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Dáil Éireann debate -
Wednesday, 9 May 1984

Vol. 350 No. 2

Finance Bill, 1984: Committee Stage (Resumed)

Question again proposed: "That section 65 stand part of the Bill."

This section gives the base power for imposing excise duties, referring as it does to the Imposition of Duties Order of 1975. I should like to make a general comment on the level of increase in duties generally here in recent years. I do not need to go back as far as 1975. I have been making a comparison with 1980. In that year spending taxes in our economy accounted for £1,348 million while in 1984 they accounted for more than double that amount, £2,753 million. Put another way, they represented in 1980 15½ per cent of national income and this year they represent almost 19 per cent. In one sense at least the Government are consistent. The fact that spending taxes have almost doubled in that period could be used by the Minister to suggest that income taxes have also. The reality is that the whole pattern of our taxation has gone towards a greater burden of taxation on every front, income taxation, excise duties and VAT.

On a point of order, I should like to ask the Deputy what relevance his remarks have to section 65?

The Minister does not have to be reminded that under this section excise duties are imposed. The other sections deal with the amount in each case. If the Minister is reluctant to hear the reality of the level of increase in excise duties, I am not surprised. I do not intend spending too long on this but it must be pointed out that this increase in excise duty is having a very damaging effect on the economy generally. As I have said on many occasions in recent years, this is leading to a shortfall in revenue, as is evident from the fact that target figures for excise duty were not reached last year.

This is merely a definition section. The following sections deal specifically with the imposition of excise duties and the Deputy's point would be more relevant to them.

I am referring to excise duties generally on this. If the Ceann Comhairle will bear with me for a couple of minutes, I will put my point to the Minister. Revenue returns last year showed a shortfall in excise duty from the Minister's target, demonstrating that we have reached the point of diminishing returns. The effect it is having on a range of our activities, be it in the drinks industry or tourism, is great. By comparison with European or world standards our tax regime is penal.

It is obvious that these remarks would be in order on sections 66 and 67.

When I come to section 66 I will confine my remarks to it. When I come to section 67 I will refer to tobacco and on section 68 I will confine my comments to wine. On this section I do not think it is unreasonable to make the comments I have been making on the definition section in regard to excise duties.

We have agreed on the use of the time for the remaining sections in order to be in a position to discuss those parts of the Bill which Deputies feel are particularly important. Therefore, I note with surprise, listening to Deputy O'Kennedy, that he has not proposed amendments to any of those sections.

That may be a measure of our responsibility.

I am sure Deputy O'Kennedy will find a way to refer to whiskey and brandy and not be ruled out of order.

I will find a way. Obviously, the Minister is very sensitive to this. He does not like the facts to be put on record.

That is what we had Second Stage for.

The public out there are concerned to hear the facts on any Stage of the Bill.

Question put and agreed to.
Question proposed: "That section 66 stand part of the Bill."

Now we have come to beer and the level of tax on it. I will further underline the case I have been making by referring to the excise duty on beer and the effect it is having in the drinks industry and on employment in that industry and the smuggling and illicit trading habits which have become a problem in every town and village in Ireland. The level of tax on drink in Ireland is one and a half times that of the United Kingdom, twice that of Denmark and about ten times that of France and Italy. There are only two countries in the democratic world which have higher rates of tax in this respect, Sweden and Norway.

Try Denmark and Finland.

Not Denmark — ours is twice that of theirs. In 1980, the price of a pint here was 53p and in 1983 the tax was 57p nearly four pence more than the total price four years ago.

The tax was 53 per cent before the Deputy put sixpence on it.

In 1980, 43.7 per cent of the price of the pint went to the Government. In 1984 it is 51 per cent, an increase of more than 7 per cent. In 1980 the brewers had 26.9 per cent of the price. Now they have 26.1 per cent and we are concerned about maintaining employment in the trade. The retailers, who represent a significant element of employment, in 1980 had 29.4 per cent and in 1984 the percentage is 27.4. This has been done by a Government who have expressed themselves since they took office as being concerned about employment. They have increased the Government take in tax while decreasing the share available to the brewing and retail industries. The brewers' percentage has been reduced by five and the retailers by more than two. That means that there has to be a reduction in the level of investment at the brewing and retailing levels.

