Before we take up the Committee Stage, may I raise a question as to why there is no Money Resolution? Section 12 of the Bill commits the Bill to the care of the Revenue Commissioners and implies therefore that there must be expenditure under the Bill. As I understand Standing Orders, where there must be expenditure, there must be a Money Resolution. It is a bit hard on the Minister, I agree.
Finance (No. 2) Bill, 1966: Committee and Final Stages.
All I can say is that we have been advised that there is no necessity for a Money Resolution in connection with this Bill.
Why?
I am afraid I am not aware of the reasons.
We have a Money Resolution with every Finance Bill every year. We had a Money Resolution on the Finance Bill the other day. I know the normal case is that there is no special expenditure, but there is special expenditure in this.
The reason may be that there is no provision for a repayment of tax in this Bill.
I am glad the Minister has given me a point which I shall raise in due course. Quite seriously, I should like to know before the next stage what the reason for it is.
I will endeavour to satisfy the Deputy before the next stage.
SECTION 1.
Question proposed: "That section 1 stand part of the Bill."
This is the usual interpretation clause.
Question put and agreed to.
SECTION 2.
Question proposed: "That section 2 stand part of the Bill."
This is the general charging section. It proposes a wholesale tax to take effect from 1st October, 1966, on receipts from sales of goods and imports. The rate of tax, five per cent, is specified in section 7.
As the Minister was kind enough to prompt me, may I inquire, in this charging section, where the authority is in the event of a person paying by mistake more than the tax due for the repayment by the Revenue Commissioners of the overpayment? It often happens that a person has paid his tax and gets a second demand before the cheque is cleared and, thinking it has not been paid, pays a second time. There must be a provision in order to repay that overpayment. Where is it?
The regulations applying to the turnover tax, in so far as they may be applied to this tax, are being applied in another section. They include a provision enabling the Revenue Commissioners to deal with an overpayment of tax.
To repay an overpayment of tax?
It may also be done, I think, by way of adjustment.
But it can be done by repayment.
It must be possible to do so, yes.
And, if it is possible to do so, then the explanation the Minister gave for the absence of a Money Resolution falls.
That is why I said I hoped to satisfy the Deputy before the next Stage.
I should like the Minister to clarify who is really responsible or who must be registered. I assume it is wholesalers, manufacturers and probably some retailers.
Does that not arise on the next section?
Oh, yes.
Question put and agreed to.
SECTION 3.
Question proposed: "That section 3 stand part of the Bill".
This section sets out the class of persons who will be accountable for the tax because of their dealings in taxable goods. Broadly, these are wholesalers and manufacturers, other than those in a small way of business, and large retailers who make their purchases on a wholesale basis. Provision is made for treating as an accountable person a manufacturer who, although making exempted goods, uses in their manufacture taxable materials. For instance, a manufacturer making foods that are packaged—food is not subject to the tax—would be accountable in relation to the cellophane containers or packages. Provision is also made for tax free sales between accountable persons, that is, wholesalers and manufacturers, since these will have to account for tax afterwards on their sales to non-accountable persons. If they sell to retailers, they have to account at that point for the tax, but, in dealings between manufacturers and wholesalers, they can deal as between themselves without being liable for tax.
Is it not a fact that a person can be both a wholesaler accountable under section 3 and a retailer accountable for the ordinary turnover tax at the same time, and that means, therefore, that some people—quite a substantial number, in my view—will have to keep double sets of registers. Is that not very unnecessary administrative expense on them? I appreciate it is not administrative expense on the Revenue Commissioners, because they will get someone else to do the work for them, but it does seem to me that this will mean a great deal of unnecessary duplication of effort. I am sorry the Minister for Education has been brought in on the details of this tax because, I can appreciate that, as a member of the Government, he will have given it his general blessing, but he cannot be expected to know all the details. I presume the Minister for Finance is in the Seanad.
That is correct.
As I see it, these people will have to run two separate registers, and parallel, side by side, two sets of numbers, two separate queries in each case as to whether there is turnover tax number or wholesale tax number. Surely it should be possible to marry the two? Personally, I think it would have been better to scrap the turnover tax and the wholesale tax and substitute an added value tax, as is done in more modern countries, rather than have the two, one on top of the other. This section will mean considerable confusion and there is need for clarification and clarification of the need for this double register.
I merely want to explain the position. We are all aware that one of the principal reasons for objection by RGDATA to the turnover tax was the fact that the retailer was made accountable. The explanation given at the time was that, if the tax were put on at manufacturer or wholesale level, it would accumulate and have a greater effect ultimately than the turnover tax of 6d in the £1. There are a number of retailers who sell both wholesale and retail. They buy in large quantities and sell wholesale to shopkeepers next door, perhaps. As Deputy Sweetman has pointed out, these are small wholesalers and, as such, they keep records. They have to keep a record, first of all, of their own retail sales. Then they must keep a record of goods withdrawn from stock for their own personal use. They must keep a record (1) of sales to registered customers, that is, registered for turnover tax purposes, and (2) a record of sales to unregistered customers. This may seem very simple but, in actual practice, it is not so easy at all. On top of that, under this new system, these retailers who buy large quantities of goods will have to be registered again, as will large wholesalers and manufacturers. It means a separate set of books and yet another breakdown because, under this wholesale tax, certain goods are exempt. I do not expect the Minister for Education to explain this since it will come up at a later stage again.
This tax should be imposed at manufacturer or importer level. All manufacturers have a suggested wholesale price. An article that may retail at 12/- may wholesale at 9/- and have a manufacturer's price of 7/6. The section should have made it a manufacturer's tax or at point of import. I do not know whether fruit is included in this or not. A box of fruit, when imported, has an imported price. It also has a retail price. On the price at which the importer sells it, it will go into the retail shop. It is on that the tax is placed. The wholesaler and retailer are already registered in regard to tax. The importer or the manufacturer is the person who should be asked to collect this tax.
To deal with the point raised by Deputy Nolan first, if we had such a system, it is undoubtedly true the effect of the tax on the retail price would be very much greater, without any increased revenue to the State. The processes under which the goods would go would involve a marking up at each stage which would incorporate the tax added at the manufacturer's level with a mark-up on that and so on along the line.
