Tom Neville (Limerick County, Fine Gael)
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136. To ask the Minister for Finance his views on a matter (details supplied) regarding correspondence from the Revenue Commissioners with regard to a tax liability; and if he will make a statement on the matter. [38110/16]

Michael Noonan (Limerick City, Fine Gael)
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I would first note that, since the establishment of the Revenue Commissioners in 1923, successive Governments and the Oireachtas have reaffirmed the principle of the independence of the Revenue Commissioners in their dealings with the tax affairs of any individual under tax and customs legislation. This independence is seen as critical to maintaining the integrity of the taxation system and forms a key pillar of Revenue's Governance framework, and it would therefore be neither appropriate nor possible for a Minister for Finance to instruct the Revenue Commissioners as to their policy with regard to the administration of tax legislation.

I am advised by Revenue that patronage shares were received by suppliers of milk as a consequence of and in proportion to the quantity of milk supplied. Where the number of shares issued is based on and dependent on the level of business between the members and the cooperative or nominated purchaser and where the cooperative does not receive the market price for the shares issued, then the profit accruing i.e. the difference between the market value of the shares issued and the price paid for these shares, to the member is a trading receipt of the member's farming income and accordingly chargeable to income tax. 

Capital Gains Tax (CGT) applies to the growth in the value of a capital asset. For example, if an individual sells a share that grew in value after it was acquired, CGT would apply, subject to the availability of any exemption, on the increase in value.  The matter at issue in the particular case, however, is the initial value of the shares received by farmers as a result of their trading relationship either with the co-op or the nominated purchaser. The shares were a form of payment received for the milk supplied by the farmers and therefore, in the view of Revenue, the value of the shares forms part of the trading income for the relevant years. It is this value which forms the base cost for CGT in relation to any subsequent disposal.

I am informed by Revenue that the letter which issued to farmers was in the first instance an enquiry as to whether the value of the shares received was included in the accounts for the years in question. Farmers who did include the value of the shares in their accounts will not have any additional income tax liability in relation to the specific matter raised in these enquiries. 

Early engagement with Revenue will, where the share value received has been included in the accounts for the years in question, result in an early conclusion of Revenue's enquiries.  Early engagement with Revenue, where the share value received was not included in the accounts for the years in question, will facilitate a discussion between the individuals concerned and Revenue with a view to agreeing a mutually satisfactory arrangement, including if necessary, a phased payment arrangement, to deal with the tax liability involved. I am advised by Revenue that there have been extensive contacts with them in regard to this matter generally and they are and will be responding very quickly to those contacts in order to assist farmers to bring matters to an early conclusion.

I would ask the Deputy to encourage any farmers who have received a letter from Revenue in this matter to engage with Revenue without delay.