We can see the consequences of this. The level of tax in the trade historically is the highest we have seen, judged by any criterion. I have been taking my figures from those of the Central Statistics Office. Not surprisingly there has been a decline in the volume of sales since 1980. Taking 1980 as the base year, sales in 1984 represent only 80 per cent of the consumption level of 1980. We all have a common interest in maintaining employment generally in the industry as we have in trying to ensure that in achieving a fair balance of tax a reasonable amount will accrue to Revenue. I have been suggesting to the Minister that because of a decline to the point of diminishing returns in the volume of sales and the impact it is having on tourism we should be reducing these duties even marginally to bring them more in line with the rates elsewhere. The increased sales which would ensue would be liable to duty which would be quite considerable. Instead, we are having smuggling, illicit distilling, home brewing of all kinds—

Katie Daly.

There has been a folk tradition. The industry is being undermined. Cross-Border smuggling is increasing and Deputies from Border areas can testify to that. The Minister should listen to the advice of the industry. We have reached a point where bona fide business is at risk of being undermined by illegal smuggling and by goods being offered for sale at less than the base price.

The percentage of duty on alcohol is higher here than in other countries. The Minister will have been told by the licensed vintners, the brewing industry and so on that he is losing as well. I recall having discussions with the Revenue Commissioners when I was Minister. They were always very balanced in their approach to this. In the course of consultations prior to the budget when I inquired if I could impose 2p on a pint I was told I could but that I would get less for the extra money I would impose. I found it difficult to accept that at the time but now I realise that the experience of the Revenue Commissioners was such as to justify that advice. I and most other Ministers acted on it.

It is time the Minister took note of the damaging effect indirect taxation is having not only on revenue but on trade. We did not put down any amendment because this has already gone through. I am using this occasion to highlight the fact. I hope the Minister will give serious thought to reducing this at the appropriate time, at the latest in next year's budget. If he does he will probably get in more money and guarantee that trading through normal outlets will be protected against the developments we have seen in recent years. If smuggling will not have stopped at least it will have been curtailed.

I wish to support—

On a point of order, all through yesterday we had a procedure whereby speakers were rotated between Government and Opposition. Is the Chair now departing from that? I suffered from it yesterday.

On Committee Stage we try to have the debate going in an orderly fashion within the normal procedures.

All I am asking is that you be consistent. Yesterday I had to give way to your colleague, Deputy Taylor and then to Deputy Brennan.

We are a bit chippy today.

Deputy Leonard indicated that he was offering. Before I observed you, Deputy Leonard had offered. You will be called next.

I was not called yesterday but had to give way to your Labour Party colleague because of Labour Party subtleties.

I will not detain the Deputy for very long.

Deputy Mitchell made an accusation against the Chair.

If I heard correctly the Deputy owes the Chair an apology.

What did I say?

You referred to the subtlety of the Chair.

It was the subtlety of the Labour Party I referred to.

I was sitting here as Chair and not as a member of the Labour Party. The Deputy should withdraw that remark.

I am not reflecting on the Chair but on the party.

Has the Deputy withdrawn the remark?

I support the points made by Deputy O'Kennedy. It is 15 months since the Minister introduced these measures which caused so much damage in the region I represent. They have had the destabilising effect we said they would have. We told him at the time the damage they would do to business. We appealed to the Minister to re-examine the measures. The point was made that there would be a loss of £14 million on alcohol alone. Every word of what we said was true. Irreparable damage has been done to the trading structure of that region. Jobs have been affected and confidence has been eroded.

Six months after the February budget of 1983 the trade supplied the Minister with figures and statistics which they got from a firm of accountants. I have since been assured that the loss has increased. Many of these outlets expect to have a reduced turnover this year compared to last year. At the time the Minister was told that on lager there was a variation of 84 per cent. The point was consistently made that the greatest damage was done by the variation in excise duty on petrol. There was an incentive to people to go across the Border to shop. They bought mainly biscuits, minerals and electrical goods.

This section deals mainly with beer.

We will come to the other items later.

They are smuggling beer too.

The Deputy is going the wrong way around. It should be whiskey first and then beer.

The point I am making is that they use petrol to get to the beer.

Section 66 deals only with beer.

I know but to get to the beer one has to use petrol. That is the carrot.

