Denis Naughten (Longford-Roscommon, Fine Gael)
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Question 187: To ask the Minister for Finance his views on the tax implications of the sugar compensation package for farmers; and if he will make a statement on the matter. [4046/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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There are three significant financial elements of the sugar compensation package, as far as farmers, as sugar beet growers, are concerned. The first is an amount of €123 million, payable over the next seven years via the single payment scheme, as compensation for the drop in the support price of beet. The second element of the compensation package is the restructuring aid. In July 2006 the Government decided that a sum of €40m restructuring aid be reserved for beet growers. This decision has been challenged by the Irish sugar processor by way of Judicial Review proceedings in the High Court. The third element is the diversification aid worth almost €44m, which will be drawn down in the framework of the National Restructuring Programme.

I am advised by the Revenue Commissioners that they are of the view that payments under the first two elements of the package in relation to the support price compensation and the restructuring aid to growers will be taxable as income. I am further advised that the Revenue Commissioners await some clarifications to enable them to finalise a view about the tax implications of the third element of the package, the diversification aid. The National Restructuring Programme on this element of the package was recently submitted to the EU Commission for consideration.

Martin Ferris (Kerry North, Sinn Fein)
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Question 188: To ask the Minister for Finance if he will introduce increased restrictions on the use of specified tax reliefs by high income persons; and if he will make a statement on the matter. [4051/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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In Budget 2006 I announced the introduction of a limit, with effect from 1 January 2007, on the use of tax reliefs, including certain exemptions, by some high-income individuals. Section 17 of Finance Act 2006 gave effect to this announcement. This measure was designed to address the issue of a small number of individuals with high incomes who, up to now, mainly by means of the cumulative use of various tax incentive reliefs, have been able to reduce their income tax liability to a very low level or to zero. Such individuals are no longer able to do so. This provision will ensure that such individuals who use tax incentive schemes will have an effective rate of income tax for each year of not less than about 20 per cent on the income sheltered by such schemes.

The method used to increase the tax rates at which these high income individuals pay tax effectively addresses the equity concerns raised over the past number of years while, at the same time, ensuring that the intended incentive effects of tax schemes will continue to be delivered.

Broadly, the reliefs restricted are those reliefs that have primarily been used by high income individuals to significantly reduce their tax liability. These are—

the various sectoral and area based property tax incentives,

certain exemptions including artistic income and patent royalties,

the reliefs for donations, and

certain investment incentive reliefs such as the BES, film relief and interest relief for investment in companies and partnerships.

The normal items claimed by taxpayers such as medical expenses, trade union subscriptions, the personal tax credits and exemptions such as that for child benefit are not restricted. In addition, normal business expenses and deductions for capital allowances on plant and machinery, genuine business related trading losses and genuine losses from a rental business have not been restricted.

I do not intend to introduce any further restrictions on the use of specified tax reliefs at this time. I would point out, however, that I am introducing technical amendments to the restriction in Finance Bill 2007 which will help to ensure that the measure will work as intended. Included in these are provisions to enable the Revenue Commissioners to seek whatever information may be necessary from individuals affected by the restriction, so as to ensure that Revenue are in a position to monitor and assess the impact of the restriction in terms of numbers affected, the additional tax paid and the nature of the reliefs restricted.