The bloodstock industry is one of the success stories of the Irish economy. It employs more than 16,000 people, is the largest producer of thoroughbred foals in Europe and competes aggressively against the United States and Australia. And, as is the case with our general industrial policy, growth in the sector has been both encouraged and driven by favourable tax treatment.
Public criticism of the extremely generous tax concessions accorded wealthy individuals and bloodstock owners has focused attention on the industry in recent years. The situation was exacerbated by the fact that no figures have been available within the Department of Finance to quantify the on-going cost to the Exchequer of the zero tax rate for stud fees introduced by the then minister, Mr Charles Haughey, in 1969. In that regard, however, the situation was no different from that which applied to other contentious tax breaks.
Now the European Commission has taken an interest in the affair and has sought - following prompting from competitors in France and Germany - the abolition or restriction of the tax free status of stud fees on the grounds that it constitutes State aid, is anti-competitive and is not compatible with the rules of the European single market. The Minister for Finance, Mr Cowen, has arranged to get legal advice on the issue. And his officials will meet the Commission at a later stage to review the situation.
A survey commissioned by the bloodstock industry last year estimated that more than 10,000 thoroughbred foals are born here each year, making it the third largest source in the world. The State supports about 390 stallions and almost 17,000 brood mares. Tax forgone to the Exchequer was estimated at €3 million, while income and other taxes paid by those working in the industry was put at €37.5 million.
A separate assessment of the costs and benefits to the economy is at present being undertaken by the Revenue Commissioners and their figures will be available by the end of the year.
The tax arrangements now in place have been of enormous benefit to the Irish bloodstock industry and have helped to make it highly competitive and profitable. They differ materially, but not in kind, from the incentives and concessions available elsewhere in Europe and in the United States. But tax arrangements alone have not brought success. If there is to be change - and a strong case can be made that wealthy individuals should not be exempted from tax - the industry must be encouraged to build on other strengths in meeting competition from abroad.