asked the Minister for Finance whether he is aware in relation to the new wholesale tax that representatives of the Revenue Commissioners, in consultation with representatives of firms engaged in the wholesale trade, gave to the trade generally an option of paying the tax either on cash received after October 1st or on sales effected after that date; that subsequently particular firms were permitted to pay the tax only on their purchases from manufacturers after 1st October; and that as a result large stocks of goods, purchased prior to October 1st and on which no tax is payable, are now competing with goods which are subject to tax thereby causing considerable loss and damage to smaller traders; and, if so, what steps he will now take to restore fair trading conditions.
Ceisteanna—Questions. Oral Answers. - Wholesale Tax.
The option to which the Deputy refers applies to certain firms carrying on a large retail business in taxable goods which are obliged to register for the wholesale tax either because they are also carrying on a wholesale business or because their purchases of taxable goods are made on a very extensive scale. Some of these firms find it impossible to segregate their taxable retail sales from their exempt retail sales at the point of sale. This difficulty was foreseen, and, under statutory provisions, these firms may be allowed to account for tax on their retail sales by reference to their purchases instead of their sales; but this option is applied to wholesale sales only in very exceptional circumstances. The purchase prices are uplifted by a certain percentage to ensure that the firms gain no tax advantage. In other words, they are put in the same tax position in relation to their retail sales as their competitors who are not obliged to register for the tax. I can see nothing unfair about this arrangement.
It is true that for some time after 1st October there may be stocks of goods in the hands of retailers in respect of which no tax is payable. The vast majority of the retailers concerned will be unregistered. This state of affairs also was foreseen from the beginning, and I referred to the question of forestalling in my statement of the 14th June, 1966, when I introduced the tax. The only way of mitigating loss due to forestalling would have been to impose a tax on stocks of taxable goods in the hands of all retailers on the 1st October. The alternative was to accept that there would be some loss of tax due to the opportunities for forestalling equally available to all retail traders. I chose the second course as the more reasonable and practical one and I can see nothing unfair as between retail traders in the resulting situation.
Is it not a fact, so far as the officers of the Revenue Commissioners and others are concerned, that the effect of this tax was not understood? Is it not also a fact that, in the discussions with the trade, only two forms of payment were suggested—payment on cash received or on sales effected—and that, in these discussions, no third method was suggested, until later on, with larger concerns? The Revenue officers of the Minister found they could not operate the tax unless they made a concession to large departmental concerns engaged in retail and wholesale trade, with the result that there is now unfair trading.
I do not accept that the officers of the Revenue Commissioners did not understand——
The Minister did not understand——
It was a new measure. Certain complications were foreseen and others that may not have been foreseen subsequently arose. In order to avoid any disadvantage accruing to a particular firm by these complications, every effort was made by the Revenue Commissioners to consult with the trading firms concerned and, in so far as it was possible—I think it was almost completely successful—any adverse effects as to retail trading were eliminated by the arrangements come to. If difficulties have been encountered by certain firms and if they suggest that, by reason of the operation of the tax, they are put in a disadvantageous position vis-á-vis competitors, the Deputy might ask them to consult further with the Revenue Commissioners who would be glad to investigate to what extent, if any, there is unfair trading or undue loss of trade accruing to particular firms.
I do not know if the Minister has understood what I suggest is the effect. As a result of what has happened, whether it was contemplated or intended, the position of the small trader is now seriously jeopardised. He is trading in goods upon which he must pay tax and he is competing with the larger traders who are selling goods which, in fact, are not subject to tax because they were purchased before 1st October last.
I think I can see the distinction to which the Deputy is referring. There were opportunities for forestalling which had to be envisaged and taken into account and which, to a large extent, could not be provided against. That forestalling was foreseen. I do not know if anything can be done to offset whatever disadvantages have occurred. Again, I invite the Deputy to suggest to these people, if they have particular difficulties which they think operate unfairly against them, that they should get in touch with the Revenue Commissioners.
Mr. O'Leary
Would the Minister be willing to meet any of the traders' associations to discuss this problem, even at this stage?
I think the Revenue Commissioners have been very oncoming in meeting these organisations and that it would be more proper to continue in that way.
Is the Minister not aware that, in fact, the Revenue Commissioners indicated to a large number of traders in the city—perhaps in the country, as well, but certainly in the city—that there were two methods— and only two methods—in which the tax could be dealt with but that subsequently, because of the difficulties to which the Minister referred in his reply, a third method was evolved? Does the Minister not consider it grossly unfair that the people who had been told earlier that there were only two methods should not have been told later that a third method was to be put into operation so that they could utilise that method instead of the methods read out and explained to them by the Revenue Commissioners in the early discussions?
The third method was introduced in order to meet difficulties that were not foreseen, difficulties that arose subsequently. I do not know to what extent——
Why were they not foreseen? The result is that the larger organisations and traders have now secured an advantage over small traders because they have been able to purchase ahead in relation to a very busy selling period and they are now in a position to sell their goods without being subject to tax while the small traders will have to pay. Why was this not foreseen?
There may be some confusion in the Deputy's mind.
There is none.
Again, I would ask the Deputy to suggest to these people that they should come in for further consultation. In so far as there is any unfair disadvantage operating against them the Revenue Commissioners will do whatever they can.
Surely it is the Minister's responsibility to ensure that taxation falls fairly on everybody? There should be no concession given to big people at the expense of the smaller people.
I admit certain forestalling occurred.
That is just a phrase.
Will the Minister explain why, when people went as a representative group to see the Revenue Commissioners—the Minister would not see them; he passed them on to the Revenue Commissioners—they were then told the tax would be levied in either of two ways, and only two ways, and there could be no other way, and then, subsequently, when a third way was evolved for the purpose of meeting certain difficulties, why that third way was kept secret and was not transmitted back to the people who had been with the Revenue Commissioners earlier? In consequence of that the people who knew of the secret third way have been able to build up an immense advantage over the small traders. The gravamen of my charge is that a third way was evolved, that it was not announced publicly and, particularly, was not announced to the people who had already been with the Revenue Commissioners for an explanation of the methods to be adopted.
I am not accepting the implication in the use of the word "secret" by Deputy Sweetman but I will certainly take up the point myself with the Revenue Commissioners to see to what extent there has been unfair trading.
This is lapping up the milk after it has been spilled.
Question No. 9.
Is the Minister fully aware of the position? Am I correct in saying, with regard to wholesalers, that the wholesaler pays his five per cent on his purchase plus his mark-up price whereas the supermarket pays its five per cent on its actual purchase? A supermarket on a purchase of £100 pays five per cent whereas a wholesaler pays five per cent on the £100 plus his mark-up in profit. There is an unfair differential there. Again, is the Minister aware that this will leave the small business man in a much more shaky position?
If I understand the Deputy correctly, I may be able to explain what is happening in this respect. People who are registered do not pay tax on the purchase of goods as between themselves. For example, a registered wholesaler does not pay tax in respect of purchases from a registered manufacturer. The tax is payable at a subsequent stage. There are many registered wholesalers who are also retailers and they can sell goods qua wholesalers to themselves qua retailers. In that respect, the sale price as between the wholesaler and the retailer is adjusted by a certain percentage to take account of the advantage that might otherwise accrue to a person who was both a wholesaler and a retailer.
I cannot allow this to go on all day. Question No. 9.
I think the Minister should appreciate that this is not an end of this matter.
Is the Minister aware that where a wholesaler sells goods at a price of £105, he pays tax on the £105, whereas the supermarket pays on the purchase price of £100.
The supermarket pays direct.
These are details of which I should like to get notice.
The big man is getting away with this.
Order. Question No. 9.