In regard to the point made by Deputy Sweetman, it is true there will be a number of people who will be registered as wholesalers for this purpose and as retailers for the purpose of the turnover tax. But in very many of these cases they have already to keep records of goods exempt from the turnover tax. These will correspond very largely to the records they have to keep under this Bill. Therefore, in practice, there may not be all that much extra work involved for them.
There will be two different registered numbers?
There must be. I do not think the actual work involved will be so very much greater than that involved already in respect of the turnover tax.
There are two different sets of books.
Not for the people Deputy Sweetman is talking about. I think they are already keeping these records.
I do not like discussing this with the Minister for Education.
This is further evidence of the way the Government have mismanaged the business in not having the Minister for Finance here.
The Minister made a point about five per cent at the point of import and argued it would be 7½ per cent at the point of retail. If a manufacturer manufactures an article, he knows what the wholesale price will be. He has suggested wholesale and retail prices. As the Bill says, the five per cent tax will be on the wholesale price. Five per cent of 9/- is approximately 10½d. It does not matter whether the importer or manufacturer collects that or not. Why can the manufacturer not collect the five per cent on the wholesale price of 9/- just as the wholesaler can collect it on the 9/-, or the retailer?
In order to make this kind of scheme work, firstly one would have to ensure that there were at least recommended prices for all goods, which there are not, and secondly, one would have to ensure that these recommended prices were the ones being charged. Again, one could not ensure this without a most elaborate system, and even that would not ensure it. Experience has shown that to operate in the way suggested by Deputy Nolan would in fact create many more problems than it would solve. I am afraid I could not go along with this argument. Although I appreciate the objectives he is trying to achieve, I do not think it would be achieved by the method he is suggesting.
I am prepared to leave it over for the Minister for Finance later.
I am still fogged. At the beginning of section 3, we have:
The person accountable for and liable to pay wholesale tax shall be the seller of goods,
The seller of goods is not necessarily the same as the person who sells by wholesale. The seller of goods in section 3 can well mean both the wholesaler and the retailer. I do not see where this section provides that the tax shall be charged, and only charged, at what I shall call the point of first return, if the Minister understands what I mean by that. I could understand the subsection if it read:
The person accountable for and liable to pay wholesale tax shall be the person who sells goods by wholesale as defined in line 25 on page 2.
The numbering is out, I am afraid. But I do not understand subsection (1) of section 3 as it stands.
May I quote this example? Under paragraph (b), if the manufacturer does not sell taxable goods in excess of £150, then, as far as I can gather, the liability for the tax is intended to go on to the next person and it is not intended there will be any liability to it. In the turnover tax, there is liability. If in the example the Minister gave the manufacturer were making a food product and also making a package to put it in and the value of the sales of the package were not more than £150 per month, then he does not pay wholesale tax on the package. But he sells the food by wholesale to a retailer and the retailer sells the food, plus the package it is in. The contents of the package are exempt; the package is not. Does that mean the retailer, because he is the person of first return under this section, has to charge the wholesale tax on the outside of the package, although the inside of the package is free? As the section is framed, it seems to me that is the extraordinary result of it.
In regard to the first point raised by Deputy Sweetman, I could not see exactly where it was either. He says it is provided in the subsection that the person accountable shall be the seller of the goods. Then it goes on to say: "Provided that the following persons shall not be accountable," and in paragraph (a): "Sellers who are not engaged in selling by wholesale." They are retailers and are not liable.
But the definition of a retailer is "a person who sells otherwise than by wholesale".
Selling by wholesale is defined; then there is provision for those who are not selling by wholesale. They are not liable and this, I think, covers the point the Deputy has in mind.
The retailer who buys at the wholesale rate is liable?
That is what I said, subject to that provision which comes later for dealing with a retailer who is buying in bulk. Leaving that aside, the ordinary retailer is excluded under this provision. Sellers who are not engaged in selling by wholesale are not accountable.
If I happen to have a wholesale account and I buy from a wholesaler and pay turnover tax, because I must, is the same operation going to apply to a wholesaler who buys from a small manufacturer? Under paragraph (b), will the wholesaler have to pay the tax then? He is not the first seller. The manufacturer is.
In the case where a retailer is registered for the purpose of this tax, that is, where a retailer is registered due to the fact that at times he buys from a manufacturer at wholesale prices, who is responsible for paying the tax in this case? He is perhaps a retailer who has a couple of shops in other towns and one month he buys at the wholesale rate from the manufacturer, but the following month, he is unable to buy the same amount to qualify for best terms, and he buys as an ordinary retailer. Who is liable for the payment of the tax?
The retailer.
This becomes then a tax at the retail price.
There is a later provision in the Bill which provides for a situation like this where he is being taxed on the basis of his retail sales. Provision is made to assess on the basis of those retail sales what is the current wholesale price, and it is on that basis that he pays the tax. Deputy Sweetman raised the point about the manufacturer who is selling food, which is not liable to tax, in a cellophane wrapper. If he purchases from one of these small wholesalers we mentioned, tax is not paid at that point because he is purchasing from one of these small wholesalers who are exempt. If he is purchasing and selling in bulk, then tax will be payable on the wrapping, but if he buys from one of those small exempt wholesalers, there is no tax payable.
Ever at all?
No, at any stage. Of course, if they continued to do that, they would no longer remain small traders.
£150 a week, that is £1,500 a year, is the limit for a small manufacturer?
That is right.
I am still not clear. This rather baffles me. May I put another point of view to the Minister which might help to clarify my mind on that? Again let me take the small manufacturer. If the polythene bag goes on through the whole course of trade, it could cover a materially large distribution of goods. Are we to have a situation at a later stage in the cycle of trade that we have to break up how much of that is the cost of the goods, how much the cost of the cellophane and how much the cost of pasting the label on the cellophane?
Is the Deputy referring to the purchase of this kind of wrapping by a small manufacturer or in general?
May I put it this way? One goes into a retail shop and buys a made-up container of food. The food is exempt. That made-up container of food has a sticky label on it. The position, as I see it, is that if the sticky label were made by a small manufacturer whose turnover of sticky labels was not more than £1,500 a year, then every one of those packages at some stage of their trade cycle would require segregation on the basis of how much is the value of the food, which is not liable, how much is the value of the package, which presumably would be supplied by a registered person because it would be a large sum, and how much would be supplied by the small trader. Is that what the section means?
Perhaps I do not understand the Deputy clearly. If the container is purchased from a small manufacturer, then it is not liable to wholesale tax at any stage, so that the question of segregating would not arise.
