Deputy O'Malley and myself have made clear what our objections to this section are. In particular, we pointed out that the wording of the section is very loose. Deputy O'Malley drew attention to the fact that it is worded almost exactly as is the directive of the Council, which was not intended to be the legal framework for implementation of it but rather the general principles laid down by the Council of Ministers. Apart from that, I am afraid this section implementing the Council's directive might be used as a precedent in future. If it were to be so used it would, in my opinion, be a very bad precedent which could lead to enormous difficulties in the courts and enormous difficulties for all the citizens in this country. The Minister may say, and probably with a great deal of justification, that the section had to be prepared in a hurry, but, in our view, the correct approach to matters of this kind is not simply to take the wording of the directive and put it into a Bill. The correct procedure is for the parliamentary draftsman to put the sense of the relevant directive into the legal terms with which the courts here are familiar, so that the Bill, as enacted by the Houses of the Oireachtas, will then be in such a form that the legal profession here will be able to advise the citizens who consult them on what their rights and obligations are, and the courts will be able to interpret them in a way that will lead to an expeditious application of the relevant directive. The approach adopted here is wrong and we very much hope this approach will not be adopted in the case of any other directive.
Private Business. - Finance Bill, 1973: Committee Stage (Resumed) and Final Stages.
It is important to realise that the terminology here is the terminology of the Council of the European Communities. If we were to take the line Deputy Colley suggests, it might make it easier to process the matter through our courts within our own system of law, but that would not mean that the view of our courts or the interpretation of our law would stand up in the European Court. It would more likely be a legal situation in which the State here would find itself challenged before the European Court, just as, for instance, the British Government now appear to be in peril——
For a different reason.
No.
For non-application of it.
No, for related reasons, that they have not taken the steps we are taking. We shall have to become more familiar with the terminology and the practice of the Commission. We shall have more and more of this in our law over the years, and it will impose new disciplines on us. Irish courts, looking at European obligations, which they will have to do from time to time, will themselves have to work in accordance with European law, because if they do not, they could well bring in a verdict which would be upset in the European Court.
The Minister will appreciate that this directive is not framed in terms of European law. It is, as Deputy O'Malley pointed out, framed in terms understandable to a layman but, in the legal sense, very loose and open to misinterpretation. I hope the Minister is not saying that in the case of other directives the same procedure will be operated. I think it would be very dangerous if this were to happen.
I would point out, in relation to what Deputy Colley said, that since this is a directive dated 17th July, 1969, before Britain or ourselves were members of the EEC and before the last formal application for membership had been made, the very strong probability is that this directive was drafted in either French or German, was discussed presumably in either French or German and that the copy which we have in the Official Journal of the Communities for December, 1972, and on which this chapter of this part of the Bill is based almost word for word, is almost certainly a translation from either French or German. It is the common experience of those who were dealing with these translated documents that up to very recently at any rate the translations were often defective or less accurate than they might be.
It is particularly dangerous, therefore, to use the precise terminology of a translation of a document that even in its original form was never intended to form part of the domestic law as such of any of the member States. When I was speaking before the House adjourned I pointed out to the Minister that under paragraph II of Article 3, on which this particular section is based, there seemed to be an "out" given to the Minister in relation to a lot of these companies. At the end of paragraph II it states: "However, a member State shall have the right not to consider it as such for the purpose of charging capital duty". I wonder if the Minister made any effort to avail of any "out" in this respect.
The particular provisions which we have in this Bill and which define capital companies are mandatory. There are other forms of capital companies, particularly in European law, which are not included in what is mandatory. Under the directive such could be exempted. We have not brought these in, so to that extent we have used the "out" to exclude them.
So far as this section is concerned, it introduces the concept of charging the duty on the assets rather than on the nominal capital. I should like to ask the Minister how it is proposed to ascertain the assets, because this is not an easy matter to ascertain at all. There are two problems, as I see it. First of all, there is the problem to discover what are the assets and, secondly, having discovered to the best of the Commissioners' ability what the assets are, the question then arises of valuing them. I should like to hear from the Minister what proposals the Revenue Commissioners have in this regard.
I think the Deputy appreciates that, at the moment, when shares are issued for consideration other than cash, there must be a valuation of the consideration given, whether it be property, services, contract for services and so on. At the moment all these transactions have to be adjudicated upon. The situation will be somewhat similar in future where there is consideration other than cash for the shares. The consideration will have to be valued, but there will be no difference in the machinery.
I am not sure that we are quite on the same point. The particular type of duty we are talking about here is stamp duty on capital. There is no sort of investigation necessary because the memorandum and articles clearly state what the nominal capital will be and the Revenue Commissioners simply assess the duty on that. I think what the Minister is talking about relates to the transfer of assets, which is not what is here. This would be on the formation of what, for the purposes of this chapter, is a capital company and the capital duty will no longer be chargeable on the nominal share capital. It will be chargeable on the net assets. I know of no procedure at the moment whereby the Commissioners ascertain the net assets of a company. The reason, of course, there is no procedure is that there is no need for the Commissioners to ascertain it because there is no form of duty which is chargeable on the net assets. I should like to know what administrative or other procedures the Commissioners have in mind for this situation?
I am afraid I cannot visualise what the Deputy's difficulty is. At the moment where there is consideration given for shares other than cash a valuation has to be made. What difficulty does the Deputy visualise in the future in respect of the new system? At the moment you may pay stamp duty on the nominal capital which could far exceed in some cases what the assets might be. It could be four times greater and in such a case a person would pay more stamp duty than he would under the new system.
It is almost invariably well below what the assets are worth.
I agree that is the tendency but sometimes it could be the other way around. That is why it is very difficult to assess what the net effect of these provisions will be. There will not be any new difficulties created except possibly there may be additional valuations to be made. On the other hand the majority of shares are issued in consideration of cash and difficulties will not arise in these cases. If there is to be a transfer of, say, premises, as consideration the transfer has, as we know, to be adjudicated on if there is any doubt about its real value. I cannot see that any problem will arise. If it is being transferred for cash the cash value is taken; if it is a transfer for some other consideration it is a matter for valuation.
The Minister is under a misapprehension that it is the shares or the issue or transfer of the shares which would bear the duty. That is not so. It is the formation of the company which bears the duty. It has nothing to do with shares. The duty is payable at the moment, and under this chapter, on the presentation of all the necessary papers and documents to the Registrar to form the company. The question of the issue of shares for cash or for consideration other than cash cannot arise until after the company is formed, registered and complies with certain post-registration formalities.
The Minister is under a misapprehension when he thinks that the duty is payable in some way on the shares or in relation to the shares. There might well be duty payable on the transfer of the shares afterwards, but that has nothing to do with this at all. This is capital stamp duty on company formation. The question of the shares being issued or not issued, as the case might be, would not arise until afterwards.
Yes, but on the formation of the company the minimum stamp duty will be paid. This is £1. Afterwards, when the shares are allocated—the shares can only be allocated for value—an assessment will be made as to what the value, the consideration, is worth.
Is that right? If so, it is directly opposite to what the Minister said already. He may be right.
It is not.
Is the Minister saying a pound will be paid on the formation of a company and then afterwards, when the shares are allotted, the com-when will be valued and the rest of the duty will be charged then?
The minimum stamp duty will be £1, but you have to assess ultimately what the total stamp duty is and that depends on the value.
If the Minister looks at section 68 he will see when this duty is payable. It says:
in the case of the formation of a capital company which is to be incorporated under the Companies Act, 1963, or formed under the Limited Partnerships Act, 1907, before the incorporation or registration thereof, and
It goes on to say:
in any other case within 30 days after the date of the transaction.
I am sure the Deputy will admit from his own experience that when a company is incorporated there are a couple or a few subscribers and no more for a small number of, say, £1 shares. That is the stage at which the £1 would become payable, because they are subscribers or potential shareholders. It is when you come down to the subsequent allocation of shares that the question will arise as to the value of the assets which were actually given in consideration of the shares. As the minimum stamp duty payable is £1, you would apply that at the first stage if there were merely a few subscribers taking shares, in order to register the company. Thereafter, the stamp duty will be assessed depending upon the actual value given for the shares when they are being allotted later.
If the Minister tells me that is what is going to be done, I accept it. It seems to me to be quite incredible that such a loose system should be operated. If only two shares are issued—and that regularly happens, as the Minister knows; it is the two subscribers to the memorandum who take up two shares and the rest are never issued—there can be no question of valuation then, and a company in that situation with potentially enormous assets can get away with £1. One would have thought in the Commissioners' own interest that the system would have been otherwise.
We have to operate the system which Europe says is to be general throughout Europe. We are not merely providing for Irish companies. We must bring our legislation and Government practice into conformity with Europe. The purpose of this is to facilitate capital transfer and formation throughout the whole Community. We are aware that quite a large number of companies are incorporated and that they remain stagnant for a long time afterwards, notwithstanding repeated reminders from the Companies Office to get things going and to register the office, and so forth. You can be certain, as the Revenue Commissioners would be liable to lose money unless there was a follow-through here, arrangements will be made in the Companies Office to ensure that there is a followup. If companies do not get into real being, and into their stride, some steps will have to be taken to strike them off the register. A situation cannot be allowed to continue in which notional companies are formed and pretend to trade and not allocating shares and performing all the obligations which lie on them.
