Aodhán Ó Ríordáin (Dublin North Central, Labour)
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Question 180: To ask the Minister for Finance the amount of tax generated by the Exchequer from stallion fees for each of the years 2007, 2008, 2009 and 2010. [18871/11]

Aodhán Ó Ríordáin (Dublin North Central, Labour)
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Question 181: To ask the Minister for Finance the way in which he can reconcile the intent of the Finance Act 2006 to close tax shelters and loopholes in order to ensure that the wealthy paid their fair share of tax with the measure in the 2007 Finance Act which enables stallion owners to shelter profits by applying a valuation on their stallions irrespective of the investment made. [18872/11]

Aodhán Ó Ríordáin (Dublin North Central, Labour)
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Question 182: To ask the Minister for Finance the amounts of tax revenue foregone to date due to the transition mechanism in the 2007 Finance Act in each of the years 2008, 2009 and 2010. [18873/11]

Aodhán Ó Ríordáin (Dublin North Central, Labour)
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Question 183: To ask the Minister for Finance if he will confirm that stallion owners have the right to apply a market value on their stallions as of 1 August 2008 irrespective of the money they spent acquiring the stallion and that this market value enables owners to shelter profits and pay little or no tax as a result. [18874/11]

Aodhán Ó Ríordáin (Dublin North Central, Labour)
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Question 184: To ask the Minister for Finance in view of the fact that the transitional measure in the 2007 Finance Act has become a significant tax shelter for stallion owners in which large numbers of breeders will not have paid or not be paying tax on stallion fees for at least four years, 2008 to 2012, if he will justify this exceptionally favourable tax treatment in view of the fact that the country has been gripped in an economic crisis since 2008; if he will move to close this loophole in the 2007 Finance Act; and if he will make a statement on the matter. [18875/11]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 180 to 184, inclusive, together.

I am informed by the Revenue Commissioners that as statistics on income tax and corporation tax receipts do not generally distinguish between the yields from different sources of income, the figures of tax yields from stallion stud profits are not separately identifiable. Figures of the profits earned from the provision of stallion stud services were required to be returned in income tax and corporation tax returns for the year 2009. The figures thus entered were €0.5 million for Income Tax and €4.0 million for Corporation Tax. However, it is not possible to infer from these figures the amount of tax that would be generated as they would be subject to deductions for allowable expenses and other costs.

The current scheme for the taxation of stallion profits and gains was introduced with effect from 1 August 2008 and replaced the exemption for stallion stud fees which terminated on 31 July 2008.

Under the exemption scheme, profits or gains arising to an owner or part owner of a stallion from the sale of services of mares within the State by the stallion or from the sale of rights to such services were exempt from income and corporation tax.

Under the current scheme, stallions are treated as stock in trade which means that income from stud fees and profits or gains on the sale of the stallions are fully taxable in the hands of both corporate and individual owners.

When the current scheme was introduced, it was suggested by the then Minister for Finance that the horse racing and bloodstock industry was (and continues to be) of enormous benefit to this country, not just economically but also from the social and sporting point of view as well.

In computing profits, a write-off over 4 years of the "initial value" of the stallion is allowed as a deduction for tax purposes. It is not the case that this provision is a loophole. It reflects the fact that some stallions have a short nomination life and also takes into account that the majority of stallions are unsuccessful at stud. The impact of the deduction on taxable profits during the write-off period is directly related to the success, or otherwise, of the stallion. Without this provision the cost of a stallion would, under normal rules, be allowed as a deduction upon its disposal or death.

The "initial value" of a stallion is its market value on the later of 1 August 2008 (i.e. the date the new scheme commenced) or when it is purchased for, or appropriated to, stud activities. For this purpose, "market value" is the price the stallion would fetch on the open market or, where the purchaser and vendor are not connected and the transaction is at arm's length, the price actually paid.

The "initial value" of a stallion standing at stud before 1 August 2008 was set at the market value of the animal as of that date on the basis that any alternative arrangement could have resulted in the sale overseas of top quality stallions and a freeze in the acquisition of new stallions in the period prior to the termination of the exemption scheme. As the value of many stallions purchased before 1 August 2008 would have declined by that date, the use of market value at 1 August 2008 would have reflected that reduction. On this basis I do not accept that this measure constitutes a significant tax shelter for many stallion owners.

As regards whether I will close off this provision, I would advise Deputy Ó Ríordáin that, like all proposals for new tax or expenditure measures, this will fall to be considered in the context of the ongoing development of budgetary and economic policy. However, as advised above, if this provision was discontinued, the cost of a stallion would be allowed as a deduction upon its disposal or death under normal rules. As the benefit of the 4 year write-off is largely one of timing, its abolition would not be expected to give rise to gains to the Exchequer in the long run, as any resultant annual gains would be offset by increased tax deductions in the year of disposal or death of the stallion.

In relation to the amounts of tax revenue foregone in each of the years 2008, 2009 and 2010, I wish to reiterate the advice to me from the Revenue Commissioners that the figures of tax yields from stallion stud profits are not separately identifiable as statistics on income tax and corporation tax receipts do not generally differentiate between the yields from different sources of income. Figures of the profits earned from the provision of stallion stud services for the year 2009 are as set out earlier. However, as they would be subject to deductions for allowable expenses and other costs, it is not possible to deduce from these figures the amount of tax that may have been foregone.