I move:
(1) That in this Resolution "the Act of 1978" means the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978).
(2) That the Value-Added Tax Act, 1972 (No. 22 of 1972), be amended—
(a) in section 11—
(i) in subsection (1) (inserted by the Act of 1978), by the substitution in paragraph (a) of "15 per cent." for "10 per cent.",
(ii) in subsection (2) (inserted by the Act of 1978), by the substitution in paragraph (b) of “20 per cent.” for “30 per cent.”, and
(iii) by the insertion after the said paragraph (b) of the following paragraph.
"(c) On the supply of agricultural services consisting of—
(i) field work, reaping, mowing, threshing, baling, harvesting, sowing and planting;
(ii) disinfecting and ensilage of agricultural products;
(iii) destruction of weeds and pests and dusting and spraying of crops and land;
(iv) lopping, tree felling and similar forestry services, and
(v) land drainage and reclamation,
tax shall be chargeable at the rate specified in subsection (1) (a) on 20 per cent. of the total amount on which tax is chargeable and at the rate of zero per cent. on the balance of the said total amount.".
(b) in section 12A (1) (inserted by the Act of 1978), by the substitution of "1.5 per cent." for "1 per cent.".
(3) THAT this Resolution shall have effect as on and from the 1st day of September, 1981.
(4) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
The purpose of this resolution is to increase the 10 per cent VAT rate to 15 per cent with effect from 1 September 1981. It also provides for a reduction of 3 per cent in the effective rate of tax applied to agricultural services and for an appropriate adjustment in the agricultural flat rate VAT percentage in order to compensate farmers for the changes in the general rate increase on goods and services used for agricultural purposes. The yield from this proposal is estimated to be £28.2 million in 1981 and in a full year £188.5 million. The justification for this measure, which we have not great pleasure in proposing, is the justification for all the other tax measures in the budget. We were convinced that revenue had to be raised quickly to put this country and its finances on a solid footing. We recognise that this will have an effect on the cost of living but we have taken steps to compensate the weaker sections by, in the first instancee, providing a 5 per cent increase in the rates of old age pension and a 3 per cent increase in other social welfare benefits. In judging its effect on the cost of living this measure must be set beside measures such as the guarantee given by the Government not to allow certain basic foodstuffs to rise in price this year, regardless of whatever increases may occur in the normal course, by means of spending subsidies on those commodities. This measure in effect is an adjustment of the price system. Certain products will go up in price whereas certain basic foodstuffs will not go up or will be reduced from what they would otherwise be, relative to costs. That is a redistribution of the burden of inflation to the benefit of the weaker sections who spend a larger share of their incomes on food and clothes. This measure is only necessary because of the serious budgetary situation we face and it would not otherwise be introduced.
