I move amendment No. 62:
In page 28, subsection (3), line 46, to delete "subsection (1) of section 117" and substitute "section 96 (2) of the Corporation Tax Act, 1976, shall not apply to any such expense and section 117 (1)".
SECTION 17.
Amendments Nos. 60 and 61 not moved.
I take it that this is a negative provision and people will have to pay more corporation tax after this one. Is that right?
No. This is the one to ensure that they will not be charged more. Participators in the company will be covered by the concession.
Amendment agreed to.
I move amendment No. 63:
In page 29, subsection (5) (b), line 15, to delete "an application under subsection (2)" and substitute "a the claim under subsection (3)".
Amendment agreed to.
I move amendment No. 64:
In page 29, subsection (7), line 33 after "kept" to insert "; and, for the purposes of this proviso, subsection (2) (b) (i) shall have effect as if ‘30 days' were substituted for ‘90 days (including not less than 60 days during the period commencing on the 1st day of May and ending on the 30th day of September)'".
This is a technical amendment concerned with ensuring that the retrospective application of new relief will apply on the basis that reasonable access to a work of art or scientific collection by the public is provided on the basis of a minimum of 60 days, but we will be changing that.
Benefit in kind is clearly chargeable when the company gives a gift to the director or the employee or whoever. If a company lends a valuable to a person who is not so connected is there a benefit in kind? If two companies, for instance, your company and my company, respectively agree that my company will lend you a Picasso and your company will lend me its Picasso does one get around this completely by that system? Is there an anti-avoidance mechanism here?
It can be traced except it is a very long chain. There is also provision in the BIK that if the company moves the painting outside the company there is also a BIK there.
I was just wondering if two companies have a back to back deal on lending items to each other's employees or whatever, does that go?
If they are connected companies there is in still a BIK charge but they would not get the benefit of the exemption that is now in the legislation.
What I am arguing is that if two companies like Guinness and Independent Newspapers lend each other's directors objects of art on a sort of agreed basis, are the directors liable to BIK?
There has been no such case as yet.
That is because the Minister has not been told about it.
The general anti-avoidance legislation would still take care of that. If such a case was known the antiavoidance people——
I wonder if the directors of Independent Newspapers, for instance, and Guinness, got together one afternoon and one said "We have a fantastic Picasso but if it is put in my house I will be liable for BIK. Why don't you take a loan of it? Have you anything good to put on my mantelpiece?" Would they be traced? I would suggest that any creative accountant could work his way through that very rapidly——
To get to know something about it might be very——
The first difficulty would be hearing about it.
The Minister would not hear about it because BIK would not apply to it.
Amendment agreed to.
Section 17, as amended, agreed to.
NEW SECTION.
I move amendment No. 65:
18.—(1) Section 35 of the Finance Act, 1987, is hereby amended—
(a) in subsection (1)—
(i) by the insertion of the following definition after the definition of ‘allowable investor company':
‘"authorised officer" means an officer of the Revenue Commissioners authorised by them in writing for the purposes of this section;',
(ii) by the insertion of the following definition after the definition of ‘film':
‘"the Minister" means the Minister for Arts, Culture and the Gaeltacht;',
(iii) by the substitution of the following definition for the definition of ‘qualifying film':
‘"qualifying film" means a film in respect of which the Minister has given a certificate under subsection (1A) (inserted by the Finance Act, 1994);',
and
(iv) by the substitution, in the definition of ‘relevant investment', of the following paragraph for paragraph (a):
‘(a) paid in the qualifying period to a qualifying company in respect of shares in the company by an allowable investor company on its own behalf or by a qualifying individual on that individual's own behalf, and',
(b) by the insertion of the following subsection after subsection (1):
‘(1A) (a) The Minister may, in accordance with guidelines laid down by the Minister with the consent of the Minister for Finance, give a certificate to a qualifying company stating, in relation to a film to be produced by the company, that the film may be treated as a qualifying film either—
(i) for the purposes of this section (other than subsection (7A) (inserted by the Finance Act, 1994)), or
(ii) for the purposes of this section.
(b) A certificate given by the Minister under paragraph (a) shall—
(i) be subject to the following conditions, that is to say—
(A) not less than 10 per cent. of the work on the production of the film is carried out in the State, and
(B) not more than 60 per cent. of the cost of the production of the film is met by relevant investments:
Provided that where the percentage of the work on the production of the film carried out in the State (referred to subsequently in this proviso as the specified percentage) is less than 60 per cent., paragraph (b) shall be construed as if the reference to 60 per cent. were a reference to the specified percentage,
and
(ii) be subject to such other conditions as the Minister may consider proper and specifies therein.
