruled out of order on Committee Stage.
It was.
Amendment No. 39 not moved.
Amendment No. 40 in the name of Deputies Noonan and Deenihan arises out of committee proceedings.
I move amendment No. 40:
In page 106, between lines 21 and 22, to insert the following:
"32.–The Principal Act is hereby amended in section 118 by the insertion of the following subsection:
‘(9) Where a body corporate incurs expense in or in connection with the provision for any of its directors or shareholders of any benefits or facilities of whatever nature and, by virtue of this or any other statute, income tax shall not be chargeable other than by virtue of the expense being made good, then the body corporate shall notify the Revenue Commissioners each year with the details of such benefits or facilities.'.".
Benefit-in-kind is normally a benefit which is taxed on the personal income tax of the recipient. We have discovered that under section 19 of the 1994 Act, a person who enjoys benefits conferred by a company particularly a benefit-in-kind may be deemed free of any tax liability. This amendment would place an obligation on corporate bodies to notify to the Revenue any exemptions along the lines of section 19 of the 1994 Act. There may be others in legislation with which I am not familiar and which certainly have not been brought to my attention. It would be important if the Revenue were to know what benefits of a tax free nature may be conferred on individual employees or directors by their company, and in what circumstances. That would position the Revenue to close any loopholes which may be undesirable, inequitable or unfair.
In so far as section 19 of the 1994 Act is concerned, will the Minister inform us what was the tax foregone in respect of any retrospective application of the 1994 Act when it was introduced and applied? Will he also indicate what was the tax foregone in each tax year from 1994 to the present tax year, in respect of persons availing of this section?
The aim of this amendment appears to be to require a company to notify the Revenue Commissioners of all benefits or facilities provided by it to its directors or shareholders free of charge. Currently, the Revenue Commissioners issue annually to companies, on a selective basis, a form, P11 D, on which they must give details of all benefits given by them to their directors or employees on a free or subsidised basis. In addition, an individual must in his or her annual income tax return give details of any benefits received by him or her from his or her employer on a free or subsidised basis. Once an individual is identified by the Revenue Commissioners as receiving a benefit in kind from his or her employer, he or she will be charged income tax on an ongoing basis in respect of that benefit until the Revenue Commissioners are notified to the contrary.
In relation to benefits received by shareholders, these would be treated as distributions by a company and must be included in the annual return, CTI, made by a company.
I consider the current reporting arrangements for any benefits given to a director or shareholder to be adequate. In the circumstances, I must reject the amendment.
I do not have the details of the cost of that section, but if such is available in the Department of Finance or the Revenue Commissioners, we will forward it to the Deputy.
The Minister has been very helpful but he misunderstood the intention of my amendment, which is not to ensure that persons who are liable for benefit-in-kind tax on certain benefits actually pay it. The Minister referred to the tax form which is to ensure there is no evasion, but I am talking about avoidance. There are provisions in the Tax Consolidation Act which allow a person to enjoy a benefit conferred by a company, which they are quite legally entitled to enjoy because of certain provisions in the Act. There is one that I know of, which is section 19 of the Finance Act, 1994. There may be others.
To ensure that there are no other loopholes in the law for avoidance of significant amounts of tax, there should be a reporting mechanism along the lines I suggest. The reporting mechanisms referred to by the Minister – both on a random basis by the company and on an individual income return by the employee, director or shareholder, as the case may be – only apply to circumstances where there is a benefit on which benefit-in-kind should be charged but is not being charged. It is a reporting mechanism to ensure that the Revenue can impose the charge.
Where there are statutory exemptions from benefit-in-kind, there should be a reporting mechanism so that the Revenue can monitor them to ensure they only operate in accordance with the original intent and that there is not a large leakage of revenue.
The Minister may be able to confirm to me that there are no such provisions elsewhere in the Tax Consolidation Act, other than in section 19 of the Finance Act, 1994. If the Minister is prepared to confirm that, I hope to receive the information.
I am glad the Minister has promised to provide me with information which he does not have in his brief now; that is the tax foregone to the Exchequer as a result of any retrospective element of section 19 of the Finance Act, 1994, from 1982 to 1994. He has also confirmed that he will provide me with information relating to any tax foregone by persons who benefited from section 19 by claiming the relief, for each of the tax years up to the present one since it was introduced in 1994.
As far as anybody can be sure of this matter, I am not too sure whether there are any other sections which would fall within the remit of that to which Deputy Noonan is referring. The purpose of section 19 of the Finance Act, 1994, was to give relief. At all times, in dealing with the accounts of companies the Revenue Commissioners have more than adequate powers either to assess the company and get further details from it regarding any particular matter, or to assess individuals.
I do not see the purpose of the amendment which Deputy Noonan has moved, except to stir up an issue which was debated here some weeks ago and which arose from an article in one of the Sunday newspapers. It is another of these balls of smoke which we have had in recent months. It was dealt with at the time by way of a parliamentary question. There is nothing to this relief in section 19 of the Finance Act, 1994. The details surrounding the background to the introduction of the relief have been adequately provided, both by me in reply to a Parliamentary Question and by officials of the Department of Finance in briefing documents given out quite recently. There is nothing to this matter that is not already in the public domain. Everybody knows the background to this relief.
As far back as 1982 a section was introduced to the Finance Act – another section 19, by coincidence – relating to the granting of income tax relief on certain expenditure concerning heritage houses. The background to this matter has been bandied around in recent weeks and I do not know why Deputy Noonan wants to keep the debate going on this matter. It is of no benefit to anybody at all. The matter has been quite adequately explained, but if we must keep having questions for the next six months, so be it. We will keep answering questions for the next six months.
First of all, I do not recall any debate in this House on section 19 of the Finance Act, 1994. I remember having a debate here to do with contracts for the national lottery. The Minister may be confusing both issues.
No, there was definitely a parliamentary question.
A parliamentary question is not a debate. A parliamentary question was tabled in my name to which the Minister kindly replied, but there was no debate on the issue in this House. For the Minister to suggest I am trying to raise an irrelevant issue for political purposes is unfair since I raised it discreetly by way of a parliamentary question and did not attempt to debate it in the House. I simply mentioned it on Committee Stage so that the Report Stage amendment would be in order. The Minister is being unfair to me in his reflections on the manner in which I am handling this issue.
The Minister went to great lengths to explain that the Revenue Commissioners, on a random basis, require companies to make returns on the benefits they may give to employees, shareholders or directors. The Minister states there are obligations on individual taxpayers to indicate the benefits they may be getting from a company when making their returns. It seems the Revenue Commissioners are very careful to ensure that benefits conferred by companies on taxpayers are subject to tax. In those circumstances, it is unprecedented, if I understand the Minister correctly, to have a provision such as section 19 of the 1994 Finance Act.
