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Dáil Éireann debate -
Thursday, 2 Nov 1972

Vol. 263 No. 3

Ceisteanna—Questions. Oral Answers. - Operation of VAT.

44.

asked the Minister for Finance if he is aware that business houses will have to employ staff on overtime to deal with the stocktaking necessitated by the transfer from turnover and wholesale tax to VAT; and if he will allow the necessary remission of income tax to the principals concerned to meet this extra outgoing.

Stocktaking at the changeover to value-added tax will affect only those firms who wish to claim a refund of turnover tax or wholesale tax borne on their purchases of stock-in-trade for resale.

Expenses incurred in operating value-added tax, including overtime payments to employees, are allowable in computing profits for income tax.

45.

asked the Minister for Finance if he is aware that the most suitable time for business houses to take stock is the end of January; and, in view of this, as VAT became operative on 1st November, 1972, he will extend the period of stocktaking so that goods may be assessed for at least three months to enable assessment to be made at 31st January, 1973.

The most suitable time of the year for stocktaking varies in different sectors of trade. The requirement of stocktaking in relation to the introduction of VAT on November 1st affects only those firms who wish to claim a refund of tax borne on stock-in-trade at the changeover date.

The Revenue Commissioners have stated that, where the normal stocktaking for accounting purposes is within two months before or after 31st October and it is possible to make an accurate calculation of the stock at the changeover on the basis of such stocktaking, they will accept the calculated stock for the purposes of the claim to refund. An extension of this period would make it difficult to calculate the stock position on November 1st of the ordinary trader. Where, however, accurate stock records are kept from which it is possible to make an accurate calculation of the stock on November 1st, the Revenue Commissioners will be prepared to consider claims based on stocktaking at the end of January.

The purpose of my question was to draw attention to the fact that the suggested time of stocktaking is the busiest time of the year for business houses and there is a good deal of muddled thinking on the matter. Some business firms think they have to take stock at that time. Am I to understand now from the Minister's reply that he is prepared to put the period back to 1st January?

As I pointed out, the question of what is a bad time or a good time for stocktaking varies from one business to another. The position is that the Revenue Commissioners have already indicated that where the normal stocktaking for accountancy purposes is within two months before or after 31st October, and it is possible to make an accurate calculation of the stock at the changeover, on the basis of such stocktaking they will accept the calculated stock for the purpose of the claim to refund. I have indicated they will even extend this to stocktaking at the end of January provided that the stocktaking at the end of January is based on records which are sufficient to enable a reconstruction of the stock as at 1st November.

46.

asked the Minister for Finance if he is aware that when VAT becomes operative many business houses will have had already paid wholesale tax on goods; and in such cases if this tax will be remitted in full so that dual taxation will be avoided.

Provision is made in the Value-Added Tax Act, 1972, to avoid dual taxation in the circumstances referred to by the Deputy. Any trader who becomes liable for value-added tax on the sale of stock-in-trade held by him on November 1, 1972, may claim full relief for any turnover tax or wholesale tax borne by him on the purchase of such stock which he held for resale.

47.

asked the Minister for Finance where VAT has been paid on a finished unit or on a component part in the country of origin, if this tax will again be levied on sale in this country.

The question of double taxation should not arise because under the system as laid down in the directives of the EEC exports are free of value-added tax in the country of origin. Sales of taxable goods by accountable persons in this country will be liable to tax.

48.

asked the Minister for Finance whether in view of the fact that food prices have risen by 14 per cent in the 12 months ended August, 1972, he will reverse the decision to apply VAT to foodstuffs and agree to zero-rate food.

Having fully examined various proposals for the application of a zero rate to food, I am satisfied that the interests of price stability will best be served by a changeover to VAT at the rates of tax set out in the Value-Added Tax Act. These are as near as possible to the present combined rates of turnover tax and wholesale tax.

Would the Minister not agree that, since this matter was considered by a committee of this House, the increase in food prices has accelerated to the point where there has been a 14 per cent increase in a 12-month period, a situation without any precedent in recent times, and, in those circumstances, his decision should be reconsidered in view of the extreme hardship on people so much of whose budget goes on food? Is there not a very strong case for reconsidering his decision now?

I do not think so. As I pointed out on a previous occasion, any change on the basis of zero rating food items could only result in very substantial increases in basic commodities, such as clothing and fuel, and would also provide a complete change of price structure on all commodities across the board, a situation which could only result, I believe, in adverse effects upon the consumer, particularly the poorer consumer.

