Indecon survey estimates that the industry is worth €330m to the economy, writes Barry O'Halloran
Before the stud fee tax break was introduced in 1969, the Irish bloodstock industry lagged several furlongs behind that of competing nations such as the US, Britain and France.
Although good horses were trained in the Republic to win Derbys and other top prizes, they spent their stud careers in the US, where there was (and is) a highly incentivised and lucrative market for racehorses.
The picture has changed dramatically since. More than 10,000 thoroughbred foals a year are born here, making the State the biggest producer in Europe and third in the world after the US and Australia respectively.
According to a report produced last year by economic consultants, Indecon, stallions and mares, contributed €330.5 million to the economy.
Indecon also estimates that between breeding and racing, the thoroughbred business supports about 16,500 jobs. The industry says that figure is closer to 26,000.
At the same time the State supports around 390 stallions and almost 17,000 broodmares (the maternal half of horse breeding).
Indecon estimates that the amount of tax foregone to the Exchequer from the exemption is €3 million a year, while the industry contributes €37.5 million in taxes. That figure includes taxes on the profits earned from the sale of horses, which is the primary activity, and the income tax paid by workers in the business.
The industry is a universe away from where it stood in 1969. However, Mr John O'Connor, former chairman of the Irish Thoroughbred Breeders' Association (ITBA), says the tax break was in place for over a decade before the industry began to operate on a serious level.
The tax exemption had a slow evolution. The then minister for finance, Mr Charles Haughey, introduced it in the 1969 Finance Act as part of a general exemption for income from farming and some forestry activities.
In the 1970s Fine Gael finance minister Mr Richie Ryan dropped the farming exemption, but left those applying to stallions and forestry. He also extended the former to companies. The exemption applies strictly to the profits from stud or nomination fees which is paid once a stallion has successfully impregnated a mare.
That exemption covered income from stallions based here and abroad. However, in 1984, another Fine Gael finance minister, Mr Alan Dukes, amended it to cover only Irish-based stallions. He severely limited the grounds on which owners of foreign-based stallions could claim the relief.
The State's leading stallion is Sadler's Wells. He stands at the John Magnier-owned Coolmore Stud in Co Tipperary. His fee is €250,000.
Few other horses cost this much. Another Coolmore inmate, Rock of Gibraltar, which sparked an ownership row between Mr Magnier and Manchester United manager Alex Ferguson, stands for €55,000. Based on the fact that he will service about 150 mares this year, Rock of Gibraltar could turn over between €6 million and €7 million, depending on the number of successful matings.
The story, though, is a lot different for the majority of Irish horses. The Indecon report estimates that the average nomination fee is €8,000. It also says that this is artificially lifted by a handful of very expensive stallions and that the bulk of horses charge far less than this sum.
Fees advertised on the Irish Thoroughbred Marketing website show that the majority of the top 100 horses cost anything between €3,500 and €6,000.
Mr Joe Foley, who runs Ballyhane Stud in Carlow, which has five horses in this category, argues that the end of the exemption would mean the end of the industry. He says that while the stallions standing here would stay, they would not be replaced by as good or better horses at the end of their lives.
The argument runs that without good stallions, breeders would no longer be able to produce saleable horses, and thus the business would die as the better horses based here die.
Mr Foley says that the British, French and Italian governments support their industries by providing direct incentives to encourage people to buy racehorses bred in those countries.
"If Brussels is going to look at the stallion tax exemption in Ireland, then they should also be investigating the incentives offered in other European countries," he says.