The introduction of value added tax at this time could be disastrous for the economy. It will only exacerbate a situation which is giving rise to considerable concern at the moment in all sections of the community. Prices have spiralled. The country has not got over the shocks following decimalisation. The Minister for Finance may grin at this and think it is of no concern. Obviously, he is not aware of the concern of the people who do not fully understand the situation following decimalisation. As I have said before, decimalisation was a psychological confidence trick on the public. They have not yet recovered from the shock. I often hear people saying that they do not understand it but that they are not able to buy the essentials of life for their families.
We will have massive protests soon from the public about the cost of living. People are waking up to the fact that they cannot continue enduring the effects of the high cost of living. The increases in the cost of living are felt very much by those on fixed incomes, those in the really lower income group and those on old age or disability pensions. It is becoming more than obvious that these people are deprived of the essentials of living. I have heard it said that poverty does not exist in Ireland and that our country has become a rich man's club. Unfortunately, those who are most badly hit by the rising costs are the people who are unable to articulate their grievances. These are the silent people who suffer. Many of them suffer from malnutrition. They make little or no protest. They just accept their position as normal. We do not recognise their problems or do anything to help them. The Minister should not say that the value added tax will make little or no change in the cost of living. The Minister said yesterday:
The tax proposals represent little more than a change in the method of collection and their incidence and impact on prices should be broadly similar to the incidence and impact of the present sales taxes.
The Minister knows that this is a lie and is not correct. It is not correct to say that value added tax will have little or no impact.
Why must we take this initiative? Why must we push this tax through without giving the public an opportunity of discussing and considering it and letting the Government know their opinion of it? It is not vital that this tax should be introduced before Christmas or early in the New Year. There is no urgency about it. It is not a precondition for entry into the EEC. If it were the Italians would not only now be thinking of introducing a value added tax. They would have been compelled to introduce it long ago, which they were not. They propose to do so in the future. I have not seen any demand in the discussions between the Minister for Foreign Affairs and the Ministers of the EEC for the introduction of a value added tax before we are admitted into the EEC. Britain says she will consider introducing it by 1973.
When I told the Minister there was public concern about this and that he should postpone it, he said he would postpone it for two months. That is not long enough to give the public an opportunity to discuss it. The Minister has received representations from various business interests but he has not received representations from the public. The public want an opportunity to think about it. The Minister has not tried to explain it to the public. Can you imagine small companies and small businesses trying to work out percentages such as 15.56 or 5.26 or 16.37? Can you imagine how complicated life will be under this new method of taxation? Life will be so complicated that more small businesses will have to close down. It is obvious that the Minister has this in mind and that he wants to put an end to these small businesses. He will not let them survive. They already have a tough problem but he has decided to make life more and more difficult for them. Can you imagine 16.37 per cent being worked out on a product costing ten or 15 pence? It is utterly ridiculous. Why was it not worked out to the nearest unit and fixed at 15 or 16 per cent? Because the Minister knows the value added tax will bring in more revenue.
Small business people have been unpaid tax collectors for too long. I had discussions with grocers with small businesses and it was interesting to hear their grievances and the justification for their complaints. They mentioned that a ¼lb. of Lyon's tea costs 2/6d. The label states that it costs 2/6d but when they tell a customer that they have to add on turnover tax naturally the customer resents it. The small trader is obliged by the Minister to add on the tax or else he has to pay it himself. That is one of the problems created for those people. They have to try to explain the Government tax. The Government should have been explaining it. The Government said: "We do not care how you collect it. Just have the money for us."
They fooled the public into thinking that the tax was 2½ or 5 per cent. People thought that if something cost £100 they would have to pay £105 but if you bought something costing £100 you had to pay £106 because the person who sold it to you had to pay turnover tax on the £100 plus the 5 per cent. This was the fraud and the deception in the turnover tax. These uneven figures such as 16.3 per cent expose the fact that we did not have a 5 per cent turnover tax and that it was not a proper sales tax. It was a tax on tax. The people were duped for too long about this.
There is mounting public concern about the taxation system. We find now that the overhead expenses of small businesses have increased enormously with the result that they are closing down, and more will have to close down if the Minister persists in this proposal. Why is there not some public educational programme in relation to VAT? Why is it not explained to residents' associations? Surely the educational programme on VAT should not be confined to business people only. Why not extend it to radio and television programmes? Let us ask the public to comment on it. We are not in the EEC yet. We must have a referendum and the wishes of the people must be taken into consideration. I think we are jumping the gun. We must have a referendum to find out how the people feel about entry into the EEC. This should be thrashed out before we talk about VAT. We should be trying to find out if conditions and terms for entry are satisfactory and safeguard the rights of the people.
