asked the Minister for Finance if he is aware that VAT is not payable on imported furniture until the product is sold, whereas VAT is payable on all stages of furniture manufactured in the State; that consequently Irish shopkeepers have an incentive to import furniture rather than to purchase from manufacturers here; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - VAT on Furniture.
38.
Under the VAT system a registered person buying supplies on the home market is invoiced with tax by his supplier and credits this tax against his own liability on sales. If he buys from abroad he does not pay tax at importation but must pay the full tax when he sells the goods.
I am satisfied that on balance the system gives no incentive to purchase from abroad. The purchaser gets credit for the tax on his purchases in the home market in the taxable period in which he receives his supplier's invoice, whether or not he has actually paid the supplier at the time and whether or not he has sold the goods. The result is that, on normal credit terms, the purchaser will have obtained his tax credit before he pays his supplier. He will, in such circumstances, have no tax incentive to buy from abroad rather than in the home market.
The collection of VAT at the time of importation would, on the other hand, seriously affect the cash flow of the many Irish manufacturing firms which depend on essential raw materials from abroad.
This is causing great concern to the furniture industry. These people tell me that it is a direct incentive to firms to buy completed furniture from abroad——
Has the Deputy a question?
Is the Minister aware that there is disquiet in the industry, particularly in my constituency where the furniture manufacturers are finding——
I am afraid the Deputy is making a statement rather than asking a specific question.
I can inform the Deputy that I met a deputation in regard to this matter in July last. But even before I received that deputation I caused to be made intensive inquiries by the Customs and Excise officials for the purpose of ascertaining whether this practice had the consequence which some people feared. Inquiries made both before and subsequent to receiving the deputation confirmed that the practice was not having the effect which people in the furniture trade feared. My reply indicated clearly why it is not having that affect. On the contrary, there are certain benefits to the furniture trade as a result of the present system because they can get a set-off against their liability for VAT in respect of payment which they have not made at the time they get the set-off.
I assure the Deputy that we will continue our surveillance of this matter. It was feared by the trade that a number of purchases were being made from abroad and that there was concealment of subsequent retail sales, but the Revenue Commissioners are satisfied that this is not so and the inspections are continuing so as to ensure that there will be no avoidance of tax and no preference arising out of purchases from abroad.
The people in the industry tell me that the present situation is an incentive. Therefore, would the Minister consider imposing tax on completed furniture at the time of its importation.
There are great difficulties in selecting certain goods in a certain condition for imposition of VAT at the point of importation. It would be a serious disadvantage to the trade, including the Irish furniture manufacturers, if we were to upset the whole regime of VAT, because a consequence of that would be that essential raw materials, including raw materials required for the furniture trade, would be subject to a certain amount of delay and difficulty because of the inevitable adjudication as to whether a commodity was subject to VAT at the time of importation.