Stud fees:An incentive introduced by the late Charles Haughey to be abolished, reports Barry O'Halloran
The tax free regime for stallion and greyhound stud fees will end in August 2008 under provisions contained in the Finance Bill.
Profits from stud fees, paid when a stallion successfully impregnates a mare, have not been taxed since 1969, a result of an incentive introduced by the late Charles Haughey when he was Minister for Finance.
But an EU ruling forced the Government to agree to tax these earnings. Yesterday, the Minister for Finance Brian Cowen said they will be taxed from August 1st next year. Under section 24 of the Finance Bill, stallion owners will be allowed to write off either the cost or the value, whichever is relevant, of their horses over its first four years at stud.
Earnings after this point will be taxed, at 12.5 per cent if the horse is owned by a company, or at the personal rate if owned by an individual or individuals.
Where horses are in corporate ownership, dividends or other payments from these companies will be subject to income tax.
Owners will be allowed to write off their costs against tax in the same way as any business, which they cannot do now. Speaking at the Bill's publication yesterday, Mr Cowen said: "The same broad business principles that apply to any enterprise will apply here.
"We've come up with a scheme that we believe is in line with those proposals."
The four-year write-off period will also apply to horses currently at stud, beginning on August 1st next year. Their owners will be allowed to write down the stallions' market value at that time.
Where stallions are bought and retired to stud in the Republic, their buyers will be able to write off the purchase price against their tax bills over four years.
Owners who acquire horses before they become stallions, and subsequently send them to stud, can write off the equivalent of their market value at the time of their retirement to stud.
Chairman of the Irish Thoroughbred Breeders' Association (ITBA), Joe Hernon, said that it was unfortunate to lose the exemption, which allowed the industry to grow without having to depend on large grants or other forms of aid.
"The new proposals are welcome and would indicate that the Government is trying to help us compete in an exceptionally competitive, high risk and volatile industry, which is rural based and very labour intensive," he said.
Mr Hernon pointed out that the Republic's competitors use a range of incentives to support their bloodstock industries. He added that time will tell if the measures announced yesterday would continue to attract high quality stallions to this country.
Department of Finance principal officer, Liam Murphy told yesterday's press conference that returns made to the Revenue Commissioners show that the gross cost to the Exchequer of the tax break during 2004 was €10.7 million.
However, Mr Murphy pointed out that the actual cost would have been "much lower", as this figure did not take into account a range of allowances to which the owners would have been qualified if stallion fees were taxed.
The EU has to approve the new proposals.