Is the Minister telling the House that there is only one example in law where somebody gets a major benefit from a company which is not liable to be taxed as a benefit in kind. When we match that with the information furnished in the reply to my question that only one person availed of this relief, is the Minister confirming to the House that there is only one such provision in the Consolidated Tax Acts and that there is only one beneficiary? If that is so, we would require an explanation.
I draw attention to the Standing Order which states that each Member in the House may make two contributions on Report Stage. The Minister has already made two. The proposer of the motion may make a third contribution and in this case Deputy Noonan has already made his third contribution. The second contribution by a Member may not exceed two minutes. I will allow the Minister to give a brief reply.
In this year's Finance Bill there are a number of areas where benefits in kinds are exempted from tax – for example, more amendments to approved profit sharing schemes, the non-application of benefit-in-kind to bus passes and the further non-application of benefit-in-kind to child care. I am sure if I went back to last year's Finance Act I would find a dozen more examples of the non-application of benefit in kind. There is nothing unusual about a section in the Finance Act not to apply the benefit-in-kind provision to a particular person or persons or class of persons.
Is the Deputy pressing the amendment?
No, I will pursue the issue by way of parliamentary question.
Amendment, by leave, withdrawn.
We now come to amendment No. 41 in the names of Deputies Noonan, Deenihan and Coveney. Amendment No. 43 is related and amendment No. 42 is consequential on amendment No. 43. Amendments Nos. 41 to 43, inclusive, will be taken together by agreement.
Mr. Coveney
I move amendment No. 41:
In page 114, between lines 48 and 49, to insert the following:
"(c) in section 340(2) (as inserted by the Finance Act, 1998) by the substitution in paragraph (ii) of '31st day of December, 2000' for '31st day of December, 1999'.".
Amendment No. 41 deals with enterprise zones for airports. We attempted to try to improve the situation for Cork Airport, in particular.
Cork Airport is the only airport to have taken advantage of the airports enterprise zone scheme. A business park, Cork Airport Business Park, is being developed at present. A potential threat to the success of the business park is the fact that the enterprise zone scheme will terminate at the end of this year. We are asking the Minister to consider extending the scheme by a further year, allowing the Cork Airport Business Park to be completed. It is hoped to have one-third of the business park completed by the summer and this will provide 500 skilled jobs, the types of jobs we are trying to attract to Cork. If the Minister could succeed in extending the scheme for a further year there is a potential that an additional 1,500 skilled jobs will be created. Cork has taken a hammering from job losses and this is particularly relevant.
The Minister's amendment No. 43 doubles the industrial buildings tax allowance for the lessor from 25 per cent to 50 per cent. I thank the Minister for doing this. This will compensate for the loss of the double rent allowance. The essential issue is not necessarily compensation for the developer but trying to ensure that potential jobs will locate in Cork. These jobs will not come Cork's way if the Minister will not extend the scheme. It is strange that he will not do so when he has made time concessions for carpark developments, which have nothing like the same employment potential as an enterprise zone. Will the Minister reconsider our argument and accept the amendment? I know he has problems with the European Union in regard to this matter but will he do all he can to try to ensure that 1,500 jobs will come to Cork in the next year?
Amendment No. 41 in the names of Deputies Noonan, Deenihan and Coveney proposes an extension of the qualifying period for which capital expenditure giving rise to capital allowances can be incurred in the airport enterprise areas covered by the 1997 Finance Act from the end of 1999 to the end of the year 2000.
I am not in a position to accede to this proposal. The EU approval of February 1998 for the enterprise areas covered by the 1997 Finance Act was conditional on the expenditure being terminated for capital allowance purposes at the end of 1999. Consequently, in last year's Finance Act it was necessary to change the termination date for the tax reliefs for the 1997 Finance Act enterprise areas from 30 June 2000 – as it was in that Act – to 31 December 1999 in compliance with EU Commission requirements. It is obvious, therefore, that there can be no question of extending the period as is being called for in the Deputies' amendment.
I am unable to accept amendment No. 41. Amendments Nos. 42 and 43 in my name also relate to the enterprise areas adjacent to the regional airports. These amendments concern the year 1 capital allowances which are available in respect of capital expenditure incurred on the construction or refurbishment of premises used by qualifying companies in those enterprise areas.
As originally provided for in the 1997 Finance Act, the capital allowances are 25 per cent in Year 1 and 4 per cent per annum for the next 19 years. That Act also provided that these airport enterprise areas would benefit from the double rent relief. However, this double rent relief as well as rates relief were ruled out by the EU Commission in 1998 for the airport enterprise areas.
In the light of the loss of these two reliefs, I have reviewed the position of these airport enterprise areas and have concluded that there is a good case for increasing the year 1 capital allowances and I propose to do so by these amendments. As a result, the year 1 or initial allowance is being increased to 50 per cent, compared to 25 per cent, with the balance of expenditure being written off at 4 per cent per annum over the next 13 years. This doubling of the year 1 allowance is particularly important for investors-lessors of the qualifying buildings in the airport enterprise areas.
This matter was raised informally with the EU Commission in the past few days and it gave rise to no problem from their point of view. An increase in the initial allowance to 50 per cent strengthens the "investment aid" character of the allowance.
My amendments, which enhance the year 1 capital allowances from 25 per cent to 50 per cent, are as much as can be contemplated for the airport enterprise areas and this represents a significant response to requests for easements in this area having regard to the position vis-à-vis the EU Commission.
I thank the Minister for going some distance to meet the essence of the amendment, as Deputy Coveney has a particular interest in job creation at Cork Airport enterprise zone. Cork has had the difficulty of job losses in Apple Computers. Although our economy is moving forward and never were more jobs created than in the last couple of years, there are still local and regional difficulties. There will be rapid changes of jobs in some circumstances, certain industries will prosper and others will not, and people can look forward to many changes of job in their lives. It is important that a package of incentives appropriate to a region should be in place, not least the incentives attached to the regional airports, in particular to Cork Airport.
The Minister has moved some way to meet these needs by allowing a 50 per cent write off in the first year. What is the arrangement for the subsequent years? I understand it was 25 multiplied by 19 multiplied by 4 per cent—
The balance can be written off at 4 per cent per annum over 13 years.
In circumstances where investors are involved in a BES to invest in a project or industry attached to one of these zones, can they operate as if it was a double rent allowance in writing it off against income tax? In other words, can the tax benefits which apply to a BES, which were levered for double rent allowance, equally be levered to capital allowances? If not, how would it work?
I would like some clarification. The Minister is right to move in this way on capital allowances. In recent months the impression has been given that we are losing all capacity to direct investment to particular deprived areas but that is not the case. European competition rules provide for investment aid but the ongoing assistance towards rent and rates is causing problems. Do the additional concessions for capital allowances, which the Minister has made today, only apply until the end of this year? If so, is there any reason in principle for the European Commission to refuse to extend that deadline? In his initial response the Minister said it had been agreed some years ago that the closing date capital allowances for the airport enterprise zones would be the end of this year. Is there any reason that should not be extended?
