Horse-breeding costs - Fairer tax regime is long overdue

IRELAND’S beleaguered taxpayers will shed no tears because wealthy horse-breeders are finally to lose their lucrative tax exemptions on stud fees.

In a land where golden circles flourished under successive governments, it took the EU to bring down the guillotine on this country’s tax-free haven for mega-rich bloodstock owners.

Fianna Fáil’s close affinity with the sport of kings is legendary and seen annually at the Galway races where the party royally entertains wealthy patrons during one of the most spectacular events of the racing calendar.

But a public grown cynical about politics will applaud the Brussels initiative to close the paddock gate on the highly lucrative tax scheme. The brainchild of disgraced ex-Taoiseach Charles J Haughey, it has been running since 1969 and since then senior figures - including ex-Finance Minister Charlie McCreevy, now an EU Commissioner - have long-fingered decisions that might impact negatively on the pockets of rich breeders.

Inevitably, this has given rise to the popular perception of the horsey set as a privileged elite enjoying largesse while the average person paid tax through the nose.

The Government’s cosseting of wealthy breeders is in stark contrast with its treatment of tens of thousands of young couples who are denied tax relief on childcare costs. Child-minding is now so expensive that many pay more on crèches than on mortgages, an explosive issue set to loom large in the next election.

So attractive is the equine tax scheme that nearly 50% of Europe’s foals are bred here, ranking Ireland as the third-largest global producer after the US and Australia.

Five years ago, changes in the generous tax regime extended the exemption for stallion owners to cover income that a part-owner of a horse made from its earnings abroad. Conveniently swept under the carpet by Government, that ploy only came to light when a whistle-blower lodged a complaint with the EU.

The industry has warned that jobs will be lost if it is taxed. But the other side of the argument is that while PAYE workers pay more than their fair share of taxes, wealthy horse breeders have been making tax-free millions for years.

It would be a shoddy betrayal of Ireland’s generosity if they were to pack their bags and move the stallion business to another country.

One way or another, Ireland’s tax-free horse holiday for breeders is finally coming to an end because Brussels found it to be anti-competitive and in contravention of treaty rules by distorting the common market for horse breeding.

Taxpayers must be treated on equal terms. A government that creates special exemptions for the super-rich is failing in its duty to the man and woman in the street.

With Ireland’s equine industry mired in the crisis besetting top showjumpers, there is no place for special deals. Ensuring survival of the valuable equine business, part of the fabric of this country’s image abroad, is of paramount importance.

Ideally, the Government should come up with alternative measures which do not fall foul of EU rules on State aid. A more realistic tax rate, akin to the 12.5% corporation tax, is required.

Though industry sources estimate the tax exemption to be worth around €3 million annually, others put the figure closer to €100m.

It should not be beyond the resources of the Coalition to devise a more equitable and acceptable tax regime for bloodstock producers. Giving a golden circle tax-free exemptions for their lucrative business cannot be justified on any grounds.