Phil Hogan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 90: To ask the Minister for Finance his action in response to the EU challenge to the tax relief of stud fees; and if he will make a statement on the matter. [13272/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

The stallion stud fee exemption was introduced in Finance Act 1969 and applied to nominations on all stallions whether standing at stud in Ireland or abroad. The relief was amended in Finance Act 1985 so as 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 has been acquired by a breeder for the purpose of acquiring new breeding lines for a bloodstock enterprise carried on in State.

The stallion relief was included as part of annual reports on aid granted in Ireland to the agriculture sector sent by the Department of Agriculture to the Commission in 1982 and on a number of subsequent occasions. The Commission wrote on 24 June 2003 stating that a complaint had been received about the relief and asked that full details on the exemption be sent to the Commission for it to be assessed as a potential state aid.

My Department responded to the Commission on 17 July 2003 and a meeting between the officials of the Department and the Commission took place on 23 July 2003. The Department sent further details to the Commission by letter on 30 December 2003. The Commission wrote on 21 April 2004 seeking additional information to complete the assessment of the relief as a potential state aid. This information was supplied by the Department later in the year.

In the most recent letter from the Commission dated 6 January 2005, it was indicated that it had come to a preliminary conclusion that the stallion tax exemption would seem to constitute an aid scheme that is not compatible with the common market. The letter sets out the Commission's reasoning and, against this background, invited Ireland to submit comments within one month, together with any concrete proposals regarding how the scheme in question could be brought in line with Article 87 of the EC Treaty.

Officials from my Department and the Department of Agriculture and Food met with officials from the Commission directorate general for agriculture and rural development on 23 February 2005. At this meeting, the Commission agreed to extend the deadline to respond to the end of March and agreed subsequently to a further extension in time to 15 April 2005. A reply issued to the Commission from the Irish authorities on 14 April 2005 and I will outline the Government's position on the matter shortly to the European Commission.