In response to Deputy McDowell, we obtained approval for the enterprise area zones, including those for airports, only in February 1998, even though they were announced in the 1997 budget and the Finance Act of that year. To address Deputy Coveney, the agreement specified that capital allowances would only apply until 31 December 1999. The date cited in the Finance Act, 1997 was 30 June 2000 but in last year's Finance Act, in order to comply with our written agreement with the EU on the enterprise zones, I had to bring the date forward to the end of this year. The amendment asks me to change the date to 31 December 2000, for good reasons which the Deputy outlined on Committee Stage and again today. It is not possible to do that because the agreement with the Commission which allows us to go ahead with that scheme specifies 31 December 1999. I am therefore not in a position to extend the closing date as per the amendment.
That being the case, the Deputy legitimately and sensibly asked why relief for multi-storey car parks extended until 31 December 2000. We have not yet received permission from the Commission to introduce capital relief for car parks so we have fixed that date and will see how matters progress.
What happens if the Commission says no?
The way things are going, Europe often says no. Apropos of the previous debate with Deputy Noonan, perhaps only one lessor will benefit from this and if a tribunal is set up in ten years' time to inquire why I increased the allowance from 25 per cent to 50 per cent, the Deputies present may have to appear before it. I hope other people come to our aid and the Deputies should be prepared. I hope they remember where they were on 10 March 1999 and whom they had lunch with in previous weeks. I will not be able to recall that but perhaps they will.
The mood may have changed and the Minister may get a medal.
We all accept that double rent relief and rates allowance will not be available to future projects, whatever the rights and wrongs of that may be. However, if the Commission has accepted the use of capital allowances in enterprise zones, there is no reason in principle not to extend it for another year or two. Given the delay in receiving approval and starting projects, surely the Commission must accept that there is a genuine problem which prevented us making use of the agreement reached last year.
Mr. Coveney
I accept the Minister has not received permission for an extension of the relief to car parks, but what is the difference between the application procedure for airport enterprise zones and that for car parks? Why can he not make an application in respect of airport zones as he has done for car parks?
The agreement we reached in February 1998 on enterprise zones was a general agreement but, as I pointed out in the debate on last year's Finance Act, we must make applications for specific projects and therefore must go back to the Commission to apply for the Cork Airport project. In that context we can raise the possibility of extending the closing date of 31 December this year. As was pointed out last year, approval for airport enterprise zones is given on a case by case basis. The Cork project is the only one which is up and running to date and when we return to seek approval for it we can raise the possibility of extending the deadline.
Mr. Coveney
That would be helpful.
Amendment put and declared lost.
I move amendment No. 42:
In page 115, line 15, to delete "and".
Amendment agreed to.
I move amendment No. 43:
In page 115, between lines 27 and 28, to insert the following:
"and
(iii) in subsection (8)(a), by the substitution, with effect as on and from the 1st day of January, 1998, for subparagraph (iv) of the following:
‘(iv) the following subsection were substituted for subsection (4) of that section:
"(4) An industrial building allowance, in the case of a qualifying building (within the meaning of section 343(1)), shall be of an amount equal to–
(a) 25 per cent, or
(b) in the case of such a building the site of which is wholly within an area described in an order referred to in section 340(2)(i), 50 per cent,
of the capital expenditure mentioned in subsection (2).",',".
Amendment agreed to.
I move amendment No. 44:
In page 118, between lines 19 and 20, to insert the following:
"44.–The Principal Act is hereby amended in section 372L of Chapter 8 (as inserted by the Finance Act, 1998) by the substitution in the definition of ‘qualifying rural area' of ‘means any area described in Schedule 8A' by ‘means any area described in Schedule 8A or any other area which the Minister for Finance may, on the recommendation of the Minister for the Environment and Local Government (which recommendations shall take into consideration an economic plan for the area submitted by a local authority or a company established by a local authority and prepared by the local authority in co-operation with any other groups in the area which are funded by the Exchequer or the European Union and which are charged with promoting economic development in the area, to that Minister in respect of an area identified by it), by order direct that the area or areas described (being wholly located within the boundaries of the area to which the Economic Plan relates) in the order shall be a qualifying area for the purpose of one or more sections of this Chapter'.".
Whatever the result of the negotiations in Europe to achieve Objective One status for 13 counties, or for the 15 counties which were the subject of the submission, it seems clear that the remainder of the country will have the status of Objective One in Transition. Within that part of the country there are large areas of poverty which are underdeveloped and rapidly losing population. If the Minister accepts this amendment he would have power to designate other parts of the country which would enjoy the same benefits as the upper Shannon designation. This would allow the Minister to address one of the issues that has been highlighted in debates on the Government's regionalisation programme, namely, how to deal with blackspots which have an equally strong case for Objective One status as the counties already included in the Government's plans. Is there a Government policy to address this matter?
Various Deputies have highlighted the prob lems of urban blackspots, but amendment No. 44 seeks to establish a mechanism to allow the Minister to address the problem of rural blackspots at some future date. The Minister is familiar with the situation in rural areas, particularly in County Kildare, but it is interesting to see what is happening in counties, such as the one in which I live, which have a reputation for having good farmland.
Farming people are the salt of the earth and they have a great commitment to education. It is seldom that a boy or girl from a farming family will drop out of school; they all complete the leaving certificate and many of them go on to college, at which point, having qualified, they make certain choices. Invariably, they choose not to return to the family farm and to seek employment in industry. Many of these young people move to our cities, particularly Dublin, but quite a number of them make either a temporary or permanent move abroad. They are making choices which ensure the fabric of rural Ireland is in decline.
I could take the Minister to parishes in east Limerick and walk with him along roads where, up to ten years ago, between 20 to 25 farmers supplied milk to the creameries but where now only two or three farms remain in operation while the remaining land is being leased out. Another feature of this development is that professional and business people from the cities are moving out to a wider commuter belt, purchasing 25 to 30 acres of quotaless land, constructing a house and keeping a few head of dry cattle and a pony for their children. They are making lifestyle choices and, in the absence of people who are economically committed to rural Ireland, I will not criticise them for being socially and residentially committed to rural Ireland. However, the entire structure of rural society is changing.
Listening to Ministers other than Deputy McCreevy, one gets the impression that the Government is following a strategy where the decline of rural areas will be compensated for by the development of villages. However, I have yet to see serious initiatives of a policy nature directed at village development. Even the provision of small water and sewerage schemes, which would be essential to the clustering of people in villages to compensate for the decline in the wider countryside, is not taking place.
