asked the Minister for Finance if he is aware that retailers who pay their wholesalers on a cash basis have to meet VAT charges at the point of purchase of goods for retail sale; that such retailers are at a serious loss as compared to the position that applied under the turnover and wholesale tax laws; and if he proposes to redress this position, by amending legislation if necessary.
Ceisteanna—Questions. Oral Answers. - Operation of VAT.
36.
Under the former sales tax system registered retailers were accountable for the retail turnover tax on their sales and were entitled to obtain their business supplies free of turnover tax. Wholesale tax where it applied was included, however, in the price which the retailer paid to his supplier.
It is an essential feature of a value-added tax that tax is chargeable on all business transactions and that each registered person takes credit against his own liability for the tax invoiced to him by his suppliers. Accordingly, a retailer bears value-added tax on his purchases but is entitled to a credit for it against the tax on his sales.
I do not accept that this position puts retailers at a serious loss where they pay cash to their wholesalers. A retailer has certain benefits under the value-added tax as compared with the situation under the retail turnover tax because (a) he gets credit for the wholesale tax which he suffered under the previous system on his business equipment, repairs, et cetera, and (b) he has the use of his receipts from sales for an extra month because of the two-monthly accounting period for VAT.
Is the Minister aware that, in the case of small retailers who pay cash, if you take a multiple of £100, for every £100 which they formerly paid, they now have to pay £105.26 at the point when they are ordering the goods and paying for them in cash; whereas under the turnover tax system, if they were registered, they had not to pay turnover tax for at least a month and maybe longer if they did not happen to dispose of the goods because it was on a turnover basis. If they had them for three months, they did not have to pay until they had the turnover on the goods. Will the Minister agree that, far from having the advantage of an extra month's credit as he stated on radio, they are suffering a loss, and in many cases a fairly serious loss, and that this occurs in the main in relation to very small traders who work on a cash basis and that it is hitting the poorest of the retailers?
I do not accept that. What the Deputy says is true in regard to certain retailers who are now paying 5.26 per cent on purchases for cash where they did not do so before. That is correct. It is also true that the number of retailers who do this is relatively quite small and it is further true that they have an additional month's credit which they did not have before. I do not think the Deputy would suggest that they go to make purchases only once every three months and that suggests that the extended period of accounting for VAT is certainly of benefit to them. Thirdly, the Deputy will be aware of the fact that the system which operated previously was one which certainly led to abuse and was abused by people purchasing the goods from the wholesaler for cash and giving a false registered number as a result of which they did not pay any tax at all. That loophole has certainly been closed under VAT.
The Minister said that this related to only a very small number. He and I represent the same constituency. Has he not had representations from many small traders in Dublin North Central about this matter? Further I wish to state that I did not say it was three months. I said that in some cases they did not sell the goods for three months and then paid on turnover.
I have not received the representations to which the Deputy has referred.
How does the Minister decide that it is only a small number of retailers who trade in that way? He says there is a small amount of retail goods disposed of in this way.
No.
There is quite a large number of small people trading in this way.
A small number of retailers is what I said.
Who buy goods for cash for resale?
Yes, instead of buying on credit.
Could I ask the Minister where he got that figure——
Question No. 37. We cannot discuss this matter all evening.
——because to the best of my knowledge most retailers buy that way?
Most small retailers.
37.
asked the Minister for Finance whether any general assessment of the effect of the introduction of VAT is under way.
All aspects of the implementation of the value-added tax are being kept under continuing review. Technical transitional matters are being considered in the first instance by the Advisory Council on the Transition to Value-Added Tax.
As to the effect of the tax on prices, the National Prices Commission has commenced a weekly sample survey of retail prices which will enable an assessment to be made in due course.
The Minister says that all aspects are being kept under review. Is he aware of the loopholes already being availed of by unscrupulous traders, such as when a man goes in to buy a tractor costing £1,500, they will hire it out to him for a month and then sell it as a secondhand tractor so that, instead of paying 16 per cent they pay only 5 per cent, thereby saving 11 per cent tax? Is he aware that that abuse is taking place in different towns and other places in the country to the detriment of honest traders?
I am aware that some efforts in this and other regards are being made.
And the same applies to furniture.
The Deputy may take it that these attempts will not in the long run be successful.