The whole effect will be, not only as a result of these measures but, in general, that the whole company position will be strengthened. There will have to be greater expedition and supervision and, in the long run, the danger which Deputy O'Malley referred to will not arise. I would expect the position to improve substantially.
I move amendment No. 10:
In page 37, line 1, to substitute "25p" for "£1".
This amendment was put down by us primarily to draw attention to the fact that it is proposed in this section to increase the relevant duty fourfold. The Minister has said that this is the minimum that he can impose under the directive. We accept that but, as we have indicated earlier, we believe that where a fourfold increase in any duty is involved and in particular when it is associated with the introduction of a completely new concept in law the least the Minister might have done was to draw the attention of the House and of the public to what was involved. It was for that reason we put down this amendment, to draw attention to this omission on the part of the Minister. In the circumstances in which we accept that the Minister cannot under the directive make the duty less, we withdraw the amendment.
I move amendment No. 11:
In page 37, subsection (4), line 31, to delete "register" and to substitute "registrar".
This is a drafting amendment to delete "register" and substitute "registrar".
I raised a point on the Second Stage and I would be glad if the Minister would clarify the matter. As I see it, under this section the rate of duty imposed is 1 per cent. This relates to assets and transfers to a company after its incorporation. The question that I would like to have clarified is: where the assets consist of real or leasehold property and are being transferred to a capital company, on the face of it this would attract a duty of 1 per cent, and I want to know will that duty operate in addition to or in substitution for the existing stamp duty on an assignment or a conveyance at the appropriate rates, that is, 3 per cent if the value is less than £50,000 and 5 per cent if it is £50,000 or more?
The ordinary stamp duty would apply in the case of a transfer. I do not think I can justify exempting a transfer where it takes place to a company rather than to an individual. The company stamp duty would also apply.
It would be in addition to the existing ordinary stamp duty. Is that correct?
Yes.
Am I right in saying that at present before the enactment of this legislation such a transaction would attract the appropriate rate of stamp duty in the ordinary way but no duty in the Companies Office, if I may put it that way? If that is so, what is happening is that the Minister is increasing by 1 per cent the stamp duty on the assignment or conveyance of property to a capital company. This could amount to a very substantial sum of money. It seems to me that there is a case in such circumstances, where such a duty arises under this section, for reducing the ordinary stamp duty by a corresponding amount so as to ensure that the actual rate of stamp duty as laid down for conveyances and transfers of property would remain as at present.
I accept what the Deputy says but we have no option in the matter.
The Minister has another option. Surely he can provide that in the case of ordinary stamp duty it would be abated by the amount payable under this section? This would mean the Minister would receive the same amount of revenue and the person liable would pay the same amount of stamp duty as at present. If the Minister does not accept this he is imposing a very substantial increase in the case of property to which it does not now apply.
I still say what I said earlier, that this would be against the spirit of the directive.
Would it? It would be a reduction of the domestic noncapital stamp duty.
It would have to be done across the board. The obligations in regard to companies and not to others could not be avoided. We have given substantial reductions in regard to stamp duties this year, also, wherever in the Community people have used dodges, if I may use the word, of this kind they have found themselves brought up before the Commission or the Court for breaching sometimes the letter and, if not the letter, then the spirit of directives.
I think the Minister has got the wrong end of the stick. I understand that the object of the directive is to ensure that all capital companies are subjected to the same kind of charging but I do not think it should be achieved in this way. I cannot say for certain, but there must be some member state in the Community which does not apply stamp duty in the same way as we understand it to real or leasehold property, and certainly not at the same rate. Therefore, as Deputy O'Malley says, this is a domestic matter. The matter of concern to the Community should be whether it is the same rate here. What a state does in regard to its domestic inland duty is a matter for the state. Therefore, it is quite open to the Minister to do what we have been suggesting. The effect would be not to reduce the revenue and at the same time not to increase the duty.
The Deputy appreciates we will be losing revenue on the nominal capital——
You will be gaining considerably because the assets will be greater than the nominal capital.
We do not know. We know that the figures are not so gross as to justify the suggestions that what is being done is something——
Could the Minister give a sample of the situation Deputy Colley is putting? If this applies, in effect it will mean an increase of 1 per cent in stamp duty. If a company buy a factory for £100,000 the company pay £5,000 on the ordinary deed of transfer but that company become liable to 1 per cent, or £1,000, capital stamp duty in addition, under this section. In other words, the company pay £6,000 in stamp duty when in equity they should pay only £5,000. What Deputy Colley is very clearly and fairly putting to the Minister is that although we cannot do anything about the £1,000 capital duty there should be provision in the Bill to remit so much of the duty as shall equal the special additional capital. The effect of this would be that a company would pay a total of £5,000 stamp duty rather than £6,000. At the moment the proposal is one that cannot be defended in equity.
I repeat that I am very pleased at the way in which the Opposition have assisted me on this Bill but I am afraid the clock is running against us. The House rises at 5 p.m.——
Say that again.
The House is to rise at 5 p.m.
Not that I am aware of.
As far as the Chair is concerned there may have been a misunderstanding in regard to 5 p.m.
I see.
I assure the Minister that we do not wish to keep on and on.
I think 5 o'clock was a national aspiration.
I have an obligation in Washington——
(Dublin Central): The Taoiseach did not mention any time.
Apart from that, I should like to fulfil the national aspiration. May I very quickly say that the situation is one which will affect the acquisition of an asset? The 1 per cent applies only where shares are given as consideration.
No.
The Minister is not right.
It has nothing to do with shares.
That is why we said this is a whole new concept.
If the Minister reads the directive carefully, as we have done, he will appreciate what we have been saying. This is a type of amalgamated Continental concept. I do not wish to appear to be critical but the Minister has continuously referred to shares in the sense that they are not considered in the concept——
I cannot accept the Deputies' interpretation. That is all I can say.
Is the Minister receiving advice as to what he is now saying?
Of course I am.
In other words, words must not mean anything at all.
They do if you study them carefully.
What the Minister is saying is at variance with what the position would be under ordinary Irish law. Fundamentally, this is a totally different question.
If a company parts with cash in order to purchase an asset, whether it be machinery or other property, it is merely exchanging an asset. If a company acquires an asset in exchange for shares then it is caught by the directive—an increase in assets in consideration of the issue of shares.
The Minister is giving a very simple explanation. If you go one step further the entire matter becomes much less simple because you are getting into the value of the asset concerned. However, we have done our best to draw the Minister's attention to the problems which are arising. He says they will not arise: we hope he is right but we rather fear he is wrong. When it does happen I hope he will remember that we drew his attention to it.
Whoever is Minister for Finance next year will be coming in with a clatter of amendments to this Chapter.
The preceding section provides that the statement of assets, liabilities and expenses shall be charged with stamp duty at the rate of 1 per cent on an amount determined in accordance with the section. The section falls naturally into two parts, namely, that dealing with the formation of a company or an increase in its capital or assets, and that where the transfer of an existing company is concerned, the section follows closely the format and wording of the relevant article of the directive and brings about the fundamental change required by the directive on the basis upon which stamp duty is chargeable in relation to capital companies. Under the existing law, stamp duty is charged only on the amount of the nominal share capital of a limited company or partnership. This section changes all that—henceforth the duty will be assessed on the net value of the assets involved in the relevant transaction.
I do not wish to be in any way provocative but I think this section proves the point I was making on the previous section.
I asked the question earlier but it arises more relevantly on this section: how will the Commissioners ascertain the net value?
In the same way as at present. The Deputy in his professional practice has probably furnished details from time to time to the Companies Office showing the consideration other than cash for which shares are allocated. They are adjudicated; there may be discussion as to whether the value is a true one or not and on that basis the transaction is stamped. It will not be dissimilar.
Will it not mean in practice that every charge of stamp duty under this Chapter will, in effect, have to be adjudicated?
No, not unless there is a consideration other than cash and in a large number of cases in my experience—I would say in most of my own experience—the consideration was cash. It is only where cash is not the consideration that a valuation would have to be made. It will not be all that difficult to do.
There is a typing or printing error in the first line where it refers to section 67 (i). I think this should be 67 (1).
Yes, it should be a one. I am grateful to the Deputy. God bless his eyesight.
Question agreed to.
This section arises as a result of various amendments of the law governing value-added tax which will come into operation on September 3rd, 1973. The exception referred to is the amendment of the definition of a manufacturer to include a trader who supplies material for the purpose of having goods made for him. This amendment is contained in section 89 and the tenth Schedule and comes into operation immediately the Finance Bill is enacted.
(Dublin Central): I move amendment No. 12:
In page 41, before section 77 to insert a new section as follows:
"Section 1, subsection (1) of the Principal Act is hereby amended by the insertion after ‘November' of or 4 months in the case of traders where 60 per cent. of their business is zero rated".