Where is it exempt under the charging section? It is exempt under the persons accountable section, yes, but because a person is not accountable, it does not necessarily mean that the article is not taxable. I think the article is taxable, but the person is not accountable. Does the Minister see what I mean?
I do, but I do not think the Deputy is correct.
I am waiting to be told where I am wrong.
If the person who is manufacturing the goods is not liable to tax, then this tax is not payable.
Section 2 makes it payable.
Let me put it the other way. How is it payable?
Because it is not in respect of goods sold in the course of the business and the person accountable is the next in the chain.
This is the same provision as in the 1963 Act in regard to the turnover tax.
In the case of the turnover tax, it is going out of the trade into the pockets of the Revenue Commissioners. In this case it is not, because selling by wholesale is not selling by retail.
Agreed, but when it is provided that when the goods are sold by a small manufacturer he is not liable to account for tax on them and that nobody else is liable for tax on them, then the question of paying tax on the goods does not arise if nobody is accountable for it.
If the Minister or I were found in charge of uncustomed articles, though we may not have brought them in we are still liable for the tax on them. We will not get out of our guilt if we are not included in section 3.
There is no corresponding provision to the customs penalty clause to which the Deputy refers in relation to the wholesale tax.
Yes, but we will be in the possession of articles which should have been taxed under section 2. If the tax is not payable on small manufactures, then there should be an exemption from the charging section, which is section 2.
Might I refer the Deputy to the charging section, section 2, which says that the tax shall be charged, offered and paid (a) on moneys received in respect of the sale of goods and (b) on goods imported into the State? The tax is payable and charged in respect of the moneys received and not on the goods.
The small manufacturer receives moneys?
Yes, but he is specifically made not liable for the moneys.
That is not saying that he is exempt from tax on those moneys.
In practical effect, it is the same thing.
The Minister is advocating that under section 3 people can break the law.
Deputy Sweetman is stretching the law further than it need be stretched.
It is going to be fun when the Minister has to prosecute himself as Minister for Education for having paid these moneys. Apart from that, it seems clear now that the exemption in sub-paragraph (3) of section (b) of section 5 should have been so drawn as to include another class. I am not getting my information from clients of mine, I was arguing the matter with somebody on the other side this morning. As I was arguing on the other side of the table, I was unable to ask them how much they were relying on the cascading of the tax and on the add-back of the five per cent tax all down the way.
They are concerned in the building industry, for whom I do no business and for whom the Minister has never professionally done any business, and whose names I do not want to mention but whose names I will give to the Minister privately if he wishes. They are the people able adequately to judge. It seems appalling that we are adding, as a result of deliberate Government action, four per cent to the cost of housing. I know that cement is exempt under the turnover tax and possibly it is exempt also here but it is because there are substantial exempted materials that the amount added is not five per cent plus the add-back but four per cent. I hope the Minister for Finance will realise that to increase the cost of the housing of the people is something that should not be done and that an exemption order should be made under paragraph 3 of the last subsection of this section.
In exactly the same way, I think this is going to have the effect of starting a chain of inflation in relation to the building and construction industry which is going to be thrown back on our people as happened in 1963. I was appalled to discover that one of the effects of that inflation has been that the education of the children in the area in which I happen to live has been made considerably more expensive. I am glad the Minister for Education is sitting in for the Minister for Finance. He will be able to appreciate this from his point of view, just as the Minister for Finance must deal with the general inflationary spiral. The inflation in regard to bus fares means that the expenses of children travelling from Kill to Naas have been doubled in the past month. The Minister would be the first to admit that this is very bad indeed.
I am afraid we are going to have a similar chain of inflation in regard to the building of houses, if articles for house building are not included in the exemption. I had a question down to the Minister for Finance today, Question No. 6, but in whatever way the machinations of these things work, I must have missed the usher because I have not yet got the reply to my question. There must be a very considerable part of the money that is being created, the £5 million in a full year that is being taken which must be raised on articles that will be used in the building and construction industry when it is estimated that a four per cent increase will arise in houses as a result of these.
When Deputy Sweetman talked about cascading, I presume he did not mean this in the technical sense in which it is used in reference to taxes?
Oh yes, because it does cascade. They are going to charge TOT on the wholesale tax.
I thought the Deputy was referring to a cascading of the wholesale tax.
No—the cascading of one on the other.
It is true that some increase may result in the cost of building as a result of this tax but the best information available to me does not suggest that it will be anything like four per cent. As regards the question of exemptions, as the Deputy has mentioned, the basic materials of the building industry are already exempt from turnover tax and correspondingly will be exempt from the wholesale tax.
I do not think timber is.
They are sand, gravel, lime, cement, tar, structural steel and aluminium. The question of any further exemptions will, of course, arise when the Minister for Finance comes to make the necessary orders on foot of this Bill. I do not want to give any impression or any suggestion of a commitment that he would do so but even if he were to do so, he could only do so after detailed consultation with the trade interests concerned, and I cannot, therefore, at this stage, suggest or indicate anything beyond the exemption which already exists on foot of the exemption from turnover tax.
I might also say that I think Deputy Sweetman knows probably better than anybody in this House that the increases in costs which have occurred in recent years have been largely due to factors other than the turnover tax and that the amount of increase due to turnover tax is quite a small portion of the increases which have taken place.
On that, may I just say to the Minister for Education that the estimate given to me this morning was a three to four per cent on labour —I checked it again; I thought it was four—and a three to four per cent wholesale tax, making a total, therefore, of between six and eight per cent increase in the cost of building. The £1 a week was estimated to be exactly the same as the cost that was estimated to be the increase due to wholesale tax. The estimate the Minister has in relation to the wholesale tax for the full year is £5 million. I understand that means, at five per cent, that it is on moneys received from the sale of goods of £100 million. How much of that £100 million does the Minister estimate, then, is coming out of the building and construction industry? I am sure that that must be in his brief somewhere.
I am afraid I have not got that figure here, but as I say, the best estimate available to me is that, at most, the increase would be two per cent and not four as stated by the Deputy and that it may not even be two per cent.
I should like to get one point clear, that is, the question of the retailer who buys from the manufacturer at best terms, similar to a wholesaler. When this Bill becomes law, must this retailer register for the purposes of this wholesale tax?