While I am sure there will be a great deal of comment about the result of upcoming negotiations, led by the German Presidency, on the Santer proposals and attempts to reform the CAP, it is a mistake to believe rural decline and the decline in agriculture as an industry are synonymous because there are wider issues involved. The only hope for many of the rural areas to which I refer – whether it be the Ballyhoura region, which stretches from Cork to east Limerick, or the Sliabh Luachra region, which takes in the borders of Cork, Kerry and west Limerick – will be the implementation of integrated development plans led by the kinds of reliefs the Minister has applied in the upper Shannon area. A combi nation of green tourism, small industry and knowledge based activity, in conjunction with the residue of a stronger farming industry, based on larger holdings with less people involved, represents the way forward.
Unless the Government moves in that direction large rural areas will be reduced below the point of what I term "critical social mass". When a community reaches that level it dies. By using the term "critical social mass" I refer to rural areas where there is no longer any social life, where young people lack sufficient companionship to enjoy themselves locally and where the fun is in the party town, namely, Dublin. The attractions offered by Dublin and other urban centres is draining the countryside of its life. Once the population drops below a certain level, young people no longer stay and older people become more isolated and try to move into villages or nursing homes. Fear and loneliness are two of the main factors in the decline of rural Ireland.
Unless compensatory policies are put in place to arrest the decline to which I refer, we will be left with an unbalanced country. On reading this morning's newspapers, reflecting on the Bacon Report or considering the problem of the housing shortage in Dublin – Members will be familiar with the fact that 18,000 new houses in north County Dublin are to be connected to temporary sewerage systems – I wonder if the city would come under as much pressure if we took account of from where the people demanding these houses are coming? We must remember that certain rural areas will become landscape reservations or regions of extensive flora and fauna unless action is taken.
Not since the Famine has there been such decline in rural areas. One need only travel outside the commuter belts surrounding our main towns to witness that decline. I am more familiar with the situation in County Limerick and the last census of population showed increases in every parish within 12 miles of Limerick city. However, beyond that circumference and in areas of west Limerick, there has been a decline in population in every parish. Combined with changes in farming practice, that is making a huge difference.
The amendment suggests that, by regulation, the Minister should take the power to designate as he sees fit. When the decision taken in Brussels is announced, this will arm him with a mechanism to at least provide assistance to the blackspots in rural areas which require intervention.
This is an important amendment from the perspective of people living in rural areas. We are losing the battle for rural Ireland. Despite the most recent initiatives from Europe, which included the Leader programme, we have failed to come to terms with the major problems of rural decline, depopulation, the loss of services in rural areas, etc. We are losing the battle despite the existence of so many well intentioned programmes.
Members who represent rural constituencies are aware that many of these areas have a short time left to live. Many houses in rural areas are occupied by single people or married couples whose children have left home and are not likely to return because there is no incentive for them to do so. There are people living in isolated areas whose houses are serviced by very poor roads. Investment in basic sanitary services, such as water mains and sewerage, in rural areas and villages has been low. This has led to the decline to which I refer, which will be difficult to arrest.
Unless alternative activities are introduced to rural areas, those areas will continue to decline and, in many cases, townlands will be wiped out. The amendment will give the Minister the opportunity, in consultation with local authorities, to pinpoint specific areas within counties which are in a permanent or terminal state of decline. For example, places such as Tarbert and Ballylongford in north-east Kerry were very prosperous until five years ago when the effects of Moneypoint, Aughinish Island and Tarbert ESB station began to be felt. These areas contained vibrant communities but they are now in decline because people are abandoning farming. There is a need for a tax incentive to attract a new range of activities. Other approaches have to be looked at. As Minister of State at the Department of Agriculture and Food, I established a special strategy group on rural development. One of its key recommendations was that tax incentives should be targeted at specific rural black spots. The amendment would offer alternatives to local and would be investors, now that the number of tax shelters has been minimised.
If there is to be an intelligent debate about rural development, at least one fact has to be accepted. Whatever the rights or wrongs, the number working on the land and living on farms will continue to diminish for the foreseeable future. While my party supports the provision of direct payments to farmers to make marginal farms more viable, there are many farms which are not viable and do not offer the standard of living nowadays expected.
Those fleeing the land are moving to the cities, Dublin in particular. It must be made viable for them to move to their nearest village or town. This requires an integrated approach and means that post offices will have to be provided in areas where their viability is marginal and schools in areas where there are only one or two teachers as well as the social and recreational facilities people are entitled to expect.
This is a complex issue which demands selectivity. It would not be effective to apply the rural renewal scheme in large swathes of the country. That would defeat the purpose of the exercise. There is no point in encouraging people to move to towns which are increasing in size, such as Letterkenny, Ennis or Castlebar. There is a need to ensure they remain in Ennistymon or Buncrana. Any measures introduced would have to be targeted.
When the issue was debated last year the Minister confirmed that it was his intention to rely on liaison with the Department of the Environment and Local Government and reports and plans prepared by regional and local authorities. A system has to be put in place. With all due respect, officials in the Department of Finance or elsewhere are not necessarily conferred with total wisdom in these matters. The areas which should be eligible for this relief should be decided selectively. The scheme set out in the amendment is reasonable. It provides for a consultative process with regional and local authorities and for the Minister to act on the recommendations of the Department of the Environment and Local Government.
I question the wisdom of altering the length of the qualifying lease to attract relief from 12 months to three months. This appears to be designed specifically to encourage the construction of holiday homes. I am not certain that is the type of development required in the Shannon basin or elsewhere. Why has the Minister moved within a relatively short period to reduce the length of the qualifying lease?
The purpose of the amendment is to enlarge the definition of "qualifying rural area" for the purposes of the reliefs provided for in Chapter 8 of Part 10 of the Taxes Consolidation Act, 1997, introduced by section 77 of the Finance Act, 1998. In addition to the areas listed in Schedule 8A to the Taxes Consolidation Act, 1997, that is, all of counties Leitrim and Longford as well as certain specified areas in counties Cavan, Roscommon and Sligo, the amendment envisages certain other areas which might be recommended to the Minister for Finance by the Minister for the Environment and Local Government. This recommendation, in turn, would have regard to an economic plan for the area submitted by a local authority or a company established by a local authority. It is proposed that an economic plan would be prepared by the local authority in co-operation with certain Exchequer or EU funded groups in the area which are charged with promoting economic development.
The structure proposed in the amendment for defining qualifying rural areas is akin to that used for identifying qualifying areas in the context of the urban renewal scheme introduced in the 1998 Finance Act. There is a crucial difference, however, between the two schemes in that the urban renewal arrangements apply, subject to conditions, to urban areas countrywide whereas the rural renewal initiative is a pilot project focused on a limited and specifically defined part of the country and aimed at parts of the upper Shannon region.
