Tommy Broughan (Dublin North East, Labour)
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Question 129: To ask the Minister for Finance the reason the stallion tax exemption was excluded from the terms of reference of the consultants asked to consider the cost of various tax reliefs and whose reports were published on 6 February 2006; if figures are available to his Department on the cost of this exemption; and if he will make a statement on the matter. [7867/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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During the course of 2004 and 2005 the tax relief for stallion stud fees as provided for under section 231 of the Taxes Consolidation Act 1997 was the subject of ongoing discussions between the Irish authorities and the European Commission, with particular regard to the State aid aspects of the relief. In that context, the policy background to the tax scheme was considered extensively. No separate review of the tax scheme was in the event compiled by my Department. However, in the context of the consideration of the scheme, regard was given, inter alia, to the review conducted in July 2004 by economic consultants Indecon for the Irish Thoroughbred Breeders' Association, the European Breeders' Fund and Horse Racing Ireland. In my 2006 Budget Statement I announced that the tax relief for stallion stud fees would be terminated with effect from 31 July 2008 and that a new regime appropriate to the industry will be discussed with the European Commission.

With regard to the cost of this exemption, section 35 of the Finance Act 2003 provided that details of exempt income from a number of sources, including from stallion stud fees, would be returned to the Revenue Commissioners. With regard to the tax year 2004, this information was included in personal income tax returns filed in October and November 2005 and, in the case of companies, in corporation tax returns filed up to the end of 2005. While a significant proportion of these returns have now been processed, not all have. Therefore, it is not possible at this stage to give an accurate assessment of the level of exempt income in respect of the stallion relief. However, based on the information received and collated to date, a total of €17,140,959 was included in the relevant returns for 2004 as profits or gains that are exempt under section 231 of the Taxes Consolidation Act in terms of stallion stud fees. This figure would correspond to a maximum Exchequer cost of the order of €7 million in 2004, in terms of income tax and corporation tax forgone. However, the actual Exchequer cost in terms of the income declared to date would be lower to the extent that the exempt income is subject to deductions for allowable expenses and other costs, thereby reducing the level of income actually subject to tax.