(c) Where a company fails to comply with any of the conditions to which a certificate issued to it under paragraph (a) is subject by virtue of paragraph (b), that failure shall constitute the failure of an event to happen by reason of which relief falls to be withdrawn under subsection (4).',
(c) by the insertion of the following subsections after subsection (4):
‘(4A) A claim for relief in respect of a relevant investment in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, so far as applying to the company and the qualifying film, are or will be satisfied in relation to that investment.
(4B) Before issuing a certificate for the purposes of subsection (4A) a company shall furnish the authorised officer with a statement to the effect that it satisfies or will satisfy the conditions for the relief, so far as they apply in relation to the company and the qualifying film.
(4C) A certificate to which subsection (4A) relates shall not be issued without the authority of the authorised officer.
(4D) Any statement under subsection (4B) shall—
(a) contain such information as the Revenue Commissioners may reasonably require,
(b) be in such form as the Revenue Commissioners may direct, and
(c) contain a declaration that it is correct to the best of the company's knowledge and belief.
(4E) Where a company has issued a certificate for the purposes of subsection (4A), or furnished a statement under subsection (4B), and either—
(a) the certificate or statement was made fraudulently or negligently, or
(b) the certificate was issued in contravention of subsection (4C),
then the company shall be liable to a penalty not exceeding £500 or, in the case of fraud, not exceeding £1,000, and such penalty may, without prejudice to any other method of recovery, be proceeded for and recovered summarily in the same manner as in summary proceedings for recovery of any fine or penalty under any Act relating to the excise.
(4F) For the purpose of regulations made under section 127 of the Income Tax Act, 1967, no regard shall be had to the relief unless a claim for it has been duly made and admitted.',
and
(d) by the insertion of the following subsection after subsection (7):
‘(7A) (a) In this subsection "a film or films to which this subsection applies" means a qualifying film or films the cost of production of each of which does not exceed £1,050,000 and in respect of each of which the Minister has given a certificate under subsection (1A) (a) (ii).
(b) Where, in the period beginning on the 9th day of July, 1994, and ending on the 8th day of July, 1995, an allowable investor company makes, by way of a subscription for new ordinary shares (within the meaning of subsection (7)), a relevant investment in a qualifying company which exists solely for the purposes of the production and distribution of a film or films to which this subsection applies and that relevant investment is not one to which paragraph (b) of subsection (3) refers, then, if those shares are disposed of by the allowable investor company on a day which is not earlier than 12 months after the date of their acquisition by that company, the provisions of paragraph (b) of subsection (7) shall apply to the consideration upon such disposal of those shares as if the reference therein to three years were a reference to one year.'.
(2) (a) Subparagraph (iv) of paragraph (a) of subsection (1) shall apply and have effect as respects relevant investments made on or after the 14th day of January, 1994:
Provided that the said subparagraph (iv) shall not apply or have effect in relation to a sum of money paid to a company on or before the 1st day of August, 1994, in respect of the production of a particular film where, on or before the 14th day of January, 1994, the Revenue Commissioners having received an application in that behalf from the company and on the basis of the information furnished to them by the company in support of that application, had expressed an opinion that, in relation to the production of that film, the company would be regarded as a qualifying company for the purposes of section 35 of the Finance Act, 1987, and, but for the enactment of the said subparagraph (iv), the sum of money would fall to be treated as a relevant investment (within the meaning of that section).
(b) Paragraphs (a) (other than subparagraph (iv)), (b) and (c) of subsection (1) shall apply and have effect as respects relevant investments made on or after the passing of this Act.".
On Report Stage I will be bringing forward an amendment detailing a percentage of film production work to be carried out in the State for the purposes of tax relief for films. It is the one to which I referred this morning where we want to target small indigenous Irish films.
There is no limit to the trouble that Deputy Michael Higgins will raise when the Minister goes down this road. The Minister will have to keep mending his hand every five minutes.
Amendment agreed to.
NEW SECTION.
I move amendment No. 66:
In page 30, before section 19, to insert the following new section:
"19.—As respects the year of assessment 1994-95 and subsequent year of assessment, section 12 of the Finance Act, 1986 is hereby amended by the substitution of the following subsection for subsection (2):
‘(2) The amount of ordinary shares that an employee shall be entitled to purchase in his or her employing company in one tax year shall not exceed £5,000.'.".