To follow the line proposed in the amendment could result in rural areas in all parts of the country coming within the scope of the rural renewal initiative. This would be incompatible with the proposals for rural renewal as envisaged when I announced the scheme. I stated clearly at the time the area in which the new arrangements would apply, that is, the upper Shannon region. There are other areas which would benefit from this type of incentive package but, as I explained in my Budget Statement in December, I am still awaiting European Commission clearance for the business tax incentives element of the scheme. The residential incentives element has been in operation since 1 June 1998. This clearance has not yet come through but when it does I will examine the possibility of extending the pilot scheme to other rural areas on a targeted basis.
The rural renewal scheme was notified to the European Commission in mid-September 1998 having been discussed on a number of occasions earlier in the year. The European Commission replied on 19 November with comments and several detailed questions. The matter was discussed at a meeting in mid-February. A reply was sent on 5 March and its response is awaited.
I have sympathy for many of the remarks made by Deputies Noonan, Deenihan and McDowell. Deputy Noonan indicated that the population of rural areas in County Limerick has decreased while the population of Limerick city is increasing apace. The 1991 and 1996 censuses of population show that the population of County Kildare is increasing at European record rate. It increased from 120,000 in 1991 to 135,000 in 1996. This camouflages the fact that the population of many district electoral divisions and townlands has decreased.
Deputy Noonan referred to the Bacon report, published yesterday, on foot of which initiatives will be taken to increase the supply of housing in certain parts of Dublin. I have a difficulty as an elected representative for County Kildare where various groups are opposing, for good reasons, further development in certain towns and villages. There are other areas crying out for development. If I had delayed last year and appointed a task force consisting of officials of my Department, the Revenue Commissioners and various other groups to consider a tax scheme for rural renewal it would still be meeting and would probably decide against the idea for the good reason put forward by those in my Department and elsewhere that it is difficult to draw the boundaries to such a scheme. Similar objections were put forward to the seaside resort renewal scheme which originated when I was Minister for Tourism and Trade.
In view of this I decided on a pilot project based on the upper Shannon region. As Deputy Deenihan has pointed out, recommendations regarding such tax incentives for rural Ireland were included in various reports compiled by some of the groups to which he referred. Some of them may have been produced when he was Minster of State at the then Department of Agriculture, Food and Forestry. With that knowledge and knowing also the difficulties in resisting calls for an extension countrywide, I proceeded with this scheme on a pilot basis last year.
We have not as yet obtained EU approval for business incentives in those areas. Aware of this last year, I decided to commence with the residential reliefs. I have no compelling evidence to date as to whether it has been a success. I have introduced changes in this Bill to owner reliefs. I have also reduced the letting period from 12 months to three and have allowed an increase in the square footage of owner occupied houses. I received representations to implement some of these measures.
Concern has been expressed about the reduction in the release period. For example, some people might be afraid it may lead to a proliferation of holiday homes in County Leitrim. I do not know if this will happen. I travel to that part of the country on a regular basis, more than to any other, and I would be delighted to see any activity in some of the counties in the region.
Deputy Noonan referred to families living in rural areas. We may soon end up driving around the country from the big towns and villages on Sunday afternoons to see the people living in what will be, more or less, a reservation. There would be vast wildernesses devoid of people where the fauna and flora could be explored. There are advocates of this approach, though not in this House, who reside in parts of Dublin and subscribe to certain newspapers.
However, I was born in the heart of rural Ireland and lived in a lock house on a canal bank which was miles from any village. I have seen what has happened in rural areas of County Kildare. In the area in which I lived many people are now buying plots of land and maintaining a rural presence. When I lived there people worked from small farms and there were farmhouses every few yards. None are working on farms at present. The sons and daughters of those on landholdings as small as 25 acres were educated at UCD. Most of them were migrants from the west or south of Ireland who showed people in County Kildare how to work and put their children through college when there was very little money around. Most of it was earned through dairy farming. Their houses are still there but the owners now have a very nice lifestyle on perhaps 25 acres of land, with perhaps a few cattle or a pony or two for their children.
Rural Ireland has changed. Notwithstanding the disadvantages from the tax viewpoint etc., it is worth taking a chance with this pilot project. If a person is brave enough to attempt to generate economic activity in the upper Shannon region, say in County Leitrim, I wish him or her the best of luck. I cannot say if it will be a success, but I hope it will be.
Deputy Noonan also referred to the Ballyhoura region from west Limerick to north Cork. I met the group concerned and was impressed with their approach to integrated development. It was not merely concerned with designating an area and then waiting to see what will happen, rather it was a well thought out development proposal. If or when we get EU permission and when I get a further assessment on the pilot programme in the upper Shannon region I will consider matters further because I see merit in Deputy Noonan's proposal to extend it to other parts of the country.
There is very little about Deputy Noonan's discourse on rural Ireland with which I disagree. It has been happening in the country for some time. For the reasons outlined by Deputy McDowell and others, which include income levels and EU developments, farming will be in decline. However, there are other reasons people have left rural Ireland. I do not suggest the upper Shannon pilot project will solve all the problems, but if it is a success we may perhaps extend it to other parts of the country.
I thank the Minister for addressing my point in a straightforward manner. I am glad he will reserve the right to proceed in the way I have suggested in the future. It would be easy to become over romantic about this. We could end up picking mushrooms and snaring rabbits—
They were great days.
—or exchanging anecdotes about the hard youth we had. Most of the argument about the decline in rural Ireland is presented on the basis of a lack of economic activity. Deputy Deenihan and I no longer consider that to be true. The main factor now is the lack of a social milieu to enable people to continue to live there.
The Deputy correctly referred earlier to the lack of a critical social mass.
The young are no longer staying there because of the lonesomeness, the lack of company, the drabness and the lack of vibrancy and activity, especially in the months from September to June. Any plan that addresses this will be of benefit and any strategy which keeps people in the parish is effective. People do not have to earn their living from economic activity generated in the parish. Perhaps a third of them may do so. There is nothing wrong with commuting as long as there are vibrant families. Nor is there anything wrong with holiday homes if people travel to them at weekends. They also add vibrancy. There could be a descending order of priorities with regard to keeping places alive and maintaining a critical social mass. It will subsequently generate an economic mass.
The county councils are applying policies with the best of intentions but they are running counter to the restoration of life in rural areas. They have taken seriously the advice of the Department of the Environment and Local Government that only sustainable development should be maintained. However, it is impossible to get planning permission in parts of rural Ireland. I understand the difficulties in preserving a pure water supply and that the water table can only sustain so many septic tanks. There is no point telling people they can build in the village when they will not get planning permission for a septic tank or there is no sewerage scheme.
There are two types of villages in Ireland – the linear village, which is built along the road between the speed limits, and the nodal or cluster village, which is the remnant of a planned village of the 19th century. Part of the strategy should be to turn linear villages into nodal villages. As Deputy Deenihan remarked when the Minister was replying, there is a field between the end of every development in a town and the speed limit. The council at its best will give permission to build three houses along the front of that field, but there could be six acres behind that which are totally sterilised from development. There would be better development if small sewerage schemes were put in place.