The purpose of this amendment is to change the Principal Act in regard to the taxable period which in the Principal Act means a period of two months beginning on the first day of January, March, May, July, September or November. We feel that for certain sections of the trade, particularly those in the distributive trade who are now zero rated—I am speaking particularly about that section of the trade such as the grocery section—this change is desirable. Representations have been made to me by many small traders, now that the largest part of their turnover will be zero rated, that it would be convenient for them if, instead of having to make returns every two months the taxable period would be put on a four months basis. Even though these goods are zero rated it does not simplify the VAT system of returning accounts—if anything, quite the contrary. This brings in another level of taxation and will mean four levels of taxation for the ordinary traders. They maintain that they must, as many of them must, bring in accountants to make up these accounts every two months and that they could effect certain economies if they were allowed to return their taxes every four months instead of every two.
There is a certain justification for this. If we consider the people I am speaking about, traders the majority of whose turnover is in zero rated commodities, we can easily see that 70 per cent or more of their turnover—the average groceries—will be zero rated. Only 30 per cent of their turnover will be returnable for VAT. The Revenue Commissioners will have received 75 per cent of that 30 per cent by virtue of the fact of the wholesalers having deducted tax at a wholesale level. We are left with a very small figure of 30 per cent which I think will represent a very small amount of money in the case of the majority of traders but we are putting them through the process of trying to segregate accounts for a two-month period when, if we made it a four-month period it would simplify matters for them.
The compilation of a VAT tax return can be quite complicated. I was on the committee of the House which dealt with VAT and having gone through that I thought at the time that I understood the problems traders would face. But I found that the theoretical end of it bears no relation to the practical application of it when one is trying to compile a VAT return. Up to now you knew the difference. When we had only turnover tax all that was necessary was to take the turnover of the month or the two months which would be normally added up in one's accounts and return it to the Revenue Commissioners but now, with VAT, we have to keep our different columns for the 5.26, which operated before this tax came in, and the 16.37. Some of the 16.37 is of a saleable nature, others are not.
These are problems which, I find, have presented difficulties. I believe that the Minister should come forward and try and simplify this in order to make it easier for these people to return it every four months. He could cut down expenses and, on the other hand, make it easier for the small trader, the people I am mostly concerned about. I am convinced that the average grocer throughout this country will have 70 per cent of his turnover zero rated from September when the Minister zero rates food.
I should like to ask the Minister to change the Principal Act to read, a four months' period for businesses where 60 per cent of their business has a zero rating. It was on that basis that we, in this party, put down this amendment. Many traders in this city would welcome this provision and I am sure that representations were made to the Minister on this. By complying with this amendment the Minister would be helping those people to get over these difficulties.
There is no doubt that VAT has caused complications in the distributive trades. The acceptance of this amendment is a step which would help these small traders.
The amendment, which has been tabled for what I consider to be legitimate reasons, would mean that only those traders whose business was exactly 60 per cent zero rated would qualify for postponement. It is taken to mean that any trader with 60 per cent or over of his turnover zero rated will be entitled to make returns at intervals of four months. Under the VAT system a trader who has suffered tax on his purchases in excess of that due on his sales is entitled to a repayment of the difference on submission of his periodical returns.
Many of the traders affected by the proposal in this amendment will, with the extension of the zero rating, be in a repayment position and the deferment of the repayment which would be due to them from two months to four months would not be welcome to them. For the traders who would still be liable to pay tax on the taxable part of their turnover the effect of the amendment would be to postpone the payment of tax for a further two months with a very serious loss of revenue. That, over a year, would mean a considerable loss of revenue for half of the year.
The amount of the revenue would be substantial in some cases, for instance, in the case of big supermarket chains where 60 per cent of the turnover will, as a result of the removal of VAT from food, be zero rated. There is no reason why any additional benefit should be given to such concerns. If it was intended to apply the relief only to small traders it could be worked only on the basis of an actual amount of tax payable. If this were to be the criterion, it would have to apply to all businesses whose tax did not exceed a certain amount and not only to those where 60 per cent or more has a zero rating.
The proposal would also create difficulties in operation as it would be uncertain which traders should be making returns every two months and which for every four months. The issue of reminders and charging of interest on late payments would be confused and, I believe, in the long run, would add, rather than detract, from the difficulties which traders might experience.
I might add, because this will not be generally known and this may be of assistance, that the Revenue Commissioners have power to make arrangements to vary the period of making returns and they would not look unsympathetically upon an application from very small traders to make returns at longer intervals than two months. However, it would be undesirable to issue a global direction that returns should not be made, or need not be made, more often than every two months.
Already such informal arrangements are operated and there are some traders who, as a result, are able to claim, and get, repayments at monthly intervals. What I would suggest to Deputy Fitzpatrick, and to those who have approached him, is that they might present their particular difficulties to the Revenue Commissioners and I would be hopeful that they might, if they have particular difficulties, find some way, through the kindness of the Revenue Commissioners, of overcoming that. I think that that is the better way of dealing with it. If we find that administratively there are still great difficulties at the end of the trial period of these concessional operations, then I will be prepared to have a look at it again next year.
(Dublin Central): I thank the Minister for his information. I did not realise that there was any discretion at all allowed in this taxable period whereby some traders could make arrangements to come in line with the amendment which I have before the House. I am certainly not here to fight the case of the Revenue Commissioners or to make it convenient for them. I am here solely to put the case of the small traders who have put the case to me.
If there are provisions whereby it will be possible for them to make the returns for a four month period, as the Minister has stated, then I will be satisfied. I did not realise that that provision was in the original Act. That is the first I have heard about it.
If the Minister says that this is so, then these particular traders, if they feel that only a very small part of their business, say 10 per cent, is taxable, should approach the Revenue Commissioners to see if arrangements could be made whereby they would return every four months instead of every two. I believe that it is their duty to make their case to the Revenue Commissioners. It was only a certain number of traders who made representation to me and for that reason I thought it right to bring it to the Minister's attention.
The provision to which I refer is not in the Principal Act but the Revenue Commissioners have a general authority of care and management. Within that discretion, which is conferred on them from time immemorial, they have this right to allow a deviation. However, what I say should not be regarded as a blanket permission to everybody to leave it to four months. If they interpret it that way, they might find themselves in some difficulty regarding the payment of interest.
Anybody who seeks a concession will want to apply and make his or her own particular case to the Revenue Commissioners. I feel sure that the Revenue Commissioners will be only too happy to deal with that. Apart from their natural humanity and consideration for traders, the Revenue Commissioners would also be only too willing to cut down the amount of paper work that they have to do themselves. In relation to small amounts, it clearly can be argued that it might be better not to insist on the two-month period.
(Dublin Central): I appreciate the Minister's remarks. He has certainly given me information about something I did not know existed. My amendment, I should like to assure the Minister, was not intended to apply to the big supermarkets if at all possible, because I am quite convinced that they have sufficient staff, and personnel, and are well geared, to cater for this type of thing.
I was dealing entirely with the small traders who are not capable of making returns. I was anxious that a simplified form should be introduced to facilitate them. I accept that there are provisions to facilitate such traders and I would suggest to small traders that if they find that the amount of money due to the Revenue Commissioners is infinitesimal they should approach the Commissioners and, as a result of what the Minister has stated, I am sure they will be dealt with sympathetically.
Such traders should apply in advance of liability in order to obtain permission to operate.
It appears that one effect of this section will be that workers who eat in canteens attached to their place of work will now find that they will have to pay more for their meals than it would cost them if they went home; if they went home the food they consumed would be zero rated whereas in the canteens a service element will be charged to tax and it will be charged at the 6.7 per cent rate. There are many thousands of workers and it would now seem that they will not be as well off as the Minister said he would leave them. I realise the Minister has a problem in dealing with this situation so as to ensure that there is equality as between what I might describe as inside and outside caterers.
That is the point exactly.
I am well aware of how the problem arises, but we must draw attention to one of the consequences of what is being done in the section. Those who go home for their meals will pay less tax than will those who are obliged to consume their meals on the premises where they work—Deputies of this House, for example.
It is, of course, quite a common practice for employers to subsidise canteens. I think people get better bargains in canteens than they would if they purchased the food on the retail market—not indeed that subsidy means one necessarily eats more cheaply, as we know from the facilities available in this House.
(Dublin Central): When the Minister was zero rating food I believed he was zero rating it for the average working man. I believed that was his primary objective. In cities and towns throughout the country it just is not possible for the worker to go home for his lunch, his principal meal of the day, and he is therefore compelled to eat in a canteen. What the Minister is doing here is victimising that worker by putting this additional charge on him under this section. Is it the Minister's intention to force workers to go home for their midday meal? Remember, as well as the time element, there is also the problem of transportation. The whole idea of zero rating food was to try to alleviate the burden of heavy prices. What will be the position where nurses are concerned? They have a deduction made from salary to pay for meals they eat in the hospital or nursing home. What will be the position in the Civil Service canteen? Will these not get any benefits, none of the benefits the Minister intended to confer by reducing the price of food? They will not be able to go home and so they will get no benefit at all from the zero rating of food. These people take their main meal at midday. They do not dine in the evening in the principal hotels in the city. They should not be victimised. Is it the Minister's intention to tax them on their principal meal of the day?
