Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank all the Deputies for their contributions. I know there are points concerning this issue that are arguable and that is why I am following the Revenue advice and saying this should be appealed on a test case basis to see where the law lies. I know Members have very strongly held views and that is also the case for the constituents whom they represent. However, as I said to Deputy Griffin, the way Revenue operates and has always operated, is in accordance with a long-established taxation principle that where consideration is received for services rendered or produce sold, that consideration is subject to taxation as part of an individual's income.

In other words, regardless of whether one is paid in cash or in kind, one has a tax liability if one is paid in kind in lieu of cash. That is the principle and that has always been the case. If one is paid in kind instead of cash, one is liable for tax on the monetary value of whatever the payment in kind is. Revenue now deems that discounted shares were payment in kind for each 1,000 litres of milk. That is the case it is making. That should be tested, and it is well worth testing it, but Revenue is not changing the law or its practice. It is doing what it does with every taxpayer. It is applying the law.

Farmers got their accounts done by their professional advisers and sent in their tax returns in the normal way. There was no reference to shares being got at a discounted rate so their tax returns are accepted. It has come to the notice of Revenue that Kerry Co-op, in particular, had this discounted share system and in Revenue's opinion, a tax liability arises. A number of people have asked what the position is if they already paid tax. I think the Deputy asked about the incomes. I will send them out to him and he will get them in a written answer. On average, Cork farmers are slightly north of €30,000, Kerry farmers are slightly ahead of €20,000 and Limerick farmers are around €27,000 - somewhere in the high 20s. All those would be subject to the standard rate of tax, which is 20%. All of them would also be subject to PRSI payments and USC so their effective rate would be somewhere around 29% but where the capital gains tax is 33%. On that part of the gain which was contributed by the discount, some farmers subject to the standard of tax have actually paid too much tax if they sold the shares because they have paid a rate at 33% when the maximum they should have paid on income tax was 29%. Each individual taxpayer has to be assessed on this and it is complex but the best way to go is to take the test case and let it go after that. I have been involved with this since the start. It was brought to my attention by several Deputies. I got my officials to inquire into it and I am meeting the chairman of Revenue before the end of the month and will raise this issue again, even though it is not the primary purpose of the meeting.

In respect of suggestions that there is some kind of discrimination against farmers, there is no discrimination. This is the way tax law applies. I have been very sympathetic, as Deputies know, to the farmer taxation system and have introduced amendments to reform farm tax in a very fundamental way over the past four or five years. Someone can average income over five years, a change we introduced two years ago. This year, we introduced an extra year because this was a very poor year for farming with very little profit. There is now a sixth year which someone can use as an opt-out year on income averaging and only pay whatever tax liability there is for that individual year. If, by definition, there was hardly any income at all, one would not have a tax liability on it.

With the Leas-Cheann Comhairle's patience, I want to check my notes. In respect of the point made by Deputy Ferris, there is no taxation. I think I have dealt with that. Deputy Michael Healy-Rae spoke about the incomes of different farmers and a change of rules. Deputy Brassil spoke about an individual who had a VAT repayment held back which he thinks may be because he is not compliant on this. That should be raised directly with the Office of the Revenue Commissioners. If the Deputy sends me an e-mail about it, I will raise it with the Office of the Revenue Commissioners. The Deputy should give me the individual's name, address and tax number and it will be done confidentially. I can transfer it to Revenue and make sure the Deputy gets a written reply because I do not know what the circumstances are. That is the situation. My strong advice is to get the co-operative in co-operation with the individuals involved or somebody to take a test case to the Tax Appeals Commission and we will see where it lands after that.

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