If the planning policy is that houses cannot be built on once-off sites in the countryside, the quid pro quo must be that people can live in the villages. However, planning policy is making it impossible for anyone, other than close relatives, to build in some country parishes. Unless a person can prove a close family relationship with the landowner, they will not be able to build. This is driving people into urban areas.
As the man who holds the key to the purse strings, if not the purse strings, I ask the Minister to ensure the Minister for the Environment and Local Government is given a Supplementary Estimate for water and sewerage schemes in villages. A limit could be put on the size of the villages; I am not talking about towns.
This decline is real. I was talking to a friend recently who is an auctioneer in a village in County Limerick which looks prosperous. I asked him if there was anything for sale. He said the entire street was for sale on his books but the old families were embarrassed to put up the signs. The notices would not be seen in the newspapers or the auctioneers' windows. Villages reflect the farms. There are many old shopkeepers and publicans, some of whom open only for a few hours each day for company. The economic activity would not sustain a living.
This decline across rural Ireland is not being addressed or is being addressed in the wrong way. People say they will put advance factories into these areas. That does not work anymore. The people who want to live in these areas are prepared to commute to the local industrial estate to work, even if it is 20 miles away. Consultants are always good at spinning a line, such as stating that in a modern age an on-line IT industry could be located in Cappamore, for example. We could build a mountain there as well, put artificial snow on it and turn it into a ski resort. The solutions must be related to the difficulty. The Minister will get better advice from the Deputies than from most people on what is happening in rural Ireland.
The problem is not economically but socially driven. That is why the young people are leaving rural Ireland and the older people want to move into houses for the elderly beside community centres. That is why many old people are moving to their sons and daughters in the cities. It is the loneliness, the lack of vibrancy and the fact the population has dropped below the critical social mass that is driving people away. The next phase is the closure of the school, the Garda barracks and the post office which leads to the economic decline of the parish.
It is ironic that in the last years of the millennium, when the economy has not been better at a macro level, there is more decline in the rural areas than ever before. When people were poorer they were more sane. It is ironic that people are being educated out of their environments and their skills levels cannot be satisfied where they were born and reared. In addition, there is the problem of the social expectations of the rising population. There is no match between the difficulty and the policies being applied by the local authorities and Departments.
Amendment, by leave, withdrawn.
Amendment No. 45. Amendment No. 46 is cognate, therefore amendments Nos. 45 and 46 may be discussed together.
I move amendment No. 45:
In page 136, line 25, to delete "1993" and substitute "1998".
These are technical amendments to deal with the citation of the Planning Acts.
These amendments relate to two of the sections that deal with the scheme of relief for rented residential accommodation for third level students being provided for in section 47 of the Bill. The scheme contains two references to the Local Government (Planning and Development) Acts, 1963 to 1993. Deputy McDowell's amendments seek to have these references changed to the Local Government (Planning and Development) Acts 1963 to 1998 to take account of the enactment of the Local Government (Planning and Development) Act, 1998. I am happy to accept these amendments to correct the collective citations in question.
Amendment agreed to.
I move amendment No. 46:
In page 141, line 28, to delete "1993" and substitute "1998".
Amendment agreed to.
Amendment No. 47. Amendments Nos. 49 and 52 form a composite proposal. Amendments Nos. 48, 50 and 53 form an alternative composite proposal and amend ment No. 51 is related. Amendments Nos. 47 to 53, inclusive, may be discussed together.
I move amendment No. 47:
In page 167, line 17, to delete "5th day of April, 2000" and substitute "5th day of April, 2002".
I am sure the Minister is aware of the concern in the film industry about the future of section 481 tax relief for investment in film production. This has been extended for just ten months in this Bill pending, as the Minister said on Second Stage, consideration of special studies on film relief to be published by the Minister for Arts, Heritage, Gaeltacht and the Islands. This has led to widespread uncertainty at all levels of the industry.
Section 481, previously referred to as section 35, has been an invaluable instrument in the growth of the Irish film industry, especially in the indigenous production sector, in recent years. It allows Irish producers to approach the international market with a proportion of their budget in place, which is a great advantage. This is a key element in triggering foreign investment in the form of pre-sales and co-production finance. It is also treated as the Irish producer's equity which allows the producer ownership in the film, thereby providing potential for future revenue from foreign sales.
As the incentive can be used only by producers who have raised a significant amount of their budgets in the form of international pre-sales, the focus on film financing is on developing and maintaining a strong orientation towards the international market. This has created an outward looking and internationally aware independent production sector with a high product standard. It has helped to create strong links and co-operation between the film production sector and the financial sector and generated expertise in the area of international film finance.
These amendments support the renewal and enhancing of section 481 for a number of reasons. The enhancement of the existing incentives will enable indigenous production companies to develop business plans over the medium and long-term. Output would be increased and mechanisms organised to encourage proper and systematic project development as well as strategies formulated to retain programme and film rights. Improvements would encourage film-related services, including the provision of studio facilities and post-production companies, to plan for growth and investment in their businesses. Allowing tax relief on expenditure up to 100 per cent will encourage the emergence of additional studio sound post-production and laboratory facilities with the benefits of additional employment and economic activity.
Although the film industry has been doing well, some facilities leave a lot to be desired. The post-production facilities, for example, are non-existent. We do not have studio facilities which reflect an emerging vibrant industry. Providing stability for the industry, which these amendments would ensure, would copperfasten the process of recent years in the crucial area of talent development and would encourage people, such as directors, writers, producers, actors, etc., to stay here to work rather than going abroad. Irish producers have fostered the growth of this talent and must be able to hold on to it.
Given the sensitivity of the sector to exchange rate fluctuations and increasingly attractive incentives available in other countries, the improvements in the incentives will give Ireland a competitive edge which it is in danger of losing. The United Kingdom has enhanced its film incentives and, as a result, American producers in particular, who previously looked to Ireland, are now seriously considering England as a location because of its enhanced incentives for film making. The UK lost out to Ireland in terms of "Braveheart" and other films. The Labour Government decided to put in place a whole new package of incentives for film makers which have been successful.
The uncertainty created by the Minister's decision to renew section 481 for one year, which has been highlighted by overseas competitors, of which there are many, is sending out the wrong message to the international film community in terms of our commitment to film making in this country.
The Minister can say he is awaiting the publication of the think tank report on film making but uncertainty has been created and I am sure he got some feedback on that from the Minister for Arts, Heritage, Gaeltacht and the Islands following her launch of the Irish Screen Commission in Los Angeles. There is a perception that the Government is not committed to the film industry but if the Minister accepts our amendments, he would be sending out the right signal. If he wants to enhance the various incentives to the industry, following acceptance of our amendments, he can do that.
