Wednesday, 31 October 2007
Department of Finance
Question 161: To ask the TÃ¡naiste and Minister for Finance the way the money value of the entitlements are determined where entitlements under the single farm payment system are sold and there is a capital gains tax liability; and if he will make a statement on the matter. [26422/07]
Where an entitlement under the single farm payment system is sold, the normal capital gains tax rules apply. The net gain attracts a liability at 20%. Where the entitlement was originally acquired on the commencement of the scheme, the cost price, for capital gains tax purposes, is nil. However, the single farm payment entitlement will qualify as an asset for the purposes of capital gains tax retirement relief provided the farmer fulfils the 10 year rule in relation to ownership and usage of the land which is disposed of at the same time as the entitlement.
Question 162: To ask the TÃ¡naiste and Minister for Finance if he has reviewed the operation of the tax credit on research and development available here; the way this compares with the UK, Sweden, Finland and Denmark; and if he will make a statement on the matter. [26423/07]
Since 2004, a tax credit of 20% of incremental expenditure by a company on research and development (R&D), over a base level of previous R&D expenditure, is available for offset against its corporation tax liability.
A preliminary review of the R&D tax credit scheme, involving consultation with industry, was undertaken last year prior to Budget 2007. A number of changes were introduced in the 2007 Budget and Finance Act, including the fixing for a further 3 years from 2007 to 2009, of expenditure in 2003 as the base against which qualifying incremental expenditure on R&D is measured under the tax credit scheme. With the incremental period gradually widening over this time, the scheme will become progressively more beneficial to companies that are active in R&D.
Also, from 1 January 2007, expenditure by companies on sub-contracting R&D work to unconnected parties qualifies under the tax credit scheme up to a limit of 10% of qualifying R&D expenditure in any one year. This is in addition to the existing provision in the scheme under which payments made by a company to a university in the European Economic Area undertaking R&D qualify for the credit up to an amount not exceeding 5% of the expenditure incurred by the company on R&D activities. It should also be noted that expenditure on buildings used for R&D is allowed on a volume based system and the credit at 20% of cost is allowed over a period of four years.
According to a recent consultant's report in this general area, fifteen EU member states currently have fiscal incentives in place to encourage business research and development, including Ireland, Denmark and the UK. The structure of these various incentives differ from one member state to the next which makes direct comparison of schemes difficult. For example, the incentives in the UK and Denmark operate by way of tax allowances (which reduce taxable income before application of tax) whereas tax credits (as operated in Ireland and elsewhere) reduce the final tax bill. Moreover, comparing discrete fiscal incentives in isolation would serve to ignore other important considerations such as, in Ireland's case, the low corporation tax rate on trading profits from which firms involved in R&D also benefit.
The R&D tax credit scheme is a very important part of the Government's overall strategy to encourage the undertaking of more research and development in this country. I will keep the operation of the scheme under review to ensure that it continues to make a strong contribution in that direction.
Question 163: To ask the TÃ¡naiste and Minister for Finance if he will change the system whereby the vehicle registration tax payable on a second hand imported car is set based on manufactures recommended prices and remains fixed at that level for the entire twelve months in such a way that recognises that second hand cars trade at well below the manufactures recommended prices and avoids the substantially higher VRT paid on the same car in December, compared to the following January. [26424/07]
The Revenue Commissioners are the vehicle registration authority in the State. As a general rule all vehicles imported permanently into the State must register for vehicle registration tax (VRT) purposes at any vehicle registration office within one week of their arrival in the State.
VRT is charged on the open market selling price (OMSP) of a vehicle in the State at the time of registration. The OMSP is defined in Section 133 of the Finance Act 1992 as the price inclusive of all taxes and duties which a vehicle might reasonably be expected to fetch on a first arm's length sale in the open market in the State by retail.
The OMSP of imported second hand vehicles is determined by the Revenue Commissioners by reference to trade publications, price lists, trader opinions, actual selling prices and information collected during the course of audits. It is applied to individual vehicles and adjusted on an on-going basis throughout the year to allow for factors such as age, mileage and the condition of that vehicle.
In determining the age of the vehicle, Revenue take into account the actual month of manufacture so that the difference in the OMSP of a vehicle imported in December vis-Ã-vis the OMSP of the same model imported in the following January reflects the market forces at the time of registration and not a value that was fixed for the entire year.