This is a retailer who does large bulk buying?
Yes.
Yes, he must register.
Not large—there are many retailers who buy at best terms from the manufacturer.
It depends on how large he is. He would want to be very large to be in the category where he would have to register.
In fact, he can be buying at best terms from the manufacturer and still need not register? Is it optional? In the case of the turnover tax, the limit is £832.
Is the Deputy referring to exemption limits for the small trader?
No. I want to know the position of a retailer who buys at best terms. For the purposes of the turnover tax, in the case of a retailer who is not doing a business in excess of £832, it is optional; he can register or not. In the case of the new wholesale tax, will the retailer who buys at best terms from the manufacturer be obliged to register? Is it optional as in the case of the turnover tax in respect of a retailer whose business does not exceed £832?
First of all, categorisation is not optional for the retailer in question. I think the Deputy used the phrase "who buys at best terms"?
Yes.
The Bill does not use that phrase. What it says is:
A person who makes, for the purposes of a business of selling by retail carried on by him, purchases of taxable goods which in value and character are such as in the ordinary course of trade are met by wholesale merchants.
He would be deemed to fit into this category by the Revenue Commissioners, not by his own option.
That is what I mean. Therefore, quite a number of retailers will have to register for the purposes of this wholesale tax?
That is correct.
So, strictly speaking, a number of retailers will be caught by this tax and will have to register for the purposes of this tax as well as the turnover tax?
Yes.
That is correct, yes; but, if retailers are in effect wholesalers, then they must be treated for the purposes of this tax as wholesalers.
The limit is not defined in the section. The Finance Act, 1963 did define what the turnover would have to be. Any retailer who does business in excess of £832 must register but under that figure the retailer had an option. If he did not wish to register for the purposes of the turnover tax, he could opt out. In this case a retailer who buys on best terms similar to the wholesaler must register?
He would have to be buying on a very large scale to come within this category.
That is the figure I am trying to get. What would the Revenue Commissioners consider to be a large scale?
What is the scale?
Has the Deputy in mind a retailer who would be his own wholesaler?
Take any retailer. Some firms from whom you buy 1½ tons give wholesale terms. If you buy only ½ ton, they will not. That is type of thing I have in mind.
I cannot tell the House what the scale would be but it is certainly intended to be large: department stores—that kind of scale.
Supermarkets?
That type of scale, yes.
I cannot understand this.
I think what the Deputy meant was a retailer who was in point of fact a wholesaler, due to the fact that he bought in such quantities that he bypassed the wholesaler and was both wholesaler and retailer in one. If he is not to be included in the turnover tax, will that not mean that a considerable number of people will not be liable to pay turnover tax? What is the figure of those covered if retailers buy direct from manufacturers?
The manufacturer will pay the tax in that kind of transaction.
How will the manufacturer segregate this retailer from other retailers?
Because the retailer, if he is deemed to be a retailer in this category and buys in very large quantities, will have been registered as such by the Revenue Commissioners and allocated a number. If he has not been registered as such, the manufacturer will pay the tax; if he has been registered, the manufacturer will not pay the tax.
May I take it that the Minister means chain stores and very big concerns of that scale?
Yes.
Would the Minister explain what happens in the case of a very large retailer who buys a big lot of material wholesale and buys a considerable quantity from manufacturers also. He is dealing both ways. What happens in that case?
If he is registered by the Revenue Commissioners as an accountable person for the purposes of this tax, the manufacturer selling to him pays no tax but the retailer is liable to account to the Revenue Commissioners for the tax on his sales.
But where he purchases from the wholesaler, is the wholesaler exempt?
Yes, in that case it would be a registered wholesaler dealing with a registered retailer. There will be no tax on that transaction. The accountable person will be the last person to deal with the transaction, in this case, the retailer.
There can be only one tax?
Yes.
The Minister said the last person—is it not the first?
The tax is between people who are registered and it is the last person to deal with it who is liable; that is, where the manufacturer is dealing with the wholesaler, it is the wholesaler who accounts, not the manufacturer.
Is it the stage before the retail stage?
That is right.
Large department stores will pay the tax direct themselves, acting as wholesalers for themselves. Am I right in that?
Yes.
Since certain types of goods are excluded from this tax how is it proposed to know what is included by these large department stores under the included items and what is excluded under the excluded items? How will the Revenue people know how much exempt goods are being sold by a department store and how much included goods? As I understand it, I think the biggest argument against the 2½ per cent not excluding food and other essential items that should have been excluded, was that we could not possibly know in a mixed store how much of one item was sold and how much of another. How are you going to do it now?
The basic difference between this tax and the turnover tax is that the turnover tax is applied at ordinary retail level while this tax is applied at wholesale level. Therefore, the people accounting for this tax are generally people in a fairly large way of business and they are required to keep accounts which are subject to inspection by the Revenue Commissioners but one could not apply that to very small shops. That is why the argument was made in regard to the turnover tax that they could not segregate but in the case of people like this, you can segregate.
I do not like to dispute the Minister's point of view but that is not so. I do not like mentioning names but in any of the big stores in Dublin where they are selling exempted goods and non-exempted goods, it will not be possible. Anybody who has any experience of the turnover tax knows it will not be possible to find out how much was exempt and how much was not exempt. You will be depending on the people involved and taking them on trust. You would need a bigger staff than you have for the turnover tax. It will depend on trust, will it not?
No; I am afraid the Revenue Commissioners would not be prepared to leave it on the basis of depending on trust. Their accountancy can be checked against purchases. It is true that if somebody sets out to defraud the Revenue, not just in this field but in any field, and if he has sufficient ingenuity, normally he will succeed for a time but most people know that if they do this, eventually they will be caught. This is a matter for the Revenue Commissioners who would, I think, conduct spot checks and perhaps act on information they might receive about such practices, as indeed applies to other forms of taxation.
And in fact to spend money for which a Money Resolution would be required.
No, I think this would be covered.
The inspectors would be voluntary then?
Perhaps, as we agreed earlier, we might leave this to the next stage of the Bill. The Deputy may take it that the experience of the Revenue Commissioners is that in administering taxes such as this, it is possible to find loopholes but the Revenue Commissioners usually catch up with these people who avail of loopholes, remembering that the method of administration of tax is very similar to and modelled on that already in operation in respect of the turnover tax.
