Michael Lowry (Tipperary North, Independent)
Link to this: Individually | In context

Question 124: To ask the Minister for Finance if he will consider introducing a scheme (details supplied); the number of farmers affected by the lack of such a scheme; the cost of such a scheme; his views on the creation of such a scheme; and if he will make a statement on the matter.

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

There is already in place a generous package of reliefs that continue to be available exclusively to the farming sector. These include: income averaging; stock relief; accelerated capital allowances for expenditure incurred on farm buildings; accelerated capital allowances in respect of expenditure incurred on certain pollution control measures; capital allowances in respect of expenditure incurred on the purchase of milk quota; an exemption from income tax in respect of certain income from certain leased farmland and special tax treatment in respect of profits accruing as a result of the disposal of stock under statutory disease eradication measures. In addition, certain young trained farmers can also qualify for full relief from stamp duty on the transfer of land and can also avail of enhanced stock relief of 100%.

The 2005 budget also announced a special stamp duty relief relating to an exchange of farm land between two farmers for the purposes of consolidating each farmer's holding. The new relief will mean that no stamp duty will be charged on an exchange of such lands where the lands are of equal value. In a case where the lands exchanged are not of equal value, stamp duty will be charged on the amount of the difference in the value of the lands concerned.

The Deputy is effectively suggesting the reintroduction of roll-over relief on capital gains tax for farmers. It was announced in the 2003 budget that no roll-over relief would be allowed for any purpose on gains arising from disposals on or after 4 December 2002. This relief was introduced when capital gains tax rates were much higher than current levels. In effect, it was a deferral of tax to be paid, where the proceeds of disposal were re-invested into replacement assets. The abolition of this relief was in accordance with the overall taxation policy of widening the tax base in order to keep direct tax rates low. A 20% rate of capital gains tax now applies on gains arising on the disposal of assets, including land. This is the lowest rate of capital gains tax in recent history. Taxing capital gains when they are realised is the most logical time to do so and this change brought capital gains tax into line with other areas.

Stamp duty and capital gains tax are significant contributors to the Exchequer, yielding approximately €2 billion and €1.5 million respectively in 2004. Stamp duty and capital gains tax receipts allow for a broader tax base than would otherwise be possible and form an important element of State revenues. The introduction of a general exemption from capital gains tax and stamp duty for all farmers selling and repurchasing farmland for any reason would narrow the tax base considerably and would have an adverse effect on the stamp duty and capital gains tax yields. Also, such a move would lead to calls from other sectors to be given the same treatment, which would have major Exchequer implications.

Figures are not captured in such a way as to provide a dedicated basis for compiling estimates of cost to the Exchequer from introducing the scheme mentioned or the numbers who might be affected. Accordingly, the specific information is not readily available and either could not be obtained or could not be obtained without conducting a protracted investigation of the Revenue Commissioners' records.

I have no plans to introduce tax exemptions for farmers along the lines suggested by the Deputy.

Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

Question 125: To ask the Minister for Finance the reason VAT is charged on the public service obligation portion of ESB bills; and if he will make a statement on the matter. [17578/05]

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

The public service obligations levy is a charge shown on bills issued by the Electricity Supply Board to its customers since March 2003. The levy is based on the costs incurred by the ESB in meeting its obligations to produce, or buy, electricity that is generated from peat and other environmentally sustainable forms of energy. It was previously included as part of the "standing charges" shown on ESB bills and, as such, was chargeable to VAT. With effect from March 2003, the levy has been shown separately from the other standing charges.

The levy is part of the price which customers pay the ESB and is directly linked to the price of the electricity supplied. In these circumstances, the ESB is obliged to charge VAT on the levy. The rate at which VAT must be charged is 13.5%, which is the rate that applies to the supply of electricity.