Tara Mines could get a tax refund of just less than £60 million (€76 million) from the Exchequer if the High Court upholds a finding by the Revenue Appeals Commissioners that all the company's above ground activities at its Navan mine constitute a manufacturing rather than a mining process.
A finding that the activities are a manufacturing process would entitle the company to export sales relief on overseas sales of its concentrated lead and zinc products.
The money sought by Tara relates to corporation tax assessments made on the company for the period from January 1st, 1978, to December 31st, 1988, and already paid to the Revenue Commissioners.
Tara, which is owned by Finnish multinational Outokumpu, says it is entitled to the relief on goods that it manufactures for export on the basis that its only income is from the sale of these concentrates of lead and zinc.
Having mined the ore underground, the company says it is then subject to an elaborate bleaching and crushing process, during which concentrated lead and zinc is obtained, which is then taken to Dublin for export abroad.
In 12 days of hearings in 1995 and 1996, Tara appealed against its corporation tax assessments on a number of grounds. The Appeal Commissioners concluded that the company did not sell its mining output but instead subjected it to a manufacturing process to produce concentrates of lead and zinc, which it then sold in the course of its trade. Its income was therefore derived from the sale of these concentrates and it was consequently entitled to relief on its exports.
The proceedings come before the High Court by way of a case stated by two Revenue appeal commissioners, Mr John O'Callaghan and Mr Ronan Kelly, and at the request of Mr Patrick J. T. O'Connell, inspector of taxes, and Tara. The High Court has been asked for its opinion on the commissioners' findings.
Mr Justice Murphy must decide whether Tara is entitled to relief under one provision of the 1976 Corporation Tax Act or whether it is debarred from claiming such relief under a different section of the same Act.
The court must also decide whether Tara, in computing its income between 1978 and 1988, was entitled to a Mining Development Allowance under the provisions of the 1974 Finance (Taxation of Profits of Certain Mines) Act in respect of certain foreign exchange losses on its capital borrowings.
Mr Eoghan Fitzsimons SC, with Ms Grainne Clohessy, for Mr O'Connell, said both sides were agreed that Tara was entitled to the allowance. Both sides wanted the court to remit the matter to the appeal commissioners to have that finding rectified.
In regard to the finding that Tara was entitled to relief on exports, Mr Fitzsimons submitted the mining-manufacturing distinction made by the company was artificial. Common sense seemed to have been thrown out the window, he argued. The inspector believed the above ground operations of Tara, although different from those taking place underground, nevertheless constituted mining operations.
The purpose of a mining operation was to win minerals from the ground. Lumps of rock hewn out underground were not minerals. It was the winning of minerals from rock that constituted mining.
The hearing continues today.