The Minister speaks of the present tax with great confidence which I do not share. I think it is open to abuse but the proposed tax is open to such abuse that I do not think it will require any ingenuity to avoid tax. It will be absolutely impossible to administer. What baffles me is why this tax was not put on at the source, on the manufacturers, because there at least there is only a limited number of manufacturers. Why go halfway up the ladder where it is impossible to distinguish. If you tax the manufacturer, and, if the goods are imported, tax them at the customs, you have only two sources to deal with, but under the proposed system, Singer would have nothing on what this would be open to by way of abuse.
I dealt with the suggestion that it should be levied at the manufacturing or import level earlier when it was mentioned by Deputy Nolan. The main reason it is done is that it would involve a very much greater increase in the retail price system because of the mark-up that would take place down along the line. If somebody is sufficiently ingenious and is desirous of defrauding the Revenue, he will find a way to do it. The Revenue Commissioners, however, have been long enough at this job to be able to catch up on them eventually. The Deputy says this is particularly easy when one is dealing with very large people. Such people are also more vulnerable in many ways, perhaps, than small traders to inspection and very much more likely to suffer in the event of being detected in such defrauding. The total number to be registered as accountable persons for this tax is not expected to exceed 4,000.
If A is a country retailer in the town of Naas, he will probably, in addition to doing his retail business, do a little wholesale business, supplying, if you like, hucksters' shops round the way. He buys his supplies from wholesaler B. Has he got to break down his purchases from B so that he can say: "I sell 90 per cent of my goods otherwise than by way of wholesale and I sell ten per cent of my goods wholesale. Therefore my wholesaler pays tax on 90 per cent and I pay tax on the ten per cent"?
No, that will not arise.
How would it not arise?
The Deputy mentioned a smallish country shop.
A big country shop that supplies other smaller country shops. I understood the Minister to say that it was to be taken at the last possible source of supply.
Accountable persons: the vast bulk of the people the Deputy has in mind will not be registered persons. Only those operating on a very large scale will be registered. Such persons will purchase all their goods free of tax but will pay tax on their sales. Those who are not registered will pay tax on all the goods at the point at which they purchase.
Therefore, it depends on the point of registration.
It depends on whether or not you are registered.
Whether you are registered or not depends on whether you are large or not and therefore that depends on how you define "large".
Yes, but I do not think this need be of any great importance to the person, because the tax will be paid anyway. It is only a matter of administrative convenience. Whether or not he is registered depends on the Revenue Commissioners.
Have they got a discretion?
They would have, in the sense that the limits are not laid down.
May I come back again to building and construction? I confess I am not happy about this but we shall have other opportunities when we have it in operation for a while. We have the figure of £100 million, and £36 million of the £100 million in the year are durable household goods. I do not know how that would compare with the percentage of total building and construction but it is a substantial percentage. As a result of this tax imposed by the Government, there will be a percentage increase of some magnitude in the cost of housing. That is difficult enough in relation to a private person but when you take it in relation to local authority building, it is obvious that it will start a spiral all over again because every local authority has a social duty in relation to the housing of the people in its area. Now the Government say it will cost more. It will start exactly the same type of spiral as the turnover tax started in 1963, in consequence of which we shall get a far worse situation than we would have got if the Minister for Finance had dealt with this on the value added basis rather than on a flat basis.
What is the position of this tax in relation to goods handed out on credit even for six months, as many people have to do?
The tax will be payable on the money received or, if the trader prefers, on the invoice sales for the previous month.
When he receives the actual payment?
If he prefers it, on the money received.
Some of the goods will not be taxable under this while they will bear the turnover tax.
The payment of the turnover tax is based on retail sales but the payment of the wholesale tax is not based on retail sales.
It is payable on the purchase—but both are payable.
If you are talking about a retailer——
Yes.
——who is not registered——
Who is registered. He has to pay both this tax and the turnover tax.
That is correct.
I expected Deputy Corry to speak on this as musical instruments are included.
Beet is not, so you are all right. Under section 3, the exempted articles, clothing is exempted. What exactly is meant by "clothing"? Does this include fur coats? Does "clothing", under this exemption, include fur coats? Will a mink coat be exempt from tax?
Yes, at the moment.
I do not see any mention of "transport" here. Will vans and lorries for business purposes be included for tax?
They are exempt because they are already exempt under the turnover tax. Anything exempt under the turnover tax is exempt under this.
But mink coats will be excluded anyway. That will be a relief to the ladies round the country.
It is intended to exempt all apparel normally worn on the person.
To some people, mink coats are very normal.
That is the craziest thing the Minister ever suggested. Just consider that the articles for building a house are caught and that a fur coat is not caught. This Government have gone crazy.
If she cannot afford a house, she can always have a mink coat.
I thought fur coats were caught.
Inasmuch as this is the position at present—I am wrong.
I was just waiting for the Minister to finish.
The Minister may exempt but he may not charge.
Since he has not seen fit to do so, we must assume that the Minister is in favour of exempting mink coats.
The Deputy will assume that for the purpose of his own arguments.
For the purpose of the Bill.
We are bound to assume it when you have not amended the Bill.
If I am approached by my constituents, or indeed by some of the Minister's constituents, of whom I know many, I want to be sure of this. I do not want this to be known as the mink-coat Government.
I have a feeling the Deputy could compete with the Government very well as regards mink coats. The reason they are not included is the administrative difficulty in defining what is a mink coat, the different graduations between them.
There is no difficulty whatever in the customs schedule.
There is indeed.
In the customs schedule?
Would it not be a good idea to err on the side of taxing all coats, coats of rabbit as well as coats of mink?
By doing that, you could be very well taxing the people the Deputy purports to represent.
Are these the mink-coated people or the rabbit-coated people? Of course you are the mink-coated people.
I think the Deputy is getting confused.
There is no confusion.
We thought the claim was that this was a tax on luxuries and now we see that it is not.
It is a selective tax on non-essential items.
It is not. Mink coats are not taxed.
We did not say all non-essentials because we know the administrative difficulty in cases of non-essential items. The Deputy knows that if we could tax fur coats easily, we would be delighted.
There is no difficulty under section 10. It is as simple as pie.
There is no difficulty in regard to 4,000 wholesalers but yet there must be a limited number dealing in mink coats.
The Deputy really means fur coats?
