437 / 822
GAZETTE
SEPTEMBER 1988
f o r es t ry ac t i v i t y, t he ability to
reclaim the value added tax inputs
could be an important feature in the
c o mm e r c i a l
v i a b i l i ty of
t he
en t e r p r i se. The input t ax w i ll
consist of value added tax charged
on equ i pment purchased or leased
as we ll as fees and costs of
ma n a g eme nt operations, all of
wh i ch are liable t o value added tax,
albeit at the l ow rate in so far as
t hey are agricultural services.
17
In
the absence of a wa i ver of t he
e x emp t i on, the ultimate supply
wo u l d attract the flat rate addition
w h i c h is payable to unregistered
f a rme r s .
18
It is apparent, h owe v e r, t hat t he
flat rate addition is under pressure,
having been reduced in t he 1 9 87
F i n a n ce A c t , a nd a f u r t h e r
r educ t i on announced in this year's
Budget speech. Investors mi ght
query t he w i s d om of relying on it
being there in 25 or 3 0 years t ime.
Conclusion
It can certainly be argued t hat the
i n t r oduc t i on of the e x emp t i on for
f o r es t ry profits in 1 9 69 was a
retrogressive step in p r omo t i ng
private forestry i nves tmen t. For
private individual investors it is
o f t en mu ch more impo r t ant t hat
they obtain immediate tax relief for
their outlay. Nonetheless, the level
of returns s h own by forestry in the
p a s t ,
c o u p l ed
w i t h
a
t ax
e x emp t i on, make for a particularly
a t t r ac t i ve f o rm of i nves tmen t.
T he d i s a d v a n t a g es of t he
immed i a te t ax t r ea t ment can be
ove r come t h r ough an arrangement
s u c h as t he p e n s i on l i n k ed
i n v e s t m e nt m e t h od d e s c r i b ed
above. This is a highly tax efficient
arrangement, providing for t ax
relief on all ou t go i ngs wh i le still
o b t a i n i ng
t he
u l t i m a te
t a x
e x emp t i on on profits.
A s c a p i t al a c q u i s i t i o ns t a x
b e c o m e s p r o g r e s s i v e ly
mo r e
severe, because of the post 1 9 82
aggregation rules, f o r es t ry o f f e rs
an
u n u s u al
o p p o r t u n i ty
t o
significantly reduce taxable values.
FOOTNOTES
1
The grants are as much as 85% of
establishment costs for farmers in
certain "western package" areas and
70% for non-farmers. This is referred
to as the EEC Assisted Western
Scheme. See "Investing in Forestry"
issued by the Minister for Fisheries and
Forestry, 1984.
2
FA 1969, s.18 (2)(c).
3
(1969) 46 TC 143.
4
FA 1979, s.17(a).
5
FA 1969, Part (11).
6
40 TC 75.
7
Corporation Tax Act, 1976, s.116.
8
Capital Gains Tax Act, 1975, ss.26 &
27.
9
Income Tax Act, 1967, ss. 135 & 136.
10 Finance Act 1974, s.34 and Finance
Act 1978 s.8.
11 Supra.
12 Corporation Tax Act, 1976, s.11 (6).
13 Capital Acquisitions Tax Act, 1976,
s. 19(1).
14 Capital Acquisitions Tax
Act,
1976,s.19(7).
15 Capital Acquisitions Tax Act, 1976,
s. 19(5).
16 Value Added Tax Act, 1972, s.8(3).
17 Value Added Tax Act, 1972, para, v,
sched. 5, Pt.1.
18 Value Added Tax Act, 1 972, s. 12 A.
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