I must congratulate Deputy Fitzpatrick on his eloquent address on something which will cost the average worker .75 of one penny per day.
(Dublin Central): That is not the point.
The Deputy should be grateful and accept the compliment. He made a brilliant speech on the three farthings increase per day.
It is three-quarters of a new penny.
The Deputy is making a very big mountain out of a very small molehill. One would think there were millions involved. At the moment the meals to which Deputy Fitzpatrick refers are subject to 5.26 VAT. All that is happening here is that they will continue to pay VAT, but at the 6.75 rate. Many of these canteens provide meals for about 50p per day and that is why I say the Deputy's speech was a most eloquent one on the subject of saving three farthings a day.
Section 78 is directly related to this because it emphasises that the service in canteens will not be exempt from VAT. The reason for that was identified by Deputy Colley. It is a very legitimate one. It is designed to protect the workers, particularly those engaged in the catering industry. As Deputy Fitzpatrick knows, there now is a large number of canteens serviced by catering firms and, if we do not preserve this position, the danger is these catering firms would suffer very seriously. That would be a grave disadvantage to the workers in the long run because most of these firms provide very good food on very good terms. We have, I think, every reason to be grateful for the fact that one of these firms has been brought in to provide the culinary facilities in this House. As a consequence, we have seen improvements. If we did not retain this provision there would be a danger that employers, who now subsidise these canteens, would get rid of the catering firms and proceed to do the catering themselves. We are concerned with the preservation of employment, as is Deputy Fitzpatrick, I am sure. I doubt if any worker will impose upon himself the difficulty of going from his own place of work to his home for a meal which is zero rated for the sale of the small saving he could effect notionally by doing so. It would be purely notional. I think he can be comforted in knowing that he pays an extra three farthings a day so that his wife and children at home can eat all their meals zero rated, and that for the first time in ten years. That will more than compensate, I believe, for the small additional disadvantage of an extra three farthings per day—the price of a chip these days if you look at the price of potatoes.
The Minister could be right.
If a saving were to be made, and if money were the most important value, a couple of chips or a bit of cabbage taken off the plate, would provide the compensation.
(Dublin Central): How does the Minister reckon that it is only three farthings a day? On what basis does he price his lunch?
On the lunch that is available in many canteens at around 50p. At the moment, such lunches are subject to 5.26 and all that is happening in this Bill is that they will be subject to 6.75. Remember there is an element of service in all these things and that is what carries VAT.
I am afraid the Minister's calculations do not take account of what is really happening. There might be some basis for his calculations if all that were happening were that he was increasing the appropriate rate of tax. Of course, he is doing more than that. He is zero rating food and, therefore, the comparison in that context is quite legitimate as made by Deputy Fitzpatrick. The comparison is between the cost of the meal to a man if he has it in his home and if he has it in a canteen at work. The difference is not simply the difference between 5.26 and 5.75. It is, of course, between zero and 5.75.
(Dublin Central): The Minister must concede that food is not zero rated to any worker having his food in a canteen. A factory worker has not got the benefit of zero rating on food. The Minister must remember that, when he is speaking about the big benefits he is giving in zero rating food, as between the husband and wife and one or two children, the husband and wife are the principal consumers of the type of food which the Minister is zero rating. In effect, that family are getting the benefit of 50 per cent only, because the principal meal is during the day and the husband who is working in the factory is not getting the benefit, no matter how the Minister tries to gloss over it.
If we are to start arguing about who eats more at home, the parents or the children——
We heard a lot of that before.
I know plenty of children who eat more than their parents.
(Dublin Central): We heard a lot from the Minister about the benefits of zero rating. These are the people who do not qualify.
The missus and the children will be far better off. They can put a bit more water in the gravy in the canteen and get the benefit.
(Dublin Central): This covers service in hotels. Is that right? The delivery of goods to hotels becomes the rendering of a service?
It is a service rendered by the hotel.
(Dublin Central): What will the situation be in regard to wholesalers who are dealing only with zero rated food? Will the customers be issued with an invoice and a number?
Yes.
(Dublin Central): Wholesalers dealing specifically with zero rated food?
No. Such a wholesaler will still have to remain registered. This is the only way in which a record can be kept of his customers because some of what he is selling may reach outlets which would be subject to VAT, such as the outlets we are covering in this section.
(Dublin Central): It means that the average grocer will have to keep invoices still. He cannot go into a cash and carry and buy his goods without presenting his registered number.
The zero rate is a rate.
That is a very important statement the Minister has just made.
I challenged this and it hurts me to be using the phrase, but zero rate is a rate in value-added tax.
I found it very difficult to convince the Minister and his colleagues of that last year.
(Dublin Central): Grocers who are buying goods which are zero rated will still have a registration number?
Yes.
(Dublin Central): That clarifies the situation. I was wondering what the situation would be if a certain wholesaler were not held responsible, especially where we have now the rendering of a service, and where hoteliers and various people like that would be purchasing their goods. The Minister informs me now that the same regulations will exist as if they carried a certain tax and that the zero rate means that they will have to keep accounts. A grocer who purchases goods which are zero rated will have to produce his registration number. I find it very difficult to believe it, but I accept the Minister's word. The situation now in a hotel will be that drink, cigarettes and various other commodities will be deemed as the delivery of goods. On the other hand meat, vegetables and all types of foods will come under the rendering of a service. This will cause an enormous amount of confusion. Am I right?
The difference is that, if you buy food that has not been processed, you do not pay VAT on it but, if a process or a service has been applied to it, cooking it, or otherwise dressing it up, or presenting it, or serving it to you, a service has been performed and accordingly VAT arises.
(Dublin Central): On the service or on the lot? On which part of it.
On the whole lot.
On the whole thing. The price you pay for the article when you receive it in a serviced or processed condition.
There is no segregation of the value of the service as distinct from the value of the goods.
No, and I think the reason is obvious. Administratively, if you did not do that you would find that it would be said that the meat was the dearest possible meat and the service was the cheapest possible service.
(Dublin Central): I agree entirely that food in hotels should get no concession. The decision to charge VAT is right. Whether we like it or not, I do not believe it is value-added tax. As I define VAT, I cannot see any value added where the rendering of a service in this section is concerned. This is really turnover tax. You will make it up on your returns. In a hotel where there are wines on one side and food on the other, part of it will be the rendering of a service and the other will come into the category of the rendering of goods. I know the same service is charged but there is the complication——
Did the Deputy ever hear of corkage?
(Dublin Central): I heard of corkage but I see complications.
Now you are coming to the service category.
(Dublin Central): We will have to separate what is the rendering of goods. There is a complication for a hotelier who is making up his accounts for VAT.
We have avoided the complications by providing it this way. This is an umbrella clause so what he does in the hotel will carry VAT. What the Deputy is suggesting is that we should have VAT on some services and not on others.
(Dublin Central): No. I am in agreement with the Minister. I am merely pointing out the complications for a caterer. There are complications in the returning of the VAT form. Part of it is a turnover tax. There is no value added, you pay on the turnover.
We want to express our disapproval of the failure to give the benefit of zero rating to workers in factories, offices and so we would ask you, Sir, to put the section.
(Dublin Central): I move amendment No. 13:
In page 42, line 37, to delete "6.75 per cent" and to substitute "6.50 per cent".
This amendment again is to try to simplify things for the distributive trade in compiling VAT. The Minister has rounded off certain figures. He has brought 16.37 to 19.50. That is a round figure and easy to calculate. We thought the Minister could do the same here by making 6.75 6.50. On the VAT Committee last year the then Fine Gael spokesman on Finance, Deputy Garret FitzGerald, was quite adamant that this would cause considerable confusion and trouble for traders in compiling the amount of VAT due. On that occasion he put forward several amendments to round off the figure. The Minister has an opportunity here of doing this. I am only re-echoing the words of his colleagues. I am not concerned about the higher level because I know that is only collected at wholesale level. If the Minister would accept this amendment it would simplify things to some degree. He would be only agreeing with his colleague, the Minister for Foreign Affairs.
Lest the Minister would be tempted to make a particular case arising out of what Deputy Fitzpatrick has said, I want to get in ahead of him and point out that when the present Minister for Foreign Affairs was making his proposition for a round figure he was doing it in a context where we were not changing the rate of tax and I resisted all of his amendments because I did not want to change the rate of tax. It was simply a transfer from one system of collection to another. Today we have a different situation where the Minister is actually changing the rate of tax. In that context it is very reasonable to make the case that Deputy Fitzpatrick has made because there is no doubt that there are complications, especially for small retailers, with these odd percentages. The justification for not changing them in the past was that we were not changing the rate of tax. Today when we are changing the rate of tax the Minister has a wonderful opportunity to do some simplification of figures.