I am including all fur coats. There is only a small number of people dealing with these. You can deal with 4,000 people and with the very complicated accountancy that will be necessary, but when it comes to fur coats, you are baffled. That is what puzzles me.
It is not a question of the people who deal with them but the type of goods concerned, and in drawing the line between an ordinary coat and a fur coat and an imitation fur coat.
Surely the Revenue Commissioners can recognise a fur coat?
There is a clear definition of fur in the customs and excise tariff and we had a new customs tariff from 1st January last and there would be no difficulty in taxing fur coats imported under section 11. I would be quite happy to allow Irish fur, because that perhaps would be only rabbit fur——
And mink as well.
You are beginning to illustrate the difficulties.
There is very little mink made up here. It seems to me extraordinary, on looking at the list, that I see three things left out. I am sorry that Deputy MacEntee is not here because he used talk about one of them with great delight. In paragraph three caviare is not taxed, champagne is not taxed and mink coats are not taxed. This is the caviare, champagne, mink coat Government.
I do not wish to indulge in a lecture on sartorial habits, particularly those of the ladies, but Deputies will be aware that there are coats which involve part fur and part other materials. If Deputies will just think about this for a moment, they will realise the administrative difficulty of taxing fur coats as such. I am just talking about fur coats. When is a coat a fur coat and when does it cease to be a fur coat and one merely trimmed with fur? Perhaps Deputy Mrs. Burke could enlighten us. I do not claim to be an expert but I am informed——
It would have to be the ladies on the Minister's side who would do the explaining.
I am not trying to make difficulties but when I am explaining to somebody who has seven or eight children, whose husband is possibly earning £10 a week, why she has to pay tax on butter and pay tax on medicines——
Medicines are exempt.
——the Minister must see my difficulty. I have to make the case seem reasonable. I want to know what the thinking behind this is. I think I am beginning to see it.
Medicines are exempt.
Not from turnover tax. We have done very well without the Deputy up to this. If the Deputy is in favour of excluding fur coats, let him stand up and say so.
(Interruptions.)
Question put and agreed to.
SECTION 4.
Question proposed: "That section 4 stand part of the Bill".
This section provides for the registration by the Revenue Commissioners of persons accountable for wholesale tax and places an obligation on the accountable person to furnish certain particulars required in connection with the registration.
Who decides whether a person is accountable or not?
It is provided within——
This comes back to "large" again.
Except in that case; otherwise the categories are clearly defined in the Bill.
In that category, if the taxpayer and the Revenue disagree, is there provision for an appeal to the court?
Yes. The rights of appeal available under the turnover tax legislation are being imported into this.
Question put and agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill".
Could the Minister explain this section?
This section enables a person who is registered and accountable for wholesale tax to obtain his supplies free of that tax. In the absence of this provision, the tax, even in the simplest case, would be chargeable twice, once on the sale by the manufacturer to the wholesaler and then again on the sale by the wholesaler to the retailer. This is a simple transaction but you can have many transactions where goods go through a number of hands and processes before reaching the retailer, so you could have tax being charged ten times.
This is to make it payable by the person of last resort?
To make it payable only once.
Could it ever come by way of repayment?
I do not understand the Deputy.
Supposing it is paid by mistake?
Is the Deputy talking about obtaining a refund? He has this right just as he has in regard to the turnover tax. The same provisions are imported.
It will arise under section 5. I am only building up the case for the other argument which the Minister and I are going to have on the later stage.
Question put and agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill".
Is this the case of a person who is a trader and uses the goods for himself?
Yes; that is one of the cases covered. He could take them out and give them to somebody else as a present. It is the same kind of case.
Is he allowed to give them without paying?
He may give them, but he must account for the tax on them.
He is meant to pay tax on them.
Question put and agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill".
How long will the Minister leave it at five per cent?
I think I can assure the Deputy I will leave it at five per cent for a very long time.
Is the Minister speaking for himself or for the Minister for Finance? Perhaps the Minister does not expect to be there for long.
I said I will leave it.
That is what I thought I heard. I am curious.
The result of the vote must be out and the Minister headed the list.
Question put and agreed to.
SECTION 8.
Question proposed: "That section 8 stand part of the Bill".
Would the Minister mind explaining this to us?
This section gives the Revenue Commissioners power to estimate what the correct taxable turnover would be in a case in which they are satisfied that the moneys received from the sale of taxable goods do not represent the value of the goods. For instance, in the case of sales between parent and subsidiary companies, any estimates made in this connection will be subject to a right of appeal to the Special Commissioners and to the courts.
What does section 24 of the Finance Act, 1966 do?
It is the procedure for appeals to the Special Commissioners.
Question put and agreed to.
SECTION 9.
Question proposed: "That section 9 stand part of the Bill".
Am I correct in thinking that moneys payable in respect of a contract earlier this year, before the Budget, will, if not paid until after 1st October, be liable to tax?
Yes.
Is this not tantamount to a direction to wholesalers to sue and put in the sheriff, perhaps, before 30th September, and get their money, no matter how tough that may be on the person who owes the money? Alternatively, they will have to sue for the additional tax.
I do not follow that.
The wholesaler will be registered. He will supply the goods before 1st October but he will not be paid before 1st October. If he is not paid, he will have to pay the tax himself. I admit he will have the right to chase his debtor, but that is a double chase. Secondly, how will this operate in the case of a wholesaler who has instituted proceedings before 30th September but who does not get paid in the proceedings until after 1st October? Does this give the plaintiff the right to apply to amend the sums?
I should not like to pontificate on the procedure to be adopted by the courts but I think the position with regard to liability is clear enough; on moneys paid after 1st October, the tax is payable if the plaintiff issued his summons without claiming the tax, as he would have done in the case mentioned by the Deputy. How he will deal with that within the rules of court is another matter but he is, in fact, entitled to recover the tax.
It will mean a great deal of unnecessary litigation.
Moneys outstanding will be subject to tax, even though the sale of the goods took place before 1st October?
Yes.
There was exemption in the case of outstanding debts at the time of the introduction of the turnover tax.
There was.
Could the same exemption not be given on this occasion?
No.
Why?
The Government want money badly.
The concession was considerably abused. It has been decided it is more effective and just as equitable to do it this way.
What does the Minister mean by "considerably abused"? Surely the Revenue Commissioners were able to deal competently with the situation? Does the Minister mean by "abuse" that people stood up for their rights and claimed that to which they were entitled?