Would the Minister not agree that his submission that the new tax rates are as far as possible identical with those previously in operation is false and misleading in view of the fact that the Minister has increased the tax rate substantially on a wide range of goods to bring in an additional £3½ million, that figure being his own figure given in debate in this House?

I do not so agree.

Would the Minister like to clarify his disagreement because he has falsified the record on this point?

May I intrude on this long distance exchange between the Minister and Deputy FitzGerald? Does the Minister not agree the time has come to subsidise the main foods again—bread, butter, tea and sugar— instead of levying tax on them? Does the Minister not agree with that?

It is a separate question.

It was done before and rightly so.

(Cavan): And there was no trouble at all when it was done.

There was no trouble at all when it was done. The British seem to have no trouble.

It is a separate question.

The Minister has given me no answer.

I cannot answer a question when it is out of order.

It is a separate question.

I will put it down next week. I hope it will not be ruled out of order when I do put it down.

(Cavan): Is it not a fact that the British are excepting food?

49.

asked the Minister for Finance if he will give a comprehensive list of the products affected by the change in the tax rate involving the introduction of VAT on 1st November in respect of which the Government estimates it will receive £3.5 million additional revenue; and if he will state the estimated aggregate amount of tax currently received in respect of these goods and the current pre-tax retail value of these goods.

The VAT rate of 16.37 per cent is designed to compensate for the elimination of double taxation in the present system amounting to about £3.5 million. This rate is chargeable in respect of the supply of all taxable goods and services for which a special rate is not specified, and it would not, therefore, be feasible to give a comprehensive list of the products to which the rate applies.

The estimated pre-tax retail value of the goods to which the 16.37 per cent rate will apply, based on 1971-72 figures, is £180 million, and the estimated yield from turnover tax and wholesale tax on this base would be £25.9 million.

Would the Minister not agree that his reply to this question is in flagrant contradiction to his reply to my supplementary question? Having rejected my suggestion that there is an increase in tax rate yielding an extra £3½ million he has now admitted that there is such an increase and has said it is in compensation for a quite different financial transaction affecting different people. Will he therefore agree at this stage to publish this list and will he further agree that it is most desirable that the public should know precisely which goods have in fact had the tax increased by one quarter on them so that the public will know which goods they are legitimately entitled to be asked to pay more for and which goods they should not pay one half-penny more for? By introducing this extra tax on a wide range of goods, which the Minister has refused to specify, he has created total uncertainty in the minds of the public as to which goods have had tax increases and which have not.

The answer to the last of the Deputy's series of supplementaries is "No", the answer to the second last was dealt with in the reply I gave and the answer to the other supplementary questions is "No".

Would the Minister like to tell the House how the public are to know on which goods tax is to be increased when the Minister refuses to give a list to the House in reply to my question?

The Deputy is, as usual, trying to misrepresent the situation and mislead the House and the public. I have already dealt with that in my reply.

The Minister has refused to give the list so the public will not know what extra tax they will have to pay.

Has the Pharmaceutical Society been notified of the increase on their commodities? My information is that they have not. I also want to ask the Minister is he aware of the 753 articles that have been increased and is he aware of a document I have here, and which I will willingly give him, issued by a supplier to supermarkets telling these people that the 39 commodities which they supply are increased by 11 per cent. If the Minister has not got the information, as he has said to Deputy FitzGerald, I have it and I will make it available.

That is very helpful.

These are the brutal facts.

In view of the totally unsatisfactory nature of the Minister's reply to my question and to preceding questions I propose, with your permission, to raise the matter on the Adjournment.

In reply to Deputy Coughlan, may I say the Pharmaceutical Society have available to them, as has everybody else, the guide to the value-added tax. They have also been in consultation with the Revenue Commissioners and I doubt very much if they are unaware of the effects of the tax.

Of course they are unaware.

Are the public aware?

May I repeat once more what is well known, or should be, to Deputies of this House in view of the implication in Deputy Coughlan's question? Five-sixths of commodities are not affected in any way. The tax is not changed in any way. There are other items on which there is a reduction of tax to keep the matter in perspective.

We cannot debate this question all evening.

I take it the Minister is well aware, as I am, of the number of items that pharmacists stock, and that is their real trouble. They stock hundreds of items. I do not know whether the Revenue Commissioners are aware of this but it is true that the number of items stocked by pharmacists is entirely different from the numbers of items stocked in a butcher's shop, in a grocer's shop or anywhere else. I think the Minister is aware of all this.

Question No. 50.