If it is not the intention to collect more tax, why is there this urgency to shove this Bill through? The Minister has admitted that the turnover and wholesale taxes are simple to operate and that the administrative cost is low. He says it is less than 1 per cent. He has not explained what the administrative cost will be of operating VAT. I have no doubt that it will be five times as much as the cost of operating the present system because it is so complicated. It cannot be operated as effectively, or as simply, or as readily as the turnover and wholesale taxes. It is complicated all along the line. The Minister's excuse is typical of the Minister. It is the petty mind which thinks: "I am afraid that under the present system there may be fraud." This runs through every debate in which the Minister has participated.
It costs 25p to 50p to collect 10p turnover tax on books which come here for review. This is the petty mind operating our tax structure. The Minister is always thinking in terms of fraud and of people trying to defraud the Department. The amount of fraud is very small. If we have to bring in a complicated system to prevent fraud we might as well give up altogether because it will cost too much. We could have an army of civil servants and others employed in trying to detect fraud and evasion. This would not be worth the effort.
There is no justification for bringing in VAT and the Minister knows it. In every contribution he makes in this House foremost in the Minister's mind is the fact that people are trying to defraud the Government, the tax authorities, and the Department of Finance. This is no excuse for bringing in VAT. If my life and the lives of others are to be made much more complicated so that the Minister may save a few thousand pounds I say that is not worth it.
The Minister asked the postmen to collect the turnover tax on these books. We know the delay involved in trying to collect 5d or 10d. It costs almost 50p to collect 5p or 10p. This system will operate in the case of value added tax. Life will become much more complicated. The Minister has not given a satisfactory answer to the small traders. Will their life be easier or will they be more and more involved in tax collection and have less time for their normal business? Could we not have waited until we had seen how the system operates in Britain? Could we have learned a lesson from Britain? I have heard Government Ministers here saying that they would wait until Britain had introduced a certain measure so that we could learn from their experience. Could we not wait and learn from the experience in Britain in relation to value added tax?
I should like to ask the Minister if he personally has seen how the value added tax system operates in France, Germany, Belgium and the other EEC countries that have that system? I can tell the Minister that the rates envisaged here on essential goods are higher than in any of the EEC countries where the value added tax is in operation. The Minister says that the value added tax will apply to the same goods as those to which the wholesale tax applies. Would the Minister consider toothpaste to be a luxury article? Does he regard it as a medicinal article? If toothpaste is considered a luxury article, it shows little concern for the health of our people. Advertising campaigns urge people to clean their teeth. Yet, wholesale tax is applied to toothpaste on the basis that it is not an essential commodity. There is wholesale tax on medicinal shampoos for the treatment of diseases of the scalp on the basis that they are not essential items, that they are luxuries. The same system will operate under the value added tax. The Minister has not excluded essentials like medicines but he does exclude pet foods. Medicines do not matter to the Minister, pet foods do. I wonder has the Minister gone balmy?
This would have been a tremendous opportunity for the Minister to correct mistakes made by his predecessors and to exclude from tax medicines for human consumption. It is an absolute disgrace that medicines for animals should be regarded as more important than medicines for human beings. Medicines for cattle, dogs and other animals are excluded but turnover tax is payable when it comes to the health of the people. That has been the system and the Minister is going to continue it under VAT. It is a crazy system. The Minister has not the courage to say that a mistake has been made and that he will correct it when VAT is introduced. I should like to know what the Minister will do about it, whether commodities such as I have mentioned are considered more important than pet foods.
There are a few points in the Minister's speech that I should like to ask him about. How long more has Italy got before she will be obliged to introduce VAT? This is important for us. The onus is on the Minister for Finance to answer that question and to tell us why Italy has not yet introduced VAT. Italy has been in the EEC since the beginning. The Minister says that Italy has not introduced VAT yet. If Italy has not introduced it I should like to know why we are forced to do it now.
The Minister says that the Bill has been drafted to conform as far as possible to the directives of the EEC. The directives of the EEC are to apply to us but they do not apply to Italy. There is something farcical about this. If the directives do not lay down standard rates for the tax, why is the present system not acceptable to the EEC or has the EEC told us that the present system is unacceptable to them? I should like the Minister for Finance to answer that.