The Deputy will recall that the form of records had not been prescribed and it was, therefore, impossible to check. Thereafter, they were, of course, following the prescribed records and it was possible to check. I have not suggested the Revenue Commissioners are all-powerful, but I do suggest that they are reasonably good at doing their job.
I agree. I have a great admiration for them, but the Minister suggested that the concession in relation to the turnover tax was abused.
Yes.
I am at a loss to understand in what way it was abused.
Do I really have to spell it out for the Deputy?
I should like the Minister to make clear what the abuse was. I know there was a tremendous rush of sales but that is hardly an abuse.
That is perfectly legitimate.
Is that what the Minister means by abuse?
I would not call that an abuse. I am referring to the return of transactions which had, in fact, taken place after 1st October as having taken place before 1st October. What is being done here is not any inequity. It will be much more effective in catching these kinds of transaction.
The wholesaler will have a choice of either paying the five per cent tax himself, if he is not paid there and then, or of putting on the five per cent before it is legally permissible. Someone will lose somewhere.
(Dublin): Does this mean the five per cent will be charged from September?
No; it means the wholesaler can tell those who owe him money that, if they do not pay him before 1st October, they will be liable for this five per cent tax.
The Minister must have no experience of business. Wholesalers are finding it hard enough to make ends meet. There is a credit squeeze; there is a bank strike. It is not possible to do business today on the basis of telling a customer that, if he does not pay before 1st October, he will be liable for another five per cent.
If a wholesaler does business in that way, he should not ask the State to subsidise his methods of doing business.
No. Suppose a wholesaler sells goods on credit in July and, because of the bank strike, or for some other reason, the purchaser cannot pay for them immediately; suppose, when October comes, Mr. Colley, or whoever it may be, comes in and tells the customer: "I want another five per cent, thank you". I do not think that is fair.
Goods sold previous to September should be exempt. This provision is going to impose severe hardship on people building houses who have budgeted for a given cost. We all know the long delays there are in obtaining loans and grants. We can have people owing merchants up to £1,000 and these people will have to wait for their money until after this period. This means an added burden of £50 per loan. I would ask the Minister to apply here the regulation applied under the turnover tax and exempt all goods previous to that period and thus avoid placing this extra burden on these people.
All I can tell the House is that the Minister for Finance has considered this matter very carefully and he is satisfied he would not be justified in following the procedure here followed in regard to the turnover tax. By doing this, he is in fact doing more justice to the general taxpayer as distinct from the individual.
Will the Minister for Education feel when he gets out of the House that he got the same hammering as the Minister for Finance got in regard to medical expenses allowances and, as a result, change his mind five minutes afterwards? The Minister would be wise to change this too.
The Deputy should be well aware that the Minister for Finance has been considering this problem for a long time.
He rejected it, and the Minister for Education walked up those steps and rejected it. But they saw how unpopular they got and changed their minds the next day.
It is not relevant to what we are discussing at the moment.
(Dublin): In fact, all wholesalers will have to carry one month of the five per cent. They cannot collect it before the 31st of the month. Their accountancy system does not work like that. Invoices or statements of account are not sent out until 7th October. They will have to pay the five per cent themselves.
The first payment will be made in the middle of November, so that they will be counting six weeks of the tax they have collected in.
(Dublin): Any wholesaler giving a month's credit is covered?
No; you pay in October for the goods you have delivered in September. Your returns for October are made up of the moneys for the goods you deliver in September. You pay that tax in respect of October on 15th November. You have charged without the tax or else the wholesaler charges in the tax for every invoice after 1st September. They could not do it.
That is what the Minister is advocating. Stick the tax on the people.
No. What I am saying is that we were discussing the question of people paying on foot of contract and the provision to allow us to add it on on all payments after 1st October. The wholesaler may say to a retailer: "Pay me before 1st October and you do not have to pay the tax, or pay after that and you will have to pay the tax."
That is the point. If the wholesaler normally gives one month's credit for the goods supplied during September, unless the man is fortunate enough to have the cash ready to pay during the period in September up to the 30th, he has to pay tax on that amount when it is paid in October, even though those goods will have been retailed during September and the tax will not be collected. He will buy goods during September, retail them during September and, if he is lucky, sell them. They will not include any five per cent turnover tax on the retail price. Yet if he goes to pay for them on 1st, 2nd or 3rd October, he has to pay five per cent tax. Who is going to pay it, the retailer or the wholesaler? The Government are going to collect tax from 1st October on goods sold during September and neither the wholesaler nor the retailer will have got this five per cent. Somebody will be out of pocket. The Minister is evading the issue if he cannot see that.
I can see it. The Deputy knows there has to be a line drawn with any tax coming in. I have also told him that when the other approach was tried with the turnover tax, there was very good reason to believe it was abused.
How many registered turnover tax retailers are there?
About 30,000.
What would be possible with 30,000 would not be possible with 4,000?
Four thousand who can be so closely supervised even in respect of exempt and non-exempt goods.
After the regulations are in. It was on this basis the Revenue Commissioners were unable to check this the last time with the turnover tax. The regulations did not operate until an appointed day.
Are we so "stuck" for money that it is necessary to take tax from these people who will not have collected it themselves? Is it necessary to "stick" them for this five per cent tax rather than give them the benefit of the doubt? I was always under the impression that if you could not do a thing exactly, the small person got the benefit of the doubt.
Why is it always the small person we are talking about, the widow and so on? We do not hear about the large shopkeepers, who are not unknown to Deputy Norton. We hear about the poor person. In regard to this allegation that we have not got the money, I do not want to go back on all this but the Deputy knows well there is more money available under this Government this year than in any one year in the history of the State.
Nobody seems to be able to get it.
If the Deputy would open his eyes, he would see it. What is involved here is this. Are we to allow people to get away with murder in regard to this and have the taxpayer who is not so well off as the large shopkeeper, shoulder the burden? This is the choice the Minister for Finance had to make. He made the choice to ensure as far as he could that everybody liable for this tax would pay it and would not get an opportunity to get out of it.
You are about as convincing as Dr. Singer was when defending himself, except I happen to know that mink coats have been excluded. The Minister for Finance could not care less. You are now accusing the business community of making dishonest statements. You could not trust them to make a proper return.
Does the Deputy trust all of them?