This is a competitive field and I do not have to remind the Minister of the benefits of the industry. He is well aware of them as there is a spin-off even for his own constituency. Approximately 4,000 people are employed directly in the film industry. I know a number of people working in the industry. We recently set up a film commission in Kerry to attract people to Kerry to make films, although there is a difficulty with the SIPTU 40 mile rule which has not been a concern of ours to date.
The Minister should allow a three year extension of section 481 and the full tax relief of 100 per cent. If he is not prepared to do that, allowing a three year extension will not distort his figures in the Bill.
I support this group of amendments, particularly amendment No. 50 in the name of my colleague, Deputy McDowell, which asks the Minister to extend the time period. There is insufficient perception of what will hap pen when the period of time in which tax incentives are available for film is reduced to 12 months. When I visited Los Angeles and toured most of the major studios as Minister with responsibility for film, it was clear that regardless of whether one was making films, the construction of a project of financing took at least 18 months. Against my advice at that time, and on the insistence of others, the relief was reduced from 100 per cent to 80 per cent. Even more important to me than the reduction to 80 per cent was that we were able to retain the period of three years in which people could plan, put finance together and become committed to different film projects.
When the first Indecon report on the film industry was carried out it seemed that it changed course during the preparation of the study in terms of some of its assumptions. That report was the basis for the agreed strategy between the Department of Finance and myself, as Minister. When we established a three year period, I felt we were ensuring some investment. I emphasise to the Minister, by way of being helpful, that this is particularly important in relation to external corporate investment that used to be made under section 35. It is impossible to get that investment within a 12 month period.
The most recent report from Film Makers Ireland shows that what is foregone by way of tax which it is assumed would have been paid is exceeded by that which is generated by way of spend and, in turn, income to the State. Other factors which will appear tedious to some is that this is very much regionalised expenditure. When one goes over a budget of £500,000 on a film, one is talking about 52 skills. This work is heavily regionalised. In the course of my time, 14 counties participated in the spend on film. It is a clean industry and the most important component of it, the building block that is Bord Scannán na hÉireann, when it was revived, worked on two furrows at the same time, namely, the contribution of film to culture and developing certainty in relation to the film industry. There was a valuable interaction between the new young skilled directors and camera people coming from the indigenous sector who were finding opportunities of working in big budget films.
Deputy Deenihan mentioned "Braveheart". There were 11 assistantships on that film and the expenditure in the Irish economy was about 85 per cent of the total budget of the film. I find it sad that "Braveheart" was the first film I certified and "Saving Private Ryan" was the last. When I remember the projected expenditure of these films and the effect they had on different parts of the economy, we should be driving the film industry rather than putting a brake on it.
Lest anyone think it is responsible to say that now that the film industry is doing well we should leave it alone, assumptions in relation to film have been wrong in the past. They were wrong about the Irish Film Board in the 1980s and they were wrong about the early version of section 35. The growth in the spend, from £11 million in 1992, was 3,400 per cent. It is interesting to note the reason those assumptions were wrong. They had assumed that films do not make money, that they are not services like the services we have constituted previously – I frequently listened to that argument. The other reason is that film is not really an industry like the industry we were competent in promoting. Occasionally people would say to me that if it were that good, the IDA would have been involved years ago. The IDA did not become involved years ago. Other people tried to do it but they were unsuccessful. We had a model which was the envy of Europe and of the world.
There is a revolution in cinema taking place throughout the world. There is an expansion of what is possible in the English speaking world. About 78 per cent of all the net profits made in the 15 per cent of film that is successfully commercially distributed are in the English speaking world. Mrs. Thatcher, who did not like films, succeeded in reducing the gross spend on film in Britain from about £600 million when she took office to £400 million when I took office. She managed to contract the industry. We moved to a point where we were somewhere between 25 per cent and 30 per cent of the British capacity.
It is scandalous that we are not using that as a building block for moving into the new environment where there are opportunities in terms of earnings, jobs and the creative representation of the country. A huge number of tourists come to Ireland because they have seen a film made here. We are putting a precarious plank beneath what was a good scheme.
There is a reasoning which I respect which can be brought to bear, regardless of whether I agree with it, in relation to other items of tax foregone or in terms of public expenditure. However, in this instance it is wrong to limit this facility to a 12 month period. It is incomprehensible that when I left office in June 1997 and everybody claimed it was time to bring the hard nosed industry people back into the sector – a working group was to be established – it did not appear to matter that STATCOM had been there already. STATCOM included representatives of all semi-State bodies involved in film such as the Film Board, the IDA and FÁS.
However, it was claimed that a new industry group was required. My successor wanted to be advised by a new group and then by another new group. Then the two Ministers wanted to be advised again by a consultant. Why could they not, in two years, have arrived at the opinion that they wanted to continue the scheme, replace it or put another scheme in its place?
As my colleague, Deputy McDowell, suggests, the Government could have the best possible result if it states it will stay with the film industry until the year 2010, that is, taking something that is successful and treating it the same as other industry, from which the Government gets many different benefits.
I really do not know what more I can say. This has been one of the most exciting developments in Irish life. There is no country of the 15 in the European Union where more than 12 per cent of the population watch films made by themselves. Over 90 per cent of the product comes from the United States. It is the second biggest industry radiating into Europe from North America. In this rich market we are turning that around by inviting new and exciting directors and combining something that is artistic and cultural with an immensely successful commercial scheme. A British House of Commons group visited Ireland to examine the scheme and our advice is sought by several countries on how to set up a similar scheme. Yet we now decide to fire it into an atmosphere of uncertainty and allocate just one more year for that success to continue.
I beg the Minister to remove this uncertainty. Even if he will not increase the 80 per cent deduction to 100 per cent, as has been suggested, he should at least provide for the necessary period of time to give security to something that has been revived and is successful.
This case has been well made by Deputies Deenihan and Higgins. There has been a great deal of confusion about this issue. The Minister for Arts, Heritage, Gaeltacht and the Islands said in Los Angeles on 24 February, when she launched the Irish Screen Commission:
If you ask me about the longer term future of section 481 as an element of Ireland's strategic plan for the industry into the next decade, I consider that it will continue to play a crucial role. I envisage that the scheme will continue to be a critical element of the strategy that will be developed by my Government following consideration of the report and recommendations of the strategic review group.
That clearly implies to American investors in the film industry who would consider investing in major films here that section 481 will be available throughout the next decade. If it is based in real terms on a contribution of about 11 per cent to the overall cost of a major film and if it is also based on top level taxpayers investing in it, the reduction of top taxation levels will mean the value to the investor will be reduced. As it is a risky business, it will not be as attractive as it was heretofore. That is the case being made for the increase from 80 per cent to 100 per cent.
People involved in this business who speak to potential investors in the film industry are aware that there is a longer lead in time than one year to securing the budgetary commitments required. It is a weak product. The Minister for Arts, Heritage, Gaeltacht and the Islands stood before the American film industry and spoke about this attractive incentive. She gave the clear impression that it will play a crucial role in the next decade. However, it is only provided for 12 months in law.
