asked the Minister for Finance if the Commission of the EEC indicated that it intends in due course to harmonise the rate of value-added tax throughout member states, possibly to a figure of 15 per cent on all goods, which if introduced in this country would result in a steep rise in the cost of living and indirect taxation.
Ceisteanna—Questions. Oral Answers. - Value-Added Tax.
10.
The EEC has expressed its intention to formulate proposals for the eventual and gradual approximation of the rates of VAT throughout the Community. It is impossible at this stage to predict the rates which may eventually be agreed on but such indications as there are point to the possibility of a two-rate system which would provide for a low rate for food and other basic necessities and a higher rate for other goods and services.
Can the Minister give us a guarantee in view of the indication from the Commission of the EEC that they intend to harmonise the rate of VAT throughout member states? Is it not a fact that on harmonisation of the tax among member states it can rise to something in the region of 15 per cent on all goods? Can the Minister give us an undertaking that in so far as we are concerned this will not and cannot happen, despite the indications that have already been given by the Commission?
I am not aware of any indications whatever that would suggest eventually there would be, as a result of harmonisation of rates, a common rate of 15 per cent on all goods. There is no indication whatever to that effect. So far as there is an indication, it is on the lines I have already suggested in the reply. That is merely what can be gathered at this stage. There is a great deal, as yet, to happen before there is even harmonisation of the base on which VAT will be collected. Harmonisation of rates is a different matter which would take longer. No calculation which can be made would suggest that there is any base for the Deputy's fear as expressed in this question.
11.
asked the Minister for Finance if he will make a statement on a report (details supplied) to the effect that Irish farmers could be deprived of thousands of pounds which could go to foreign buyers unless the Revenue Commissioners clarify immediately the position regarding the application of VAT to live cattle exports.
The suggestion in the newspaper article referred to by the Deputy that Irish farmers would lose money by the operation of VAT in relation to exports of livestock is without foundation.
I would draw the Deputy's attention to the statement issued by the Revenue Commissioners on November 3rd, a copy of which, with your permission, a Cheann Comhairle, I propose to circulate in the Official Report.
Following is the statement:
Statement by the Revenue Commissioners Value-Added Tax in Relation to Cattle Exports
The attention of the Revenue Commissioners has been drawn to a recent newspaper article on the application of VAT to the livestock trade with particular regard to the export of cattle.
A person who is registered for VAT and who purchases live cattle from an unregistered farmer is entitled to treat 1 per cent of the price as tax available for credit against his VAT liability, or available for repayment if he has no liability. Thus, if the price paid were £100, this could be treated for tax purposes as follows—
|
£ |
|
|
Tax-exclusive price |
99 |
|
Tax available for credit |
1 |
|
Total amount paid to seller |
100 |
The effect of this arrangement is that a registered buyer who would be willing to pay £99 for an animal before the commencement of VAT, is now in a position to pay £100, and thus the price obtained by unregistered farmers for cattle should rise by 1 per cent. (This will compensate the farmer for VAT borne on his purchases of seeds, et cetera, but will not give rise to an increase in the price of meat or other livestock products.)
A registered exporter will be entitled to repayment of 1 per cent of the cost price to him of the animals exported, and he will thus, as in the example quoted, be in a position to pass the 1 per cent tax credit on to the farmer in the form of an increase in the price. He will sell to the foreign buyer at a tax-exclusive price and, consequently, there would be no question of passing on any portion of the tax refund to the foreign buyer.
It is necessary, for control purposes, to channel all tax credits through registered persons. A foreign buyer who merely purchases cattle here would not qualify for registration and would not, therefore, be entitled to repayment of the 1 per cent tax. One livestock mart has met this situation by arranging that all cattle for export will be sold to and subsequently exported by a separate non-profit making export company. Under this arrangement, the animal is sold to the export company for a tax-inclusive price of, say, £100, the company exports the animal, charges the same tax-inclusive price to the foreign buyer, claims back the 1 per cent tax, and later passes on the benefit of this repayment, after a deduction for expenses, to the foreign buyer. The result achieved is approximately the same as if the foreign buyer were a registered person, had exported the animal himself and had obtained repayment of the 1 per cent tax included in the cost price. In either case the farmer would have obtained a price which included the 1 per cent tax compensation, and the foreign buyer would effectively have acquired the animal at a tax-exclusive price.
The Revenue Commissioners were consulted about these procedures and they confirmed that they would achieve the desired result. They are aware that the two bodies mainly concerned with the livestock mart trade are fully informed of the position. Discussions on the setting up of suitable procedures are continuing. 3rd November, 1972.