Kieran O'Donnell (Fine Gael) | Oireachtas source

I welcome the witnesses from Office of the Revenue Commissioners and thank them for appearing before us. I am based in Limerick where many farmers who supply to Kerry Co-operative received these letters out of the blue. The first patronage shares were issued back in 1997, 19 years ago. Yet, the issue has just come out of the blue. The question now is, why?

I wish to raise a number of points that arise from the practicalities of the contents of these letters. In Revenue's letter to suppliers, it states that to enable the recipient to avail of the opportunity to make a disclosure, the recipient should respond to Revenue with the computation of the tax together with the appropriate payment. From Mr. Phelan's statement, it appears that Revenue is looking at a different type of payment. Is he retracting what was stated in the letter sent to the farmers? People were given 21 days in which to respond to the letter, which is grossly inadequate. Would he consider extending it to 60 days, which was requested? Pending the extension to 60 days, would Revenue put a stop on all interest and penalties arising because of the circumstances? Is it possible that a test case could be heard within 60 days? On the face of it, the question is whether the payments are considered income or capital. I believe it is capital rather than income.

Under the co-operative society rules, Kerry Co-operative Creameries Limited is entitled to buy back the shares at par value, if it so wishes. The witnesses are probably aware of the Supreme Court Case of Kerry Co-Op Creamery Ltd.v. An Bord Bainne Co-op Ltd, in which the Supreme Court found that the Kerry Co-op shares in An Bord Bainne should be replaced at par value. This is about ensuring the ownership and success of the co-operative itself. The Kerry suppliers supply their milk to the plc and not to the Kerry Co-operative Creamery Limited. They were given an option on the basis that they were milk suppliers to buy shares in Kerry Co-operative Creamery but it was part of the process of planning to keep the co-operative under the control of the milk suppliers, which would be a natural thing. The suppliers had to exercise that option within three months. The suppliers paid the par value for the share, which was £1, or €1.25 in today's terms. They appear to be totally unrelated transactions. They were paid the market value for the milk by the plc. This is a separate transaction. If they sell the shares, they pay capital gains tax. Under the reorganisation of share capital in section 532 of the Taxes Consolidation Act 1997, all forms of property shall be assets for the purposes of the Capital Gains Tax Acts whether situated in the State or not, including options, debts and incorporeal property generally. I believe this is an option. The grey market to which Mr. Phelan referred is really special persons and that is not a normal market. If they happen to sell the shares in that market, they are subject to capital gains tax.

Will Mr. Phelan address my first point on extending to 60 days the period during which people must revert to Revenue, which is fair and reasonable?

My understanding is that the Revenue would have informed the co-operative on Friday 18 November that letters would be issuing. Farmers received the letters the following Monday and they were completely unannounced. The representatives of the Revenue Commissioners have spoken about the fact that they know the financial difficulty the farmers are under. With due respect, if they knew that, they would not be issuing letters looking for a commitment to pay. In this case the Revenue is looking for €24,500 from an individual. He cannot pay.

With due respect, for the sake of fair play and allowing this matter to be looked at properly, will the Revenue extend the period that people have to go back to 60 days? Will the Revenue suspend any interest and penalties arising? Furthermore, in the interim period, will the Revenue allow the test case to go ahead in order that there is full clarity on the matter? The problem is that we are dealing with people's lives, families and generations. There are consequences for people. Revenue could put people out of business with this. I call on Mr. Phelan to deal with those points.