Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

With regard to Deputy John Brassil's proposal that I request the chairman of the Revenue Commissioners to appear before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, it is a matter for the committee to set its own work agenda and to issue invitations accordingly. I am sure the Deputy will request the committee to do that himself.

Since the establishment of the Revenue Commissioners in 1923, successive Governments and the Oireachtas have reaffirmed the principle of the independence of the Revenue Commissioners in their dealings with the tax affairs of any individual under tax and customs legislation. This independence is seen as critical to maintaining the integrity of the taxation system and forms a key pillar of Revenue's governance framework.

I can, however, address the issue of the taxation of the shares received by Kerry Co-op suppliers. It is my understanding these shares were received by milk suppliers, as a consequence of and in proportion to, the quantity of milk supplied. The shares are, therefore, a payment received by the farmer for their milk supply and form part of the farmer's trading income for the relevant year. This is similar to the general tax treatment applying in respect of share-based remuneration for employees other than certain restrictive Revenue-approved share schemes. Employees are liable to income tax, USC and PRSI on their share awards for similar reasons, namely, the share award is linked to their work and is, therefore, treated as taxable employment income. To apply a different treatment to farmers who receive valuable shares as a result of their ongoing trading relationship with the co-operative would call into question the taxation of all forms of share-based remuneration received by employees or self-employed contractors in other sectors of the economy.

It must be accepted the patronage shares received by the co-op members are valuable assets. The shares can be sold for cash, they can be gifted or transferred to a new owner, and they convey voting and dividend rights on the shareholder. In many cases, the values received by farmers were considerable. For example, in 2013, the value received by farmers ranged from zero up to €39,330, with the average value received being approximately €4,860. The receipt of shares to this value would have been disclosed by many farmers to their accountants. The letters issued by Revenue this month have in the first instance been inquiries as to whether the values received have been included in their accounts. Farmers who were tax compliant and disclosed the value received will, therefore, not be facing any additional income tax. It would be inequitable for those farmers who did correctly declare this income if Revenue did not follow up on those who did not.

In regard to the questions raised by Deputies Niall Collins and Michael Moynihan, there has been no change in policy on the imposition of income tax or capital gains tax to such awards. Capital gains tax applies to the growth in value of a capital asset. For example, where an individual sells a share that has grown in value since the time it was acquired, capital gains tax would apply on the increase in value. The matter at issue in this case is the original market value of the shares received by the farmers as a result of their trading relationship with the co-op. The shares were a form of payment received for the milk supplied by the farmers. Accordingly, the value of the shares forms part of the trading income of the farmers for the relevant years.

I am aware of the difficulties facing dairy farmers this year as a result of falls in milk prices. Several measures have been taken to assist such farmers, particularly in unusually poor trading years. Farmers may already elect for income averaging, which allows them to average their income over a five-year period for the purposes of calculating taxable profits to smooth the volatility which can occur in farm incomes. In budget 2017, the Minister for Finance introduced an opt-out from the scheme so as to allow farmers experiencing a particularly difficult year to opt out of the scheme in that year, pay the tax liability for that year's profits alone, and then return to income averaging in the subsequent year.

I would advise any farmers who have received this letter from Revenue to discuss it with their agents to ascertain if any additional liabilities are due, and, if so, to make contact with the Revenue Commissioners.

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