All things in life cost money and nobody knows that better than Deputy Colley. If we were to eliminate the decimal point, and that is what people would love to do, and bring say, 6.75 back to 6 per cent, the loss in revenue would be £6 million because each .25 at the lower rate of VAT represents a revenue of £2 million. We are even informed that the 19.50 is an irritant and that it ought to be rounded up or down. Suppose we eliminated the decimal point altogether. If we made it a rate of 6 per cent there would be a loss of £6 million, if we went up to 7 per cent there would be a plus £2 million and if we went to 20 there would be a plus of £1.2 million. Having regard to all the arguments we heard about the 3.2 increase which occurred I would not like to bring further wrath from the benches opposite by any variation. The budget figure has already been settled and it was settled on the basis of these figures. While I can understand the desirability of simplifying life for everybody, including traders, it simply would not be possible to forfeit the £2 million which would be involved by this reduction.
I do not wish to delay the House unduly but I want to place on record that in section 79 we are asked to approve the increasing of VAT on every commodity and every service other than food as defined in earlier sections, and as Deputy Fitzpatrick has pointed out, that means we are increasing the tax even on food served in canteens and factories. We have always opposed the concept that is involved in this Bill in regard to the zero rating of food. We have opposed it because we believe that it amounted to a confidence trick on the general public, that the general public will never see the benefit which they are supposed to get from the zero rating of food but they certainly will see the direct and consequential increases in the cost of everything else. In fact, it is our belief that the increases will be more than those which are directly consequential and provided for in this section if only because in some cases it is not possible to get a coin that will represent the difference.
But there are other reasons for this. We spelled these out before and, therefore, we will not go into them all again. However, I would point out that not alone is the price of everything else being increased but in the process of doing so, we are increasing by direct Government action the cost of such items as fuel for the home and footwear and clothes, all of which are essential items. The actual increase in costs will be more than that brought about by this direct Government action and, of course, this is additional to the steady increase which is occurring at present in the cost of these items because of inflation. In these circumstances we believe that this whole concept particularly as set out in this section is ill-advised and may have very serious social and economic consequences, that it will not benefit the consumer at all and that it could well contribute substantially to making extremely difficult the conclusion of a third national pay agreement, if not to making it impossible.
We could say a great deal more on this but I will not do so at present. I wish to record as briefly as possible our total opposition to the proposal in this section that the rate of value-added tax in every item, other than the ones I have mentioned, is to be increased.
We have debated this matter at very great length but it will be seen on September 3rd next who will have the last word.
We will have to wait longer than that.
The reality is that the adjustment in VAT rates means a reduction of a half per cent in the cost of living. That is not great but, like the reduction we gave on rates, it is much better than to move in the wrong direction all the time. It is worthy of note.
There was argument throughout the earlier part of this year, particularly during the general election campaign, that the EEC would not permit a reduction in VAT on food to a zero rate but that they would require tax to be charged.
I think the argument was that this would be the case ultimately.
Ultimately but not immediately.
There is a difference.
In other words, that one leaves out or introduces according to one's wishes.
To introduce the tax and then to remove it in a couple of years' time only adds to the confusion.
The interesting point is that within the EEC there are four countries which have a zero rating on some commodities. This action on our part will bring the number up to five but our wisdom is proved by the fact that the EEC will provide that, unless a commodity is zero rated before 1st January, 1974, it may not be zero rated thereafter. Therefore, this was a timely step on our part. That is one aspect of the matter but it is a very important one. The OECD report and other observations on EEC organisations indicate that where a country has a good social reason for zero rating or for reducing the rates on certain commodities, they should do so and OECD recommended that tax on food should be abolished. There is a very good reason for doing so in Ireland, perhaps more than anywhere else, for the reason that the greatest element in our present spiral of inflation is in respect of food costs. These costs are substantially beyond our control but they arise because we, being a foodproducing country, we have now available to us far more attractive prices for our produce than were available previously and because there are also certain increases in the import of other food commodities.
It is interesting to note that in this whole field of inflation, the rate of inflation in relation to non-food items has been declining while the rate in relation to food has been increasing. In that situation we have been justified entirely in shifting taxation from food. For the first time in ten years of tax. That was justifiable socially and although one has to pay a higher tax on other commodities in order to compensate for the loss in revenue by reason of zero rating food, the step was desirable and progressive socially. Economically, it is advantageous.
Now that food prices have risen so fast the reduction we are causing by removing VAT from food is comparatively greater than it would have been if it had been given a few years' ago and the step we are taking will result in a considerable improvement. I emphasise that if we did not take this step now we might never again have the opportunity to do so and that is a very good reason why we should hail the 3rd September as a day of great deliverance for the housewife.
(Dublin Central): I do not know which section the Minister is speaking about but we are referring to section 79 which contains no reference to zero rating. This section concerns increasing the rates of VAT. I wonder if the Minister has read this morning's newspapers in relation to increases that have been sanctioned by the Prices Commission in respect of a substantial number of items. These increases have been sanctioned before the date on which the revised rates are to come into operation. Petrol, for instance, is being increased by a penny per gallon and we all know that when the increase in VAT on petrol proposed by the Minister is imposed the petrol companies will apply for an additional increase. I saw no reference in the budget speech to petrol being reduced in price. I know there are certain regulations in regard to spirits and tobacco but I am not aware that they apply in respect of petrol.
A substantial increase, too, has been sanctioned in respect of transport costs but it is not very long ago —a short time before the Presidential election—that the Minister for Industry and Commerce told us here that the National Prices Commission were considering the question of transport costs. I understood that they were considering the question as part of a social service and that help would come from central funds. However, it is obvious now that the Minister is going back on his word.
A subsidy from the State of £12,250,000 is not a bad contribution but let it be remembered that that was a legacy we inherited.
(Dublin Central): I am questioning only the matter of honesty. If the Minister had told us three months ago about that subsidy and then granted the increases, I could say there was some honesty involved.
The Deputy will appreciate that a general debate on prices would not be appropriate on this section of the Bill.
(Dublin Central): Section 79 increases the price of many commodities, including petrol. Even though increases have been granted in respect of transport in this city, additional increases will be necessary because of the increase in the price of petrol. It is on this aspect that I speak. The normal turnover tax on petrol will be increased from 5.26 to 6.75. This is bound to affect transport costs. This is apart from the increase granted today of 1p a gallon. We know that increases were sanctioned in respect of public transport before this was taken into consideration. CIE will have to reassess their costings, taking into account the increase from 5.26 to 6.75. On that basis, transport costs will go up again. The Minister for Industry and Commerce deliberately delayed sanction for a specific reason. That is water under the bridge now. According to today's papers, increases will take place in respect of various items.
I would ask the Minister if the Prices Commission sanctioned increases on items which will be zero rated after 3rd September. It would be a mistake, and I doubt if the Prices Commission would do it, to sanction increases on items which will be zero rated after 3rd September because, naturally, there will be a reduction in the raw material here. I have not gone through the list of price increases but it is quite extensive. I was wondering if any of the items are items which will benefit from the zero rating on food. Apart from that, the Minister will find prices spiralling, which is happening all the time. This section increases prices across the board. Footwear, clothes, fuel and various other essential commodities are affected. The price of petrol has gone up this morning and will be further affected by the increase from 5.26 to 6.75 with consequent effect on public transport although the Minister stated three months ago that he would have another look at this matter.
In order to shortcircuit, I should like to ask one question. Will the increases which come about as a result of this section apply automatically without the approval of the Prices Commission or the Minister for Industry and Commerce?
The necessary arrangements have been made with the Department of Industry and Commerce to authorise any of the price increases which will result in this matter.
A new order would be necessary?
I am not sure of the precise machinery.
It will be legally sanctioned?
There will be no conflict existing.
(Dublin Central): In respect of the increase from 5.26 to 6.37 in the case of petrol how will that be adjusted?
These duties are imposed, not per gallon but in much larger quantities.
(Dublin Central): I buy petrol per gallon.
The Deputy may buy per gallon but he is aware that most people today buy their petrol by the £1 note rather than by the actual gallonage. Somebody will adjust a knob on the side of the machine.
(Dublin Central): It will be an increase in price.
It will be more than that too.
You may get better petrol that will take you farther.
Tá
- Barry, Peter.
- Barry, Richard.
- Begley, Michael.
- Belton, Luke.
- Belton, Paddy.
- Bermingham, Joseph.
- Bruton, John.
- Burke, Dick.
- Burke, Joan T.
- Burke, Liam.
- Byrne, Hugh.
- Clinton, Mark A.
- Cluskey, Frank.
- Conlan, John F.
- Coogan, Fintan.
- Cooney, Patrick M.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan.
- Creed, Donal.
- Kelly, John.!
- Kenny, Henry.
- Kyne, Thomas A.
- L'Estrange, Gerald.
- Lynch, Gerard.
- McDonald, Charles B.
- McLaughlin, Joseph.
- McMahon, Larry.
- Malone, Patrick.
- O'Brien, Fergus.
- Crotty, Kieran.
- Cruise-O'Brien, Conor.
- Desmond, Barry.
- Dockrell, Henry P.
- Dockrell, Maurice.
- Donegan, Patrick S.
- Donnellan, John.