One gets cheap petrol there as well.

We will all stay on the beer in deference to the Chair's wishes.

I only mentioned petrol because many people would go across the Border in a car to get the beer. The price variations still remain. In a survey carried out after the 1983 budget the price differential on lager was 90 per cent, on whiskey it was 43 per cent and on wines it was 38 per cent. How does the Minister expect to have normal trading in that area with that kind of variation?

There was a belief that there would be a levelling off of taxation. This was particularly so when we entered the EEC. Serious damage has been done and this will continue. I hope the Minister will carry out a survey not only on the loss of revenue but on how this has affected the area generally. It has affected the entire area generally and the living conditions there as a result of the imposition of these excise duties.

There are particular problems involved in the areas to which the last speaker referred. I do not intend to deal with these problems because they have been adequately dealt with by the Deputies representing the particular areas and they are intimately aware of the problems. But there are other problems being created apart from those mentioned be earlier speakers. The biggest brewery in the country is in my constituency and because of the competitiveness and the smaller market there has been a slimming down, and because of that slimming down the numbers employed are not as great as they were in the past. That is partly due to new technology but it is also due to the competitiveness which has crept into the market. Now we all know that Guinness are very good employers and have been a tremendous asset to this city and I would not want to say anything that might in any way be interpreted as taking from Guinness, but problems have been created as a result of the increase in duty.

If we undertook a socio-economic study of the effects on health and on farming and tourism and the desirability of the whole brewing industry would we, as Deputy O'Kennedy suggested, ease up on the duty on beer? It is not just a question of employment, though that is one important aspect. It is not just a question of health. There are a number of aspects involved and it is very difficult, for instance, to explain to tourists the price of the pint. There are those who think in terms of the price of the pint when we talk about the cost of living. Tourists think it is very expensive to live in this country because of the cost of petrol and the cost of the pint and these costs are very damaging where the tourist industry is concerned. The price of the pint is forever increasing.

The problem is, of course, balancing revenue vis-à-vis the economic problems. The Minister has to get revenue from some source, whether it be VAT, or PAYE, or whatever. He has to strike a balance. However no one has undertaken the kind of study to which I have referred. The brewing industry contributes a great deal, and possibly could contribute more, and I believe the Minister would get better results if he reduced these duties. If the sort of study I suggest were carried out I believe the Minister would get a better idea of the undesirability of continuing this particular form of taxation. In a factory adjacent to my constituency unemployment has occurred as a result of taxes and smuggling and so I think it is time we took a look in greater depth at the whole situation.

The most important point made by Deputy O'Kennedy was that in regard to diminishing returns. Returns are diminishing rapidly. Because of those diminishing returns the most potent argument is that directed towards a modification of duties and taxes. In many cases it is the same product which carries the burden every year. The Minister gets nothing if the product is sold in Enniskillen or Lisnaskea. That is the first point. To give the Minister an idea of what is happening the local papers along the Border are all carrying advertisements for shops in Enniskillen and even towns like Maguiresbridge and so on. That goes for Donegal and for the northern part of my constituency in Monaghan. It is the Minister who is suffering, not the hotels or retailers. Another point is that the public houses are not opening now except for a couple of hours in the evening in towns along the Border. That is a threat and has an impact on the employment in them. The Minister must get it right and on the basis of the arguments made about diminishing returns the Minister will get more revenue if he modifies the tax and the excise duties to more reasonable levels.

Deputy Mitchell mentioned table waters. I have had representations from such manufacturers and they too are under severe pressure because of the charges. On the basis then of the diminishing returns the Minister and his officials will admit that the situation as outlined exists and on that basis alone he should consider a reduction. That could have a psychological effect. Reference has been made to the tourist industry. There is a kind of mini-tourism which operates along the Border and has done so for many years and business has been gained over the decades; but there is a kind of weekend tourism covering towns like Ballyconnell, Belturbet, Clones, Monaghan town and so on. That is having a serious social disruptive effect on the area. It has been said over and over again in Private Member's Motions and so on that these areas are suffering politically and economically and whatever we can do here to minimise the damage of an impossible political situation, of the obscenity of the Border, of the general disruption as a result of the political situation, whatever this House can do — and I think the Minister for Finance can do a good deal — that should be done.

