The Gazette 1988

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. 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. FOOTNOTES 1

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FA 1979, s.17(a). FA 1969, Part (11).

I r i sh Stenographers L imi t ed (Director: Sheila Kavanagh)

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40 TC 75.

Corporation Tax Act, 1976, s.116. Capital Gains Tax Act, 1975, ss.26 & 27. 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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FA 1969, s.18 (2)(c). (1969) 46 TC 143.

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