When answering parliamentary questions yesterday, the same Minister said there was no reason section 481 could not be enhanced further and that other changes might be introduced. The strategic review group recommended in its interim report that this is a feasible proposition and that it should continue. We can assume the final report will either confirm that or offer an enhanced version of the recommendation.
I am a member of the Joint Committee on Heritage and the Irish Language. Film Makers Ireland appeared before the committee and made a strong, cogent case on this issue. We are following up its case in these amendments. The Minister is a practical person. I read the consultants' recommendation of a ten year period. If taxation levels are reduced over that period, it will not be as attractive as it was. A two year extension is warranted and would be worthwhile.
The amendments are related to section 58 of the Bill which deals with tax relief for investment in films.
Amendments Nos. 47, 49 and 52 in the names of Deputies Noonan, Deenihan and Kenny and amendments Nos. 48, 50 and 53 in the name of Deputy McDowell seek to extend the tax relief for investment in films by three and 11 years, respectively. However, section 58 extends the relief for one year only.
The Government is committed to developing the film industry. To this end, the relief is currently being reviewed by the film industry strategic review group, the think tank set up by the Minister for Arts, Heritage, Gaeltacht and the Islands. While awaiting the recommendations of this group, I am only prepared to extend the tax relief for one year.
Amendment No. 51 in the name of Deputies Noonan, Deenihan and Kenny seeks to grant a 100 per cent deduction rather than the current 80 per cent deduction granted for corporate investment in films. This restriction was introduced in 1996 by the Fine Gael, Labour and Democratic Left Government following the recommendations of the previous review of the film relief. As part of that review, independent consultants were hired who published their results after an extensive study involving consultation with various practitioners. Their view was that at the strategic level, one would have to question the sustainability of an industry which was so vulnerable that it could not survive an 80 per cent deduction rather than a 100 per cent deduction.
As I stated earlier, I am not prepared to make any substantial amendments to the current film relief until the think tank makes its report. In these circumstances, I am unable to accept the amendments.
I noted the contributions of all Deputies, particularly Deputy Higgins who has first hand experience in this area. However, there must be a certain degree of equity among taxpayers. The Minister for Arts, Heritage, Gaeltacht and the Islands will publish the report in the near future.
This relief is a beano for investors; I do not know if it is the same beano for the film industry. On 5 March, The Irish Times carried the headline “Film is star attraction for investors on tax-shelter trail”. According to that article, one of the most thriving tax shelters this year is money invested in film production. The article continues:
While returns cannot be guaranteed, risk is significantly reduced when the production company has been commissioned to produce the film and therefore has a sale or distribution agreement in place. This sort of arrangement reduces the risk largely due to production failure.
An article in today's edition of The Examiner carries a heading “Investors act to cut tax burden and films benefit”. The article states:
The film industry is in line for an unexpected £50 million windfall, thanks to the April 5 tax deadline and an ever-increasing number of investors looking to reduce their tax bill.
With the traditional options for those looking to shelter income greatly reduced, the option of investing in film production, which offers attractive rates of relief, is becoming a popular option.
The relief has been extended for one further year and the matter will be considered further in light of the publication of the consultants' report after which I am sure we will return to this matter again. There is not another relief that gives a better return to high income taxpayers. That must be borne in mind before we make any further decisions on this matter.
As it is now 6 o'clock I am required to put the following question in accordance with an order of the Dáil of this day: "That the amendments set down by the Minister for Finance and not disposed of up to and including amendment No. 65 are hereby made to the Bill".
Question put.
Tá
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Ahern, Dermot.Ahern, Michael.Ahern, Noel.Andrews, David.Ardagh, Seán.Aylward, Liam.Blaney, Harry.Brady, Johnny.Brady, Martin.Brennan, Matt.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Callely, Ivor.Carey, Pat.Collins, Michael.Cooper-Flynn, Beverley.Coughlan, Mary.Cowen, Brian.Cullen, Martin.Daly, Brendan.Davern, Noel.de Valera, Síle.Dennehy, John.Doherty, Seán.Ellis, John.Fahey, Frank.Fleming, Seán.Flood, Chris.Foley, Denis.Fox, Mildred.Gildea, Thomas.Hanafin, Mary.Harney, Mary.Haughey, Seán.Healy-Rae, Jackie. |
Jacob, Joe.Keaveney, Cecilia.Kelleher, Billy.Kenneally, Brendan.Killeen, Tony.Kirk, Séamus.Kitt, Michael.Lawlor, Liam.Lenihan, Conor.McCreevy, Charlie.McDaid, James.McGennis, Marian.McGuinness, John.Martin, Micheál.Moffatt, Thomas.Moloney, John.Moynihan, Donal.Moynihan, Michael.Ó Cuív, Éamon.O'Dea, Willie.O'Donnell, Liz.O'Donoghue, John.O'Flynn, Noel.O'Hanlon, Rory.O'Keeffe, Batt.O'Keeffe, Ned.Reynolds, Albert.Roche, Dick.Ryan, Eoin.Smith, Brendan.Smith, Michael.Treacy, Noel.Wade, Eddie.Wallace, Dan.Wallace, Mary.Wright, G. V. |
Níl
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Ahearn, Theresa.Allen, Bernard.Barnes, Monica.Barrett, Seán.Belton, Louis. |
Boylan, Andrew.Bradford, Paul.Broughan, Thomas.Browne, John (Carlow-Kilkenny). Bruton, Richard. |
Níl–continued
|
Burke, Liam.Burke, Ulick.Carey, Donal.Clune, Deirdre.Connaughton, Paul.Cosgrave, Michael.Coveney, Simon.Crawford, Seymour.Creed, Michael.Currie, Austin.D'Arcy, Michael.De Rossa, Proinsias.Deenihan, Jimmy.Dukes, Alan.Durkan, Bernard.Ferris, Michael.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gilmore, Éamon.Gormley, John.Hayes, Brian.Higgins, Jim.Higgins, Michael.Howlin, Brendan.McCormack, Pádraic.McDowell, Derek. |
McGahon, Brendan.McGinley, Dinny.McGrath, Paul.McManus, Liz.Mitchell, Olivia.Moynihan-Cronin, Breeda.Naughten, Denis.Neville, Dan.Noonan, Michael.O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Jan.Owen, Nora.Penrose, William.Perry, John.Quinn, Ruairí.Rabbitte, Pat.Ring, Michael.Ryan, Seán.Sargent, Trevor.Shatter, Alan.Sheehan, Patrick.Shortall, Róisín.Stagg, Emmet.Stanton, David.Timmins, Billy.Wall, Jack.Yates, Ivan. |
Tellers: Tá, Deputies S. Brennan and Callely; Níl, Deputies Barrett and Stagg.
Question declared carried.