Is the Minister aware——

Would Deputy Coughlan allow questions to con tinue?

The Pharmaceutical Society are an important organisation in this country. They do not know where they are. Would the Minister take steps with the Revenue Commissioners——

Question No. 50.

I want an assurance from the Minister——

The Deputy is underestimating the Pharmaceutical Society if he thinks they are that simple.

There is no underestimation on my part. It is on the part of the Revenue Commissioners.

50.

asked the Minister for Finance the approximate loss of revenue to the Exchequer if all foods were not subject to value-added tax; whether he has considered the feasibility of extending the exemptions to a wider range of foodstuffs; and, if so, if he will state the conclusions reached.

The estimated annual loss of revenue from the application of a zero rate of VAT to food is £15 million. No foodstuffs are exempt from the tax nor were any exempt from the former turnover tax. I considered very carefully the question of relieving food generally or a range of foods from tax on the changeover to the VAT system. My firm conclusion was that it would be unlikely to be of ultimate benefit to consumers.

The reasons for this conclusion are set out in a statement which, with your permission, a Cheann Comhairle, I propose to circulate with the Official Report.

Following is the statement:

"VAT will apply to food at exactly the same rate as that which applied effectively under the turnover tax. If it were removed:

(a) The Exchequer would lose £15 million a year. When one considers that unemployment assistance alone costs almost this amount and that old age pensions (non-contributory) cost about £24 million a year, one can see how difficult it would make social improvements if we were to lose this £15 million.

(b) It is almost certain that food prices would not universally fall by the full amount of the tax reduction. In these circumstances retailers would gain many millions of pounds at the expense of the consumer and the Exchequer.

(c) The tax on non-food items would have to rise in order to recoup the loss of £15 million, and this would cause a rise in prices of such essential items as fuel, clothing, footwear, medicine, et cetera. The increases would be far-reaching and would severely hit the weaker sections of the community.

(d) All food would benefit—the dear cuts of meat as well as the cheap cuts, caviar as well as cabbage—and there would be no way of limiting the benefits (even if they were passed on) to the poorer sections.

(e) It would be impossibly complex for the retail trade. They would have to contend with three rates of tax, that is, two, as at present operated, and a zero rate for food. To overcome this it would be necessary to combine the two remaining rates into a single rate so that all prices would have to change. This would make it virtually impossible to keep proper control and the ensuing confusion would provide an excellent opportunity for widespread price increases.

(f) The simplest way to effect the changeover to VAT is to leave the tax on goods undisturbed as far as possible. This is what has been done, which means that very few prices should change."

I expressed the hope already, Sir, that my question would not be ruled out of order next week. It looks very like as if the Minister, by this answer, is, in fact, ruling my question out of order. You assured me my question would not be ruled out of order.

I said: "I hope not".

That is not worth much to me.

The Deputy will appreciate that, since his question was asked today without notice to me, it is unlikely that this reply was designed to put his question out of order.

I do not mean that at all. All I am doing is protecting my own right. I am not making any reflection on the Minister, but I do think that if a Deputy is assured in the kindly words of the Ceann Comhairle "I hope not", that his question will not be ruled out of order, he can interpret that as meaning that the question will not be ruled out of order. I think, as a result of this answer, that next week I will get, as I so often got from the Ceann Comhairle, a letter prepared by some civil servant to the effect that the question is out of order because it was asked last week.

Could the Minister say whether the posing of this question by Deputy Timmons represents a change of heart by a Deputy who voted against the zero-rating of tax last July?

I think Deputy FitzGerald can answer to his constituents for the way he voted and Deputy Timmons will answer to his.

I am reasonably happy as to what will come out of that.

51.

asked the Minister for Finance if he is aware of the severe increase in cost of all veterinary preparations which will cause hardship to 200,000 farmers; whether he considers this increase is fair; if steps will now be taken to exempt from VAT all requirements of farmers for veterinary preparations and similar products, household disinfectants and germicides; and if he will make a statement on the matter.

Veterinary preparations as well as disinfectants and chemicals designated for use in agriculture are liable to VAT at the rate of 5.26 per cent. There are provisions in the VAT system which are designed to enable farmers to recover tax borne on inputs. These arrangements should ensure that VAT will cause no hardship to farmers.

52.

asked the Minister for Finance whether charitable organisations concerned with the disabled will be exempt from VAT.

The exemption from liability to pay tax on receipts which charitable organisations enjoyed under the wholesale and turnover taxes will be continued under VAT.

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