- Dunne, Thomas.
- Esmonde, John G.
- Finn, Martin.
- FitzGerald, Garret.
- Flanagan, Oliver J.
- Gilhawley, Eugene.
- Governey, Desmond.
- Griffin, Brendan.
- Hegarty, Patrick.
- Hogan O'Higgins, Brigid.
- Jones, Denis F.
- Kavanagh, Liam.
- Keating, Justin.
- O'Leary, Michael.
- O'Sullivan, John L.
- Pattison, Séamus.
- Ryan, Richie.
- Staunton, Myles.
- Taylor, Frank.
- Thornley, David.
- Timmins, Godfrey.
- Tully, James.
- White, James.
Níl
- Ahern, Liam.
- Allen, Lorcan.
- Andrews, David.
- Barrett, Sylvester.
- Brady, Philip A.
- Brennan, Joseph.
- Breslin, Cormac.
- Briscoe, Ben.
- Browne, Seán.
- Brugha, Ruairí.
- Burke, Raphael P.
- Callanan, John.
- Calleary, Seán.
- Colley, George.
- Collins, Gerard.
- Crinion, Brendan.
- Crowley, Flor.
- Cunningham, Liam.
- Dowling, Joe.
- Fahey, Jackie.
- Farrell, Joseph.
- Faulkner, Pádraig.
- Fitzgerald, Gene.
- French, Seán.
- Gallagher, Denis.
- Geoghegan, John.
- Gibbons, James.
- Gogan, Richard P.
- Haughey, Charles.
- Healy, Augustine A.
- Herbert, Michael.
- Hussey, Thomas.
- Lalor, Patrick J.
- Lemass, Noel T.
- Leonard, James.
- Lynch, Celia.
- Lynch, Jack.
- McEllistrim, Thomas.
- MacSharry, Ray.
- Meaney, Tom.
- Molloy, Robert.
- Moore, Seán.
- Murphy, Ciarán.
- Nolan, Thomas.
- O'Leary, John.
- O'Malley, Desmond.
- Power, Patrick.
- Smith, Patrick.
- Timmons, Eugene.
- Tunney, Jim.
- Walsh, Seán.
- Wilson, John P.
- Wyse, Pearse.
I should like to ask the Minister if he would clarify the position here. I have been asked by representatives of a number of small traders to get the Minister to clarify the position of registered traders, as to whether or not it will be necessary for them to take stock as at the 3rd September next in order to recover the tax suffered by them on stock which becomes zero rated on that day.
No. Such a registered trader would in the ordinary way have claimed relief of the VAT paid at the time of purchase of the stock. If a person is not registered he could apply for registration.
(Dublin Central): There is provision for that later on. It will all depend on the volume of business the person is doing. In the case of a trader who was doing a large volume of business, who now finds himself with 95 per cent of his stock zero rated, it would take a considerable amount of time for him to balance out and get his money back from the Revenue Commissioners. Would this not be so?
I take it that in the case described by Deputy Fitzpatrick— there may be quite a number of them in the next repayment period—there will be a number of small traders who will be due an actual refund by the Revenue Commissioners rather than having to wait to recover it over a period.
Yes, and having regard to the fact that the zero rating is on goods which by and large are perishable it is not likely that there would be any long wait before that person would get the refund.
(Dublin Central): Would they get a refund or would they adjust it in their returns which would be due?
They would show the tax on their returns and if it is more than their liability they would get a repayment.
This is consequential on the arrangement that the taxable period commencing on July 1st, 1973, which would normally be August 31st, will be adjusted to the 2nd September.
(Dublin Central): Is this an additional penalty?
This section amends the penalty for obstructing an authorised officer of the Revenue Commissioners in the exercise of his duties in connection with VAT. The penalty at present is £20 together with a continuing penalty of £20 per day for each day during which the obstruction continues. This section substitutes a single penalty of £100, which corresponds to the penalty prescribed by the Income Tax Act in relation to obstruction in relation to income tax.
(Dublin Central): Is this an inspector calling to view the records?
Yes, but of course it is very seldom resort has to be made to this and it is only when deliberate obstruction takes place.
(Dublin Central): The penalty is being increased to £100 from £20.
It is a single penalty of £100. The old system was £20 plus £20 per day, so if a person continued to obstruct it would be £20 per day ad infinitum.
Is what is proposed here in line with the penalties for income tax or similar taxes being collected by the Revenue Commissioners or is this a new arrangement in regard to penalties which applies only to VAT?
There are different penalties in relation to fraudulent returns for income tax purposes. There is no return to be made in relation to income tax comparable to this.
I appreciate that but the Minister will recall that in a number of cases he is bringing the penalties in respect of offences connected with VAT and PAYE into line with those on income tax. There is an argument in principle for this, but here he appears to be introducing special arrangements in regard to VAT. Is there some particular reason why this should be done?
No. The general approach has been to try and make penalties similar. This is as nearly similar as it can be made. While the particular offence does not correspond with any other particular act the penalty is of the dimension which is applicable to tax offences in other spheres.
(Dublin Central): Is this for issuing inaccurate amounts for VAT in invoices?
It is for fraudulent returns. Nobody is to be blamed for making a mistake.
(Dublin Central): That is just the case I want to put to the Minister. People, even wholesalers, can genuinely make mistakes. It is very simple to make mistakes in today's calculations. I am sure these are not the people the Minister has in mind in this additional penalty.
That may be, but nevertheless it is important to point out that this applies to something other than fraud. The amount is double in the case of fraud.
Yes. I should emphasise in relation to both section 83 and the previous section that these penalties apply only when a prosecution takes place. It is for the court to determine whether or not the action is such as to be so culpable as to deserve the penalty. While the wording used here is "fraudulently or negligently" the courts interpret that as requiring that the negligence must be such as to indicate that there was an intention to defraud or there was an negligence so grossly fraud or there was negligence so grossly careless as to be indifferent as to whether fraud or a misleading situation arose.
(Dublin Central): This question of negligence can be interpreted in different ways. You can have negligence in a particular type of business that may not have the personnel capable of keeping accounts accurately. There is nothing deliberate about this but I can see a situation arising where, through no fault of the person, he could be considered negligent. This may be completely outside the control of that person but he could also be caught under this section.
There are two protections. First of all, there is the ordinary provision and entitlement of the Revenue Commissioners to use their discretion and not to prosecute. They do not prosecute, as a rule, unless there are good reasons for believing somebody is fiddling. At that stage they prosecute and if that accused person is able to show to the court that that is not the position and there are grounds for believing him, then the court do not impose the penalty.
This section authorises the making of regulations by the Revenue Commissioners in regard to the granting of relief to a newlyregistered person for the estimated VAT element in the value of stock-in-trade held by him immediately before he first became accountable for tax. It also authorises the making of regulations setting out the procedures for making determinations by the Revenue Commissioners in regard to the rate of tax chargeable on the supply of goods or services of any kind. This is a provision which the trade would welcome in order to avoid some of the disputes and arguments which have taken place in the past in relation to the particular rate of VAT applicable to certain goods. This would enable this uncertainty to be determined in advance.
(Dublin Central): This is the rendering of services.
Goods and services.
(Dublin Central): What is this section about?
This section provides for the appropriate adjustment of the contract prices either upwards or downwards by reference to changes in the amount of tax chargeable for supplying goods or services under the contract. It is in amendment of section 35 of the Principal Act.
Is this brought about by virtue of the change in the VAT rate?
Yes.
It is a consequential change as a result of changes in the rate?
Yes.
This section explains the exemptions for hospitals and schools. It adds three new exemptions for the delivery of horses, and the delivery of greyhounds, and the natural or artificial insemination of cattle, sheep or pigs. I think I explained it on the Second Stage, and I am sure Deputies will recall the explanation for what seemed to be a rather peculiar exemption. It arises by reason of the fact that in the bloodstock and greyhound industry animals have frequently to be imported and exported for races, training and stockbreeding. This elimination avoids a situation of having to impose the tax and then refund it on the reexport of the animal.
The provision in relation to noncharging on natural or artificial insemination of cattle, sheep or pigs is something that is being done for the relief of farming co-operatives which engage in this service. If it is taxed in their case and not in the case of others who are not registered it works to the disadvantage of the farming co-operatives. The exemption in respect of food and services provided in hospitals and schools is one which no doubt commends itself to the Opposition who were so angry about the tax being imposed on canteens elsewhere.
We certainly welcome that and we recall the explanation which the Minister gave. No doubt the Minister recalls the hope I expressed that the Minister and his colleagues will be successful in explaining to the public why it is that in the same Bill it is necessary to exempt from VAT greyhounds and racehorses while at the same time increasing the VAT on fuel, footwear and clothing.
There is no VAT charged on the importation or exportation of human beings either.
That is a consolation.
(Dublin Central): Are the horses exempt from all taxes?
Yes.
(Dublin Central): The only reason I asked that is because meat is becoming so costly I can see us consuming horses shortly. I presume horsemeat will be exempt, too?
Yes, it would be food. If you eat it in the Gresham Hotel it would not be exempt.
