A special tax exemption for horse breeders faces change today, with the Government expected to initiate a review of the measure in the Finance Bill, writes Arthur Beesley.
The Government is also expected to abolish another tax avoidance loophole a fortnight after it abolished reliefs allowing companies to transfer capital allowances on buildings to individual investors.
Stallion owners do not pay tax on profits from lucrative stud fees in a controversial exemption long the subject of political dispute.
They have argued that abolishing the exemption would release €10 million into the Exchequer at the standard 12.5 per cent corporate tax rate, claiming that such a sum would have only a limited impact on the public finances.
But critics of the regime argue that it is fundamentally inequitable, arguing that the tax system should be seen to operate fairly in all sections of the economy.
Despite indications in advance of the Budget that the Government might lift the exemption because of the squeeze in the public finances, there was no change.
The Minister for Finance, Mr McCreevy, is expected to adopt a different stance today by obliging horse-breeders to furnish details of their stallion fee income for a certain period in advance of any change. While this would enable the Revenue to make an assessment of income forgone from the exemptions, Mr McCreevy would avoid abolishing the exemption in the short term.
There are suggestions that the exemption might not be lifted until 2005.
A similar exemption for artists might also be reviewed in the same manner, it is believed.
While the Exchequer would not receive an immediate return from such an initiative, the development raises the possibility that the bloodstock industry would be asked to make a contribution for the first time since the measure was introduced some 30 years ago to foster investment in the business. Bloodstock industry figures claim the elimination of the exemption would have a "severe" impact on the industry by encouraging stallion owners to take their business abroad.
In pre-Budget submissions, they argued that this would lead to a deterioration in stallion quality.
However, the Labour leader, Mr Pat Rabbitte, told the Dáil in December that industry representatives he met had offered to make a contribution "because it was inequitable that they were excluded".
He said the representatives had told him that "all they needed was a year to put forward the kind of tax structure that is sensitive to the needs of their industry".