Bertie Ahern (Dublin Central, Fianna Fail)

On the first issue, there is a major review of all the tax shelters and tax allowances under way. It is my view that as part of that review they all should be looked at. Specifically, in respect of the measure the Deputy raised, as I said yesterday, that has been on the Statute Book for 11 years. Regardless of whether it is working well, it seems that now is a good time to review it. The answer to that question is "Yes", if I was not totally clear on that yesterday. I was informed since yesterday that the Revenue Commissioners confirmed that they are monitoring the application of the non-resident rules in respect of cases being handled by their large case division. The Minister for Finance asked the chairman of the Revenue Commissioners to keep him appraised of any developments in this area arising out of the current monitoring of the position by Revenue. The Minister is expecting an update report from Revenue after these have been examined. That is currently under way.

With regard to the question on shipping, this measure was introduced three years ago in the Finance Act 2002. It was designed to help the Irish shipping sector. Along with other EU countries, the Irish shipping sector faced competition from ships registered in Liberia and similar countries which were crewed by low cost employees. Several EU countries reacted to these developments by introducing a special low tax regime known as tonnage tax under which tax is paid by reference to the tonnage of the ships. The tonnage system was introduced originally by Greece 35 years ago, which has a major merchant shipping fleet. The system currently applies in 11 other EU countries as well as Ireland. The tonnage tax regime for these EU countries has to be cleared by the European Commission for State aid purposes. The European Commission is conscious of protecting the EU shipping sector.

Regarding capital allowances, which Deputy Rabbitte raised, commercial ships have also been entitled to capital allowances. A ship is an item of plant and machinery used in a trade and the capital allowances for plant and machinery are used in lieu of normal commercial depreciation of a business asset. A ship is the main asset of a shipping trade, in the same way as a lorry is the main asset of a haulage business. The existing regime for capital allowances for plant provides that such an asset can be written off at 12.5% over an eight year period. That is how the system works.

I am not dealing with these issues on a day to day basis. Therefore, I do not know if there are abuses. That is the system that provides for this measure. If there is any abuse of the system, I am sure the Revenue Commissioners would examine it.

See this speech in context