Question 165: To ask the TÃ¡naiste and Minister for Finance his views on extending the tax saver scheme in Budget 2008 to include the purchase by employers of bicycles and electric bicycles for the transportation of their employees to work, especially in rural areas where public transport does not exist; and if he will make a statement on the matter. [26483/07]
There are no plans to extend the scheme referred to by the Deputy to include the purchase by employers of bicycles and electrical bicycles for their employees to travel to work.
There is provision in the existing Benefit-in-Kind arrangements to allow an employer to provide an employee with a small benefit to a value not exceeding â¬250 in any one year without applying PAYE and PRSI to that benefit. The purchase by an employer of a bicycle for an employee could be covered by this provision, subject to the â¬250 limit on the value of any such benefits.
Question 166: To ask the TÃ¡naiste and Minister for Finance if he has plans to ensure that where joint ownerships of family farms are dissolved and the jointly owned assets are divided and transferred to the individual family owners at that point, no chargeable gain to capital gains tax will apply. [26492/07]
Section 30 of the Taxes Consolidation Act 1997 deals with the treatment, for capital gains tax (CGT) purposes, of partnerships. It provides, in the case of a business partnership, that chargeable gains accruing to the partners on the disposal of partnership assets are assessed and charged on them separately and not on the partnership itself. In this case, the dissolution of a business partnerships, might involve three forms of asset disposal, two of which incur a CGT liability. An asset that was brought into a partnership by a particular partner and is subsequently taken back by that same partner is not considered a disposal for CGT purposes and, as such, no CGT liability arises.
Where an asset was brought into a partnership by one partner and is subsequently disposed of to a different partner, the disposal is treated as a disposal from the partner who originally contributed the asset to the partner that subsequently receives the asset. In this case the partner who contributed the asset is liable to CGT on any gain in its value. The third form of asset disposal that might arise on the dissolution of a business partnership relates to assets acquired by the partnership which are subsequently disposed of to its partners. In this situation the assets concerned are taxable and the liability to tax is apportioned according to the apportioning of the assets between the partners concerned.
I have no plans to make any changes to the current CGT treatment of business partnerships. To do so would effectively treat one group of taxpayers more generously than other taxpayers and it would lead to calls for similar relief from other interested parties. In addition, such a measure could open the CGT regime to abuse from a taxpayer who might use the medium of business partnerships as a means to avoid paying CGT.
Relief from CGT is available for persons aged 55 or over who are retiring from business where the assets being disposed of have been owned and used for ten years prior to disposal. Relief in this case is available on assets up to the value of â¬750,000. Where such assets are disposed of to a child of the individual, who undertakes to continue to run the business or farm, there is no limit to the value of assets that may be claimed under this relief.
Question 167: To ask the TÃ¡naiste and Minister for Finance if he will direct the new Commissioner on Taxation to examine the equity issue in relation to farmers' and other self-employed in relation to the fact that they did not receive the substantial increases in personal tax credits which are available to employees and others whose income is paid through the PAYE system. [26493/07]
I will be bringing proposals to Government in the near future on matters relating to the establishment of the proposed Commission on Taxation including its membership and terms of reference. The Commission will be specifically charged with considering and making recommendations on the following: examine the balance achieved between taxes collected on income, capital and spending and report on it; review all tax expenditures with a view to recommending the discontinuation of those that are unjustifiable on cost/benefit grounds; consider options for the future financing of local government; in the context of maintaining a strong economy, investigate fiscal measures to protect and enhance the environment including the introduction of a carbon tax.
Pending consideration by the Government of these proposals, I am not in a position to elaborate further on matters pertaining to the Commission. In relation to the different tax treatment of farmers and other self-employed vis-Ã-vis PAYE workers, the PAYE allowance was introduced in 1980 to improve the tax progression of PAYE taxpayers and to take account of the fact that the self-employed generally then had the advantage of paying tax on a preceding year basis. The argument was also made at the time that the general scheme of allowances discriminated against employees and in favour of other taxpayers. There have been changes since 1980 â the selfâemployed now pay tax on a current year basis, for example. However, the PAYE allowance has become a tax credit. Moreover, given that there can be significant timing advantages in the payment of tax for the self employed, the employee credit is still perceived as necessary to ensure a balance in the system.