(Dublin Central): You have made provision for it.
This Minister has not left out much.
(Dublin Central): As regards hospitals and nursing homes, does this include qualified nurses who receive their food in the canteens or is it for the trainee nurses?
No. This, in fact, does not cover the nurses. It covers the beneficiaries of the services provided in the schools and hospitals. There is exemption for the patients and the students but not for the other people there.
(Dublin Central): Student nurses should be taken into consideration. They come into the category of students.
If they fall into that category I am sure the Revenue Commissioners will make provision to exempt them. It says that the exemption applies to patients in hospitals and nursing homes and to students in the schools. If it is a nursing school it may well be that they would qualify. As I have said before, I am not going to be tax-adviser to the House.
(Dublin Central): I hope that the Revenue Commissioners will not be too strict when dealing with student nurses.
I think they would have a warm spot in their hearts for student nurses.
The Minister made a very important statement on another section, and that was that a zero rate was another rate. It is very important because I found it impossible to convince him and his colleagues about that fact in previous discussions. It is some progress that the Minister has now learned that what I said was correct. The practical effect of this is that for shopkeepers the zero rating of food constitutes a situation in which shopkeepers have to handle three rates, not two as previously. For the small shopkeeper in particular this will present very serious difficulties. This constituted one—though perhaps not a major one —of the major objections to the whole proposal of zero rating in food and increasing the rate on other goods.
I do not know whether the Minister has given much consideration to the problems which arise for shopkeepers. A number of them are extremely apprehensive in regard to the consequences of having to handle a third rate. There are certain things which can be done to ease the burden. I have no doubt that the Revenue Commissioners are doing what they can to communicate this to shopkeepers, but with the best will in the world the third rate which the shopkeepers will have to handle on foot of this section will constitute a great difficulty for some, and an almost insurmountable obstacle for other small shopkeepers.
I would not regard it as a sign of progress that I have accepted the use of the term "zero rate" as being valid in tax law. I regard it as rather sad that I am forced by the exigencies of time to tolerate imprecision and untidiness in the use of language. Apparently one has to do it in order to operate the system of tax.
The zero rating aspect presents some problems but there are some benefits. No longer will traders dealing with zero rating quotations have to mark up the commodities at the rate that they would previously have had to mark them in order to incorporate the tax. They are saved at least that discipline. Some suppliers who have had to give credit to people have had to give credit not only in relation to the actual price of the article but also in regard to the element of tax which the supplier himself had to pay. There are some benefits, and they are not inconsiderable, for these people who will be handling zero rating of commodities.
People who are handling zero rated commodities are happier to accept whatever little inconveniences arise because they realise that the benefits are much greater than the disadvantages. I should like to take this opportunity to express gratitude to the grocery trade and all traders in food for the way in which they have shown an anxiety to ensure that the reduction in VAT will be passed on to the consumers. While allegations are made against them that they might not pass on the reduction in tax, all the signs are that they are most anxious to pass on the reduction. I am sure that this will be so. There may be a few rogues who will spoil it but the Minister for Industry and Commerce will have available to him an army of inspectors to supervise the operation as best it can be done to ensure that the benefit is passed on to the consumer.
This section provides that animal medicine which is neither pet medicine on which there is the higher rate of 19.5 per cent, nor oral medicines other than pet medicines chargeable at the zero rate, shall be chargeable at the lower rate of 6.75 per cent.
(Dublin Central): Did the Minister refer to unregistered traders? I must have missed it. What provisions are being made in this respect? I cannot seem to find it in any section and I should like to know what the provisions are.
Is the Deputy referring to newly registered traders? If he is, it is dealt with in section 80.
(Dublin Central): I know it has been passed and I am sorry to have to go back on it. I am making a point only for clarification. Can they opt in or opt out?
They can opt in or opt out. It might not be to their advantage to opt out. It might be as well if they stayed in.
(Dublin Central): Would it be to their advantage to stay in if they had a very small turnover?
They have to show that they fulfilled certain conditions. In other words, the slate would have to be clean.
(Dublin Central): The only reason they would opt out is because of the Revenue Commissioners owing them money.
Can they opt out if the Revenue Commissioners owe them money?
(Dublin Central): All being equal, can they opt out?
Yes.
This provides for an amendment of the VAT Act, 1972, which is necessary because of the changes in VAT and other changes in Part V of this Bill.
The purpose of this section is two-fold. First, it is to adjust the annuity fixed provisionally last year for the period of 30 years for the redemption of the debt incurred on voted capital services in 1972-73 by relating the annuity to actual instead of estimated expenditure. Secondly, it fixes provisionally a new annuity, also for 30 years, to redeem voted capital services for 1973-1974. With the exception of the figures quoted, the section follows the wording of similar provisions in previous years.
This section relates to securities given by certain State-sponsored bodies and enables the same facilities to be given to securities issued in the State by the European Coal and Steel Community, the Atomic Energy Community and the European Investment Bank. I referred to this on a previous occasion and this provides for an obligation which is imposed on us.
I take it none of these securities has been issued as yet within the State?
No.
This is the section which imposes further taxation on the rates of motor vehicle duty, known as road tax—on motor cycles, tractors, commercial goods vehicles and motor cars. The overall effect of the imposition of these increases is very difficult to calculate, but one thing is certain. The effect will be to increase the cost or the costings of almost every industry and business in the country.
As the Minister knows, an unfortunate consequence of this kind of across the board increase is that if one could measure it as applied in a particular industry as amounting to X, it so happens that, because of the structure of industry and distribution, when it reaches the consumer it may be X plus 10 or X plus 20, depending on particular circumstances. In other words, the total effect on the community will not be the amount of the increased amount it is estimated to yield but a considerably larger sum. At a time of very serious inflation and when, as Deputy Fitzpatrick pointed out earlier, very substantial increases in the prices of various commodities have been announced, this section will add very considerably to the inflation with which we are already faced, apart from any particular difficulties it may entail for individuals affected directly by it.
There have been some instances of very substantial increases under the relevant Financial Resolution which section 92 replaces. I seem to recall one particular case in which the rate of tax is going up from 50p to £50 and I heard recently of some increases on the initial registration of commercial vehicles which were not very obvious to many people, and, indeed, I believe that some of the local taxation officers and gardaí were not aware of them and that they have had to get instructions from Dublin. The consequence has been an even greater shock to those who have now learned something of the true effect of the proposals contained in the budget and being implemented by this section.
I have already pointed out, and I do not think it needs repetition, that the total cost of the additional taxation on motor vehicles is far less than 1 per cent of the total cost of operating motor vehicles, having regard to the fact that the cost of operating motor vehicles for reasons far beyond the Exchequer has increased by multiples ten times greater than that amount. This has been so for many years past and I do not think this is at all an excessive burden for the motor fraternity to carry, particularly when the money which will accrue as a result of these minimal changes in the cost of motoring will be devoted entirely to the provision of much needed roads and associated amenities.
That sphere of national investment has been terribly neglected. The whole infrastructure is totally below the capacity of the existing motor stock and accordingly we felt it necessary, as a matter of urgency, to get the additional revenue in order to improve roadways and road services generally. That is all we are doing and I am certain from the indicators that it is well justified. As the House knows, the sale of new motor vehicles rose in the first four or five months of this year by more than 30 per cent. I might point out this was pre-budget and it indicated there was considerable buoyancy in this sector. Since the budget the rise has been even greater.
Does the Minister realise that the cost to country people, people who have been delivering milk to creameries, has gone up by £50? Contracts will have to be broken and remade with those people who are collecting the milk for delivery to creameries. This is the most serious effect I see from this provision. Of course, I also am thinking of people who use cars to get to work. These people are very hard hit.
I did not say much on this Finance Bill but this matter very much affects the country. It had an adverse effect on the fate of the Government's nominee in the Presidential election. I am quite honest about this; I am not talking politics. We have many creameries and many of them have articulated lorries which had very small tax. These have now gone up £60. Diesels have also gone up. That means a completely new contract for drawing in milk. It is a very serious matter in the country and I could speak at length on it but I do not want to hold up the House.
In regard to what the Minister said a while ago I believe that very substantial as the proceeds of this section will be to the revenue, if the Minister thinks this will enable him adequately to tackle the problem of financing the necessary roadworks he is mistaken. I think he will find, if he has not already found, that before the change of Government serious consideration was being given to the whole problem of financing necessary roadworks and that opinion was veering in the direction of what I have felt for some time, that the method by which we finance roadworks is antiquated and quite unsuited to our requirements.
In effect, we finance roadwork by current revenue, sometimes supplemented by the Exchequer. If we are to tackle the major problems that exist, it seems it will be necessary to regard it as an item of capital expenditure to be financed like the other infrastructural development necessary in the country. In this connection I have considerable hopes of the European Investment Bank and some other international agencies but it will require a completely different approach on the Minister's part to the financing of roadworks. Many millions of pounds will be required; the programme must be worked out over a number of years to enable this to be done and to enable money to be borrowed and interest to be repaid. I say this because I should not like the Minister or anybody to believe that, even though the additional revenue being raised here is very substantial it will go anywhere near solving the major problem of infrastructure involved in the roadworks that are required.