Amendments Nos. 66 and 77 are related but deal with separate matters. They deal with the issue of employee shareholding and profit sharing with employees. The present situation in relation to amendment No. 66 is that there is a lifetime limit on the shares that can be conveyed to an employee from an employer, a lifetime limit of £3,000 worth of shares. I am seeking to raise that in any one tax year to a sum not exceeding £5,000. As we know with Aer Lingus and other companies, we are dealing with a more participative industrial evolution whereby the faith of employers and employees are integrated. Therefore I think it is only reasonable that the tax clause should recognise that employee shareholding is something that should be encouraged to bring about a more responsible attitude to management and a more united approach. If companies wish to go down this road they should be facilitated. I ask the Minister to accept this change which would facilitate a greater use of employee shareholding.
To save the Committee's time, I will make a comment on amendment No. 67, if that is in order. This amendment deals with the issue of profit sharing. The present limit is £2,000 per annum and I am seeking to raise it to £5,000. Again, the principle here is sound. If a company engages in a rationalisation programme, in cutbacks involving the sacrifice of employees, the profits and the fruits of those changes should be shared by employees. Therefore they should be allowed additional profit sharing. There should be an incentive there for employees to be given that by employers. Both amendments are eminently reasonable. I think a partnership Government that seeks to espouse the cause of industrial participative democracy will have no difficulty accepting them.
The amendment seeks to increase the limit of the relief granted to an employee in respect of the ordinary shares bought in his or her employing company. The limit last year was, I think, £3,000.
That is a lifetime figure.
It is a lifetime figure, and that was raised from £750 which was a fourfold increase. In the eight years since the relief has been in existence it has been availed of by approximately 2,000 employees with average claims of £214. In the circumstances, I am satisfied that last year's increase is quite adequate for what has happened over the eight years. Clearly if it were increased again there could be a sector or section of people who would structure themselves to make use of it but among the generality of employees who have used this over the years of its existence the average claim has been £214. I know Guinness and one other company would certainly be on the maximum because they use the scheme, but generally that is not so. If I saw that there was a general demand for employees in this regard I might consider it. I recall my days when I was trying to sell employee participation and to launch employee participation in the workforce. It was a hard sell and now having moved it from £750 to £3,000 to allow a small number of people to benefit I think that is enough until we see that it is of some value to a greater number.
The purpose of amendment No. 67 is to raise the ceiling on the value of shares that may be allocated in any one year under an approved profit sharing scheme from £2,000 up to £5,000. I think the £5,000 limit would restore what was there prior to 1992. I explained the reasons for reducing the limit to its present level and believe those reasons were adequate. We are trying to preserve the benefits to be derived from such schemes in terms of improved industrial relations, greater motivation and increased productivity and at the same time provide an inducement to companies to use the scheme adequately. There is no reason to up the limit again.
These are all tax efficient remuneration schemes and I see a benefit to raising limits in some of them. The reason I increased it for some is in order to get worker participation, to get workers feeling some motivation. There is an argument even though they are tax efficient, the number of companies that use these schemes to their limits is very small.
I will not labour this point. I am disappointed that the Minister has rejected these proposals. I would ask him to consider on Report Stage some modest increase. I have been approached to say that it would be beneficial to some companies to give a greater involvement to employees. Given the benefit in kind provisions and the high tax regime that applies here, it is very difficult for businesses to avoid a brain drain. We spoke yesterday of the much lower rates of income tax in the UK. For example, to computer software companies and other hitec, dynamic, growing firms this provision would be of great benefit and would keep some of the brightest and best people in the country. I certainly intend to press this amendment.
The first amendment dealt with the lifetime cap, proposing an increase of £750 to £3,000. The second amendment's sum of £2,000 is an increase in annual cap. A small number of companies use these provisions and it is tax efficient remuneration. I know there are difficulties with keeping staff; it is hard enough in sections of my own Department to hold people down — I know the brain drain problem.
Amendment put.
Vótáil.
The division will be taken at 1.30.
NEW SECTION.
I move amendment No. 67:
In page 30, before section 19, to insert the following new section:
"19.—The provisions of Chapter IX of the Finance Act, 1982, section 24 of the Finance Act, 1983 and section 17 of the Finance Act, 1992 shall have effect subject to the further provision that the amount of ordinary shares an employee shall be entitled to purchase in his or her employing company in any one tax year shall not exceed £5,000.".
Amendment put.
Vótáil.
The division will be taken at 1.30.