Dan Boyle (Cork South Central, Green Party)
Link to this: Individually | In context

Question 135: To ask the Minister for Finance the way in which he plans to close the loophole by which luxury liners (details supplied) which generate massive revenue for their owners, can qualify for tax relief as plant and machinery; and if he will make a statement on the matter. [18474/05]

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

As the Deputy will be aware, taxpayer confidentiality requires that a Minister for Finance does not answer a parliamentary question about the tax affairs of an individual or company, other than when the Deputy is asking the question on behalf of the individual or company. In this instance, it is not clear that this is the case and in the circumstances, I regret I cannot provide the specific information requested. I can however provide the Deputy with a general overview of capital allowances available for plant and machinery in the shipping sector.

Commercial ships have always qualified for capital allowances. A ship or a luxury passenger liner is an item of plant and machinery. If it is used in the purposes of a trade, it will qualify for capital allowances for plant and machinery. Capital allowances are given as a deduction in calculating trading profits in place of normal commercial depreciation of a business asset. This would apply to a lorry, a bus, a plane or any other such craft that is used for the purpose of a trade. The present general regime of capital allowances for plant and machinery is a write-off period of 12.5% per annum over eight years.

The tonnage tax regime was introduced in the Finance Act 2002 to help the Irish shipping sector. Along with other EU countries, the Irish shipping sector was faced with the possibility of Irish shipping companies relocating their economic activities to other countries, including countries which already had a tonnage tax regime. Several EU countries had introduced special low tax regime known as tonnage tax under which the tax is paid by reference to the tonnage of the ships.

Individual lessors are prohibited from obtaining the capital allowances which would otherwise be available in respect of capital expenditure on plant or machinery used in a company's tonnage tax trade. The tonnage tax system currently applies in 12 EU countries, including Ireland, and the tonnage tax regimes for these EU countries have had to be cleared with the European Commission for state aid purposes. The European Commission is conscious of the need to protect the EU shipping sector and took this key objective into account when approving the tonnage tax regimes including Ireland's.