The European Commission is losing patience with what it sees as the Republic's foot-dragging over tax exemptions for stallions.

It is still waiting for a formal reply from the Government to a letter sent in January saying that preliminary findings showed that the exemption - by which fees for covers of mares by stallions are not subject to income tax - amounts to state aid and so breaches EU law.

According to one EU official, it expected Finance Minister Brian Cowen to have the formal reply when he travelled personally to Brussels yesterday to meet Agriculture Commissioner Mariann Fischer Boel.

"We expected the letter from them today," said the official, adding "quite frankly there's no doubt about the fact that some of the reasons [ for delay] have been quite strange".

However, speaking after the meeting, Mr Cowen remained vague on the timetable saying only that the Government would reply in "due course".

Characterising the discussion as "good from both sides" Mr Cowen said he had been there to explain the context of the industry to the commissioner.

"We were explaining the context in which the industry operates" he said, referring to how many people it employs and how much money it generates. "It's important to ensure that within the [ EU] our horse breeding industry is one that can compete and remains competitive".

For its part, the Commission released a statement saying it conveyed its "concerns about the present subsidy scheme as regards the state aid rules".

Once Ireland sends back its reply, it will be examined by the Commission. If it is not happy with the measures proposed, it will ask Ireland to modify its proposals. If Ireland then refuses, the Commission may then launch a formal investigation.