Michael Noonan rules out changes to co-op shares tax

Finance Minister Michael Noonan this week ruled out legislating for different tax treatment specifically for patronage shares paid by co-ops to dairy farmers.
Michael Noonan rules out changes to co-op shares tax

He said there would not appear to be a policy rationale to legislate.

He was responding to questions in the Dail on Revenue’s tax treatment of patronage shares issued by Kerry Co-op, from Co Kerry TDs Brendan Griffin, Michael Healy-Rae, John Brassil, Martin Ferris, and Danny Healy-Rae.

Mr Noonan emphasised that his Department has no controls on the collection and audit functions of Revenue.

“Nor would it be appropriate to have such controls, due to the independence of Revenue in carrying out their functions.”

Brendan Griffin T said the Kerry shares issue was causing major concerns.

“It is of concern to hundreds of people in Kerry, and may have significant ramifications for people all over the country and other industries.”

Mr Noonan explained that Revenue has decided that there may be an income tax liability in respect of the shares given at a discounted rate. There may also be a capital gains tax liability.

He said he was advised by the Revenue Commissioners there has been no change in policy in respect of this matter.

The position adopted by Revenue is in accordance with long established taxation principles that, where consideration is received for services rendered or produce sold, that consideration is subject to taxation as part of the individual’s income in the relevant tax year.

He said self-employed people pay tax on the basis of self-assessment.

If that self-assessment does not reveal the full level of income as Revenue perceives it, Revenue goes back.

“Shares were allowed at a discount in proportion to the amount of milk being supplied by individual suppliers to Kerry Group. I believe that it was €1.25 per share for 1,000 gallons or litres of milk.

“Revenue, in its look-back, deemed that to be another way of farmers being compensated for their supply of milk in addition to the price that they got for the litres.”

Mr Noonan said Revenue has committed to facilitate the appeals process should a taxpayer raise an appeal to the independent Tax Appeals Commission, and there would be no action by Revenue in the interim period to seek to collect the tax liability in the assessment raised by it, while appeal processes were under way.

“The assessment so far is in respect of the shares offered in 2011, and there may be liabilities in 2012 and 2013, but Revenue is not moving into that space yet,” said the Minister.

“I have been informed by Revenue that the average value received by farmers in respect of patronage shares in the years 2011 to 2013 was between €3,510 and €4,860.”

“My strong advice is to get the co-operative, in co-operation with the individuals involved or somebody to take a test case to the Tax Appeals Commission, and we will see where it lands after that.”

Mr Noonan also ruled out retrospective changes in the tax treatment of transactions occurring in the years 2011 to 2013.

“Retrospective changes undermine the certainty of the tax system for all taxpayers and can be subject to constitutional challenge in the courts, and as such, I do not believe it would be appropriate in this instance.”

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