Ending the Stud Fee Exemption is wrong

[rockofcashel]

[size=7]Ending of the tax exemption for stud fees on stallions and greyhounds[/size]

The Minister for Finance has this evening announced as part of the Finance Bill, that the current exemption from taxation on stud fees in respect of stallions and greyhounds will end in the middle of next year.

Personally, I think that this is a retrograde step, and is being made for all the wrong reasons i.e. because of pressure from certain sections of the political establishment and the media, who consistently report that horse breeders “pay no tax”.

I will before I go on, let people know that I live in the village of Rosegreen, less than a half a mile from the gates of Ballydoyle Stud farm, the home of Aiden O’ Brien’s stables, and almost surrounded by land owned by Coolmore Stud, therefore I could be accused of disagreeing with the step for electoral reasons.

This is not the reason I disagree however.

First, it should be noted, that horse breeders do pay tax. The only part of their income, which is exempt from taxation, is that which is paid for the covering of the mare only. For example, if a mare costs 50,000 euro to cover, that is paid to the stallion owner, and no income tax is paid on the amount.

However, every single other transaction, which is associated with the industry, has tax levied on it, in the same way as all other businesses do. That means that every employee of the industry pays tax, every time a good service is purchased VAT is paid etc.

The reason I disagree with the stance, which is to be taken by the Minister, is that this industry is a highly mobile one, with the whole industry being dependent on the stallions and how they go about their business. If there are no stallions, there is no industry.

Horses are a highly mobile animal, and therefore if a more welcoming tax regime becomes available, the largest stud owners will simply put their animals onto a plane and move, meaning a zero net gain to the Irish economy from tax on stud fees, but an actual net loss to the Exchequer from less goods and services being purchased, and a change from taxpaying employees to benefit drawing employees.

According to the latest available figures (in 2004), the horse breeding industry made an income of €28 million, which could be regarded as a subsidy from the Irish taxpayer. However, in net terms, the industry created a much more substantial amount, therefore it makes economic nonsense to put this industry in jeopardy.

Also this is a well-developed, well-respected global industry in which Ireland has built up a world-class reputation. Other industries, multi-national companies for example get much larger tax breaks from the Irish Exchequer, and yet retain the ability to leave at the drop of a hat on the back of a decision in some foreign city. Here in Ireland, our own Government is making a decision, for media reasons only, which will endanger thousands of Irish jobs.

I know many of my party colleagues will disagree with me about this. This may be for a host of reasons, ideological for example, but I think I have the advantage of living in a rural environment that has a developed horse-breeding industry, so I maybe have an advantage when discussing the merits or demerits of such.

This is a bad decision, from and economic and rural development point of view.

[Limerick Lad]

Are there other countries in the horse breeding world where stud fees are also tax exempt?

[rockofcashel]

Dont know, but the opportunity to damage the Irish horse breeding industry now arises if any other state wishes to create a tax exempt industry on the Irish model

[meriwether]

I accept the point regarding the mobility of the bloodstock industry, however it is simply inexxplicable that Coolmore, charging upwards of 100k for coverings by Danehill, Montjeu, Gailileo et al, pay no tax upon this.

[rockofcashel]

I accept the point regarding the mobility of the bloodstock industry, however it is simply inexxplicable that Coolmore, charging upwards of 100k for coverings by Danehill, Montjeu, Gailileo et al, pay no tax upon this.

Correct me if I am wrong .. but Danehill hasn't covered anything in a while due to an unfortunate accident a while ago.

But you've immediately hit upon the point that I am trying to make, by focusing exclusively on Coolmore Stud. There are thousands of people working in and for, and providing services to smaller stud farms all across the country, which will be hit much harder by the ending of this exemption than Coolmore.

Let the Government go ahead and place more restrictive income taxes on John Magnier, he can look after himself. Its the smaller breeders and their employess who will be damaged as well.

[Limerick Lad]

Dont know, but the opportunity to damage the Irish horse breeding industry now arises if any other state wishes to create a tax exempt industry on the Irish model

Unless Brian Cowen intends to enact a very prohibitive tax regime on stud fees (an unlikely prospect) it would appear to me that with all their infrastructure and expertise already in place in Ireland, Coolmore and other top class stud farms would be unlikely to go to the trouble and expense of moving to another country which has similar tax codes on stud fees. It would seem to be a move which is long overdue.

[meriwether]

I accept the point regarding the mobility of the bloodstock industry, however it is simply inexxplicable that Coolmore, charging upwards of 100k for coverings by Danehill, Montjeu, Gailileo et al, pay no tax upon this.

Correct me if I am wrong .. but Danehill hasn't covered anything in a while due to an unfortunate accident a while ago.

But you've immediately hit upon the point that I am trying to make, by focusing exclusively on Coolmore Stud. There are thousands of people working in and for, and providing services to smaller stud farms all across the country, which will be hit much harder by the ending of this exemption than Coolmore.

Let the Government go ahead and place more restrictive income taxes on John Magnier, he can look after himself. Its the smaller breeders and their employess who will be damaged as well.

Im unaware of the current status of Danehill's sex-life, so I wont speculate any further. What he does in the privacy of his stable is his own business.
Im pretty much in favour of a tax free status for bloodstock for the majority of the bloodstock community, for the reasons you have outlined. What Im proposing is progressive taxation, that sets a (generous) limit on what a sire can earn for his sexpolits. This would start to come in for the likes of RockofGibralter, Montjeu, Danehill Dancer, not the likes of the various sires small breeders have, charging relativly small fees.

[MikeW]

I may be wrong here, but I think you will find that this is an EU driven thing. It essentially is an illegal exemption under EU law. I doubt that it is in FF election interests to make this move, they are pretty well in with the industry. The driver here is Britain and France, both of whom have seen their native industries decimated by Irelands success in the industry.

[Decko]

I may be wrong here, but I think you will find that this is an EU driven thing. It essentially is an illegal exemption under EU law. I doubt that it is in FF election interests to make this move, they are pretty well in with the industry. The driver here is Britain and France, both of whom have seen their native industries decimated by Irelands success in the industry.

Correct. Basically any preferential regime only available to one industry is a state aid. Any such aids have to be approved by Brussels such as the IFSC was.
The stallion exemption never had such approval and following complaints from other member states (I think the UK complained)

However the patent exemption, the artists exemption (which are also state aids have so far survived.

[grassroots]

Danehill sex life is defunct seeing as he has passed to the great stud farm in the sky.

Europe objected to this incentive so it was untenable as a state aid and may indeed have jeopradised our 12.5% tax rate. My understanding is that is allowed on the basis it applies to all corporate profits in every industry.

Anyway, as the changes are reported, all operating costs can be offset aganst fess. Presumably this also includes some form of depreciation over 4 years. I amnot clear but a failed stallion capital cost may be written off against income on another stallion. Removal will not generate much income from the exchequer.

Most of the burden will be bourn by Coolmore, since they probably control 80% of the income, so you can be sure this has been written to suit them.

nice try Rock for the Magnier number 1. Just goes to prove all politics is local. Are you Rock of Gibraltar or Rock of Cashel.

Not consistent with the soak the rich policy of SF though. Hope you don't meet the same fate as some previous stallions for breaking ranks.