Every little bit helps. Directions have been issued to all authorities and to the gardaí that any person who has what is called a cutdown tractor and has an existing tax disc for it is entitled to operate under that tax disc for the duration of the period for which the disc was issued and should not be in any way inhibited in respect of the user of that vehicle during the currency of the existing tax. That means such a vehicle would be entitled to use the rebated fuel which many of them have been using. While I know that great mileage has been obtained by the Opposition in this regard——
A very suitable word.
——the reality is that this practice of using cutdown tractors arose in the days of the previous Government and obviously caused so much concern that a number of farmers and operators of these vehicles were prosecuted and ultimately a case was stated to the courts in order to have the matter resolved. Then it was clearly established that advantage was being taken of the loophole in the law so that vehicles could be taxed at this low rate so that they could avoid paying full duty on fuel to operate them. We did no more than our predecessors had intended to do. There is a draft for which I am only too ready, as Deputy Colley knows, to give credit where credit is due.
We know that—when you need a crutch.
It was ready to put into this year's Finance Bill. We just helped it along the way.
I understand that in the case of public service vehicles, especially hackney cars, up to now renewal of licence cost only 30 shillings but in the past few months the cost has gone up to £30. Could the Minister explain under what section this increase has been authorised?
This is beyond my ken. I am not aware of it. It is certainly not done by anything in this Finance Bill and I cannot think of any other legislation recently passing through the House which would have caused this—perhaps, it did. If the Deputy would be good enough to bring any cases he knows of to my attention I shall certainly, if, as I suspect, they are not my responsibility, pass them on to the Minister for Local Government whose responsibility hackney cars would normally be.
I shall certainly bring a number of cases to the Minister's attention. This is very prevalent in Mayo at the moment when people are changing cars. People who had an old hackney car and bought a new one were asked to pay £30 instead of 30 shillings for the licence.
This was something I was referring to earlier, if the Minister remembers, when I said that neither the licensing authorities nor the Garda authorities were aware of this change It now appears that the Minister is not aware of it and so it seems that it should be followed up.
I have been informed that it may arise under regulations made in 1970.
That would require further elaboration.
I have said I am so informed. I have no reason to doubt the advice I am getting but if the Deputy will be good enough to bring these cases to my attention I shall look into them.
If the change has been made under regulations that came into operation in 1970 it did not apply last year when the persons who brought this to my notice changed a car last year and had to pay only 30 shillings. This year, for some reason, they are asked to pay £30.
If the Deputy will let me have the particulars I shall be glad to look into the matter and communicate with him.
This is a new charge in respect of the licensing of a mechanically-propelled vehicle for the first time for use on public roads. The charge is £1 for motorcycles and £5 for all other types of mechanically-propelled vehicles with the exception of vehicles which are exempt from road tax. This provision operates in the majority of European countries imposing a special charge in respect of original registrations because of the cost involved. It seems there is a good social reason why society should, as it were, collect a fee at this stage because the cost of disposing of a mechanically-propelled vehicle when it comes to the end of its useful life is in excess of £5 nowadays.
In the Dublin region the public authority have taken over the responsibility of disposing of these cars free of charge because they have become such a social evil. I have always felt personally that there should be a built-in cost at the time of manufacture of every motorcar which would be handed over to the State to be held until such time as the car came to be destroyed because cars both in use and in their death are doing considerable damage to our environment. There is a good deal to be said for charging a fee at the time of first registration.
We are not very happy with this section but we will not oppose it.
This section is a repealing section which is consequential on the other provisions of the Bill.
This is the usual care and management provision.
It is the most important one in the Bill.
It is the one which allows us to display some humanity.
This is the usual provision in Finance Bills.
I move amendment No. 14:
In page 56, paragraph 1 (e), after "surrender" to insert "at any time before the happening of the event aforesaid".
This is a drafting amendment. Paragraph 1 sets out conditions with which an endowment policy must comply in order to qualify for life insurance relief. Subparagraph (e) was intended to lay down that, apart from the capital sum payable under the policy on the happening of the event, that is, death or the expiry of a specified period, no other benefit of a capital nature, other than a participation of profits was to be payable. The subparagraph, as drafted, does not cater for the payment of the capital on the happening of the event and the proposed amendment rectifies this.
Amendment No. 15 and amendment No. 16, in the name of the Minister, seem to be related and in that event amendments Nos. 15 and 16 will be taken together, by agreement.
I move amendment No. 15:
In page 57, paragraph 6, to delete subparagraph (2) and insert the following paragraph:
(2) Liability for the payment of a premium is discharged in accordance with this subparagraph if it is discharged by the retention by the company with which the insurance is made of the whole or a part of any sum which has become payable on the maturity of, or on the surrender more than ten years after its issue of the rights conferred by, a policy—
(a) previously issued by the company to the person making the insurance, or, if it is made by trustees, to them or any predecessors in office, or
(b) issued by a company when the person making the insurance was an infant, and securing a capital sum payable either on a specified date falling not more than one month after his attaining the age of twenty-five years or on the anniversary of the policy immediately following his attainment of that age.
being a policy which was itself a qualifying policy, or which would have been a qualifying policy if issued in respect of an insurance made on or after the 16th day of May, 1973.
The effective purpose of the amendments is to insert in paragraph 6 (2) the material contained in subparagraph (b). For drafting purposes, however, it was thought preferable to substitute the complete subparagraph as amended. The purpose of the inclusion of the material at (b) is to ensure that policies on a parents' life which contain an option for conversion into policies on a child's life, in the child's name, at some date prior to the child reaching the age of 25 years, will be recognised as qualifying policies.
I move amendment No. 16:
In page 57, paragraph 7, subparagraph (2) (a), after "not a qualifying policy" to insert: "unless the person making the insurance in respect of which it is issued was an infant when the old policy was issued, and the old policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining the age of 25 years or on the anniversary of the policy immediately following his attainment of that age".
This is the Continental Shelf.
This is the protocol between the Irish Government and the British Government, double taxation.
There are some minor oral amendments which I should like to make here, with the permission of the House. They are merely drafting ones.
I move:
On page 63, the deletion in paragraph 2 (b), second line, of "(b)" and substitute "(a)".
It is merely a misprint.
(Dublin Central): Does this Schedule have regard to customs duties?
The Fifth Schedule deals with disallowances of trading losses and restriction of capital allowances.
(Dublin Central): Could the Minister give us any clarification as regards the duties that exist today on imported spirits? I thought that there was an EEC regulation that this would have to be equalised. Has it been equalised or is there a difference?
There is, I understand, a small difference. The Deputy will see on page 67 that there are different rates. As regards the EEC, spirits are the subjects of a draft Council directive which is still under discussion in the Community. It is in respect of beer, tobacco, mineral oils and wine. They are also the subject of separate draft directives, but they are still only drafts. The aim of the draft directive is to harmonise the structure on the fiscal duty on spirits on a Community wide basis. The directive does not relate to the level of the duty. While the Community has harmonisation of the levels of fiscal duties as an objective to be achieved at some future date there is, as yet, no firm commitment to doing this. Until such commitment exists the member states are at liberty to vary the rates of their fiscal duties. In fact there is at present an advantage in favour of home spirits under several heads.
(Dublin Central): Have we any commitments in a free trade agreement as regard doing this between England and ourselves?
Yes, there is.
(Dublin Central): Has this been done?
Yes, it has. We have only two years to go, until July, 1975.
I think that on the spirits it has been completed.
I am sorry, I am wrong. I understand that on spirits it is already so.
I do not want the Minister to answer this. I just want him to listen to me.
At this stage I am so exhausted I might.
It seems to me to be possible that the Minister, in deciding the increased duties on tobacco, did not advert to the problem to which we referred last night of hard pressed tobacco. I would ask the Minister to consider it again and to assure him that if he thought fit to bring in some piece of legislation, or whatever is necessary to take action on that, that he will get full cooperation from this side of the House.
I am sure I would.
I move amendment No. 17:
In part III, page 75, to delete the second column of the Table and to add at the foot of the Table:
"If the term does not exceed 35 years, or is indefinite and does not exceed £500—nil,
and 50p for every £50, and fractional sum of £50 over £500."
The Minister will recall that Deputy O'Malley dealt with this partially on a section. The case he was making was that, while stamp duty has been removed in the case of what one might call relatively small purchases, in the case of ordinary tenancy agreements, which in many cases affect people who are even less well-off than the purchasers of houses, there is not an easement.
Deputy O'Malley's amendment was designed to provide an easement for them. He had some difficulty in regard to this amendment and he would not necessarily have put the figure up to £500 but, because of the way the existing Schedule is constructed, it was not possible for him to do otherwise. I would urge the Minister to give very careful consideration to this. He will, I am sure, acknowledge that there is a problem.
We have already debated this at length and I have given the answer: I said we might spread a little more jam next year and, when the time comes, I will consider this as one of the possible ingredients.
There is very little jam involved in this.
This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.