The Deputy is not in touch with the large shopkeepers in this country who, if my memory serves me right, in 1948 signed a declaration supporting the Fianna Fáil Government.
And signed many cheques as well.
This is equivalent to a tax on champagne and caviare.
I would say you know more about them than we do.
We will give you a lesson.
You gave us a lesson on goulash, I believe.
Question put and agreed to.
Section 10 agreed to.
SECTION 11.
I move amendment No. 1 :
In page 6, between lines 15 and 16, to insert a new subsection as follows:
"(2) Tax as aforesaid shall not be charged on any article specified in section 3 (5) (b) (iii) of this Act on such article being imported into the State."
The point of this is to raise out of the consideration of ministerial order the exemption in the case of imports of the articles contained in section 3 (5), paragraph (b) of subparagraph (iii). I cannot see in this section where the statutory exemption is.
The House will be aware that this country adopted some time ago the internationally accepted Brussels nomenclature for customs purposes.
That is the one I said came in on 1st January last.
I thought myself it came in earlier.
There was a new print on 1st January.
However, the point about this is that in order to define the imported goods subject to this tax in terms which can be dealt with at customs level—because that is where they will be dealt with—we must define them in terms of the Brussels nomenclature. It will not be sufficient to talk about food, drink, and so on. It is, therefore, the intention of the Minister, at a later stage, to formulate exact definitions and to have them promulgated by ministerial order provided for by section 11 (2), and this it is intended will be done in good time before the tax comes into operation. So far as similar definitions are desirable for the purpose of the internal tax, appropriate orders will be made at the same time under section 3 (5) of the Bill. It is also intended to ensure, as far as possible, that the effect of these definitions will be that the same goods will be liable for tax, whether imported or produced in this country.
We must do that under the Free Trade Area Agreement. Is that not so? And we must certainly do it under the Community arrangement.
That is the intention.
Why not put it in the Bill? Why should it be for home goods in the Bill but for imported goods by order? Surely the two should be done the same way?
If we were to do it for imported goods in the Bill, we would have to list the whole of the Brussels nomenclature. The negotiations which will take place with various trading interests may affect goods to be included in this, and if we were to specify them at this stage, we would be in some difficulty.
It is undesirable to have one by Act and the other by regulation.
The description in the Bill in relation to goods produced in this country is intended to be applied as far as possible to goods imported, to have exactly the same situation as regards imported goods and goods produced internally. This is the intention of the Minister. It does seem as though this can be done, and provision is made for it in the Bill as drafted.
Do I understand that the regulations will exclude from liability caviare, champagne and mink coats——
And Hungarian goulash.
Because Deputy Davern is particularly interested in those.
I was saying they will follow the lines of goods produced in this country, and the same considerations will apply.
I know of no caviare that is produced here. Perhaps the members of the Fianna Fáil Party are aware of some. They seem to be interested in it, when they went out of their way to exempt it.
I take it fur coats will be exempted anyway?
I have already said it is intended to apply the same regulations to internally-produced goods as to imported goods.
And that will exclude fur coats?
Amendment, by leave, withdrawn.
Question proposed: "That section 11 stand part of the Bill".
How soon will this order be made?
At the end of August or into September.
Question put and agreed to.
Sections 12 and 13 agreed to.
Title agreed to.
Bill reported without amendment.
Agreed to take remaining Stages today.
Question proposed: "That the Bill be received for final consideration."
I am awaiting the Minister's explanation about the Money Resolution.
A Money Resolution is normally required for the annual Finance Bill because that Bill provides for specific charges on the public revenue. In this year's Bill, there were three such charges and the Money Resolution provides specifically for each of these charges. There is no provision for specific charges on the public revenue in the present Bill. The only charges that will arise are the ordinary expenses of administration and it is not necessary or usual to cover these charges by a Money Resolution. In fact when the turnover tax was introduced in the Finance Bill of 1963 the Money Resolution which accompanied the Bill provided for certain specific charges, for instance, the normal charges for the Capital Services Redemption Account, but it did not make provision for the charges which were involved in administering the turnover tax.
I should like to think over that some time and see it in writing in front of me before I make any comment.
Next Stage how?
The Minister is going to introduce some amendments, is he not?
No, he is not.
Question put and agreed to.
Question proposed: "That the Bill do now pass."
There is very little I can say except to point out to the House that the provisions for the making of orders as regards exemptions from this tax will mean in practice that the Minister will have consultations with the various trading interests concerned before he makes the orders. Experience shows that very often what Deputies might consider should be exempted might turn out, when consultations take place with the trade, to be a bad idea, that one is doing more harm than good. Circumstances differ in different trades, as to how they operate their trade and how exemptions can best be applied, and the Minister will have these consultations before such orders are made.
The Minister is taking away a Bill in which he is deliberately going to add, he admits, two per cent, and I say three to four per cent, to the cost of houses, and he is exempting from the operation of this tax caviare, champagne and mink coats. He can have his Bill.
The Deputy thinks that he is on to a good thing politically there but I do not think that many people will be fooled by this. People know very well that if we could tax caviare and mink coats, we would be only too willing to do so. Deputy Sweetman has had considerable experience as Minister for Finance and he knows very well that there are substantial difficulties involved. I do not begrudge him his short moment of glory but I do not think it will last very long.
Might I refer at this last moment to the fact that mink coats and such articles are being exempted from this tax and that we are now making provision for a tax from which non-essential and luxury goods are to be exempted? The reason for not exempting essential articles such as clothing and foodstuffs from the turnover tax was that it would not be parcticable to do so. These essentials of life are now taxed and the mother who is trying to bring up a family has to pay a tax on the clothing and food she buys for them.
Now we can bring in a tax which does exempt some items, non-essential and luxury goods, such items as mink coats and mink hats. These are items on which people should pay tax. It would have been a far better idea if the turnover tax had been put on as this tax is being put on so that we could have exempted from it the necessaries of life. At this stage I think the Government should reconsider the whole matter and bring in a tax of, say, 7½ per cent on luxury and unnecessary items and do away with the turnover tax on the necessaries of life. If the Minister was in as close touch with the people as he would have us believe and if the country was as prosperous as he would like us to believe, that is what he should do. The turnover tax should be done away with and a tax put on luxury and non-essential items.
Question put and agreed to.
Acting Chairman
This Bill has been certified a Money Bill within the meaning of Article 22 of the Constitution.