Brian Cowen (Laois-Offaly, Fianna Fail)

All I can do is ask the Deputy to listen to the reply when I give it. There is no preliminary finding on the exemption and the Deputy's assertion that there is does not make it happen. The Deputy has also suggested that we have not been in touch with the Commission. We have answered any time it has contacted us about the matter. The Commission was advised of the relief in 1982 and on a number of occasions since. There is no mystery about it. As there has been no preliminary finding, I cannot give an answer to supplementary questions which were predicated on the assertion that there was. The Commission contacted us last in April 2004 and we answered in July 2004. We have not heard from the Commission since. The idea that the matter is exercising everyone's mind on a weekly basis and that some mystery attaches to it is unfounded.

I will explain the background to the relief. The stallion stud fees exemption was introduced in the Finance Act 1969 to encourage the development of the Irish bloodstock industry by creating an incentive to invest in Irish stallions. It applied to stallions standing at stud in the State and abroad. Income arising to the owner or part-owner of a stallion from the sale of services or the right to services is exempted from taxation but losses may not be set off against other income. Income from a stud farm is charged to tax in the same way as other profits from farming. The income which is charged to tax in full includes income from the keeping of mares and stallions at a farm. The only income which is exempt is the income arising from stallion fees. While the legislation was amended in the Finance Act 1985 to confine the tax exemption on stallion fees to income earned from stallions at stud in the State, income arising to a part-owner of a foreign-based stallion continued to be exempted where the share had been acquired by a breeder for the purpose of acquiring new breeding lines for a bloodstock enterprise carried on in the Republic of Ireland. That exempting measure is now contained in section 231 of the Taxes Consolidation Act 1997.

A key test of the entitlement to the exemption is whether a stallion is ordinarily kept on land in the State. An administrative ruling issued in November 1986 by the Revenue Commissioners in response to a perceived downturn in the industry confirmed that they would continue to regard as ordinarily kept on land in the State any stallion demonstrated to be temporarily exported for genuine commercial purposes for a period not exceeding two years. The ruling was withdrawn by the Revenue Commissioners in September 1998. Since then, stallions which are sent abroad to cover mares, mainly to the southern hemisphere and commonly for a period of up to six months, are regarded as ordinarily kept on land in the State. Except as otherwise provided for in the legislation, only those profits arising in the State are exempt.

As Deputy Burton knows, a study in this area was carried out by Indecon on behalf of the Irish Thoroughbred Breeders Association which suggested the estimated gross tax forgone was €3 million. We will have to conduct our own examination of the matter based on whatever information we can glean from this year's review. There are all sorts of questions. Of the yearlings which result from all this bloodstock breeding activity, 85% are exported and cost approximately €140 million. All this money is subject to taxation.

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