May I make the Minister a present of a figure from which, if he really thinks about it, he will discover what the problems are. This section increasing the excise duty on beer is yet another step in the wrong direction. There is a firm of brewers in the south which publish an annual sales figure of £22 million. They give substantial employment in the south of Ireland. On that figure of £22 million this brewery handed over to the State £17 million. Some of that is PRSI, some PAYE but a lot of it is excise duty. That drives home more than any other figure that I can think of the sheer lunacy of our taxation policy and the self-deceiving nature of that taxation policy, and this section increasing duty still further will mean that that brewery which is presently handing over £17 million to the State will hand over more than that in future. They are paying it to the Government in various forms.

They are not.

I will be glad to name the company later if the Minister challenges the figures——

I do not challenge the figures but the way the Deputy presents them.

I will be glad to put the name of the company and their annual accounts on the record of this House. From their sales figures it can be seen that they give the Government £17 million. That firm has £5 million to play with, to make a profit and to re-invest. That is ridiculous. I would not blame any company for packing their bags and leaving.

I realise the Minister has to raise money and that other Finance Ministers increased the price of beer. I know that at one time a penny on the pint could change a Government. I know all these things and so does the Minister, but we are dealing with something that is much deeper and more problematic than which Minister added less to the price of beer. Between 1975 and 1983 sales of alcoholic beverages in Ireland were down 18 per cent in volume terms while total sales were increasing by 14 per cent. While grocery trade sales were up 53 per cent and drapery sales 27 per cent, the sales in alcoholic beverages dropped in volume terms by 18 per cent, largely as a result of taxation policies.

Between 1979 and 1983 the real excise duty on alcohol increased by 20 per cent while sales fell by 25 per cent. That suggests at first glance a decrease in revenue from excise duties on alcohol, unless the inflationary element is even stronger than I thought, which I do not rule out. I would be interested to see in money terms what that revenue has been. The fact that there has been a drop in sales of alcohol since 1979 does not mean less alcohol is being consumed; it means less alcohol is sold legally. Because of the level of taxation there is unfortunately an enormous black market growing in the beer area. When taxation is at an unacceptable level the black market and the grey market come to the fore. This is very clear where beer is concerned. In the past six months sales of home-brewed beer have increased by 300 per cent or 400 per cent and figures available suggest that this trend is on the increase. That, combined with the increase in duty-free sales and cross-Border smuggling, means that a lot of the beer which would be caught in the tax net is not being caught because while consumption appears to be increasing sales are down. This indicates a substantial black market in the beer industry. That has to be worrying.

In 1977 the House of Commons Expenditure Committee after a number of studies came up with this little gem. They said that a form of avoidance and evasion of much more serious concern in many industrialised countries, including Ireland and England, was that high alcohol taxes might tempt those who could not afford them towards dangerous alternative forms of intoxication. As the excise duty increases the black market in beer and home-brewed beer will increase and the Minister will lose revenue. That suggestion has to be taken as a sensible point because at some stage we have to get some relationship between the level of tax and volume. Otherwise fewer people will be drinking legally and they will be asked to pay a greater proportion of taxation. We should avoid that if at all possible.

Deputy O'Kennedy hammered home this point but I would like to put a figure on it. The only figures I have refer to 1977 and are taken from a European Communities publication of 1980. At that time excise duties on alcoholic beverages as a percentage of all tax was 9 per cent. Does the Minister have a more up to date figure? I would like to show how out of line we are. While our figure was 9 per cent, the figure in Denmark was 3 per cent, the United Kingdom 3½ per cent, Luxembourg 1 per cent, Netherlands 1 per cent, Belgium less than 1 per cent and Germany 1 per cent. Ireland was taking 9 per cent of her total taxation from the alcohol industry despite the fact that approximately 38,000 people are directly employed in the drinks industry. That level of taxation is unwarranted.

In a table published in 1982 giving figures of special taxes on a litre of alcohol there were three groups of countries, high tax countries, medium tax countries and low tax countries. There were four high tax countries: Norway, £12; Sweden, £6; Ireland £14; and Finland £8. No other country is near the £14. In Italy the figure is £1, Netherlands £2, Hungary £3, the United States £1, Belgium £1, West Germany less than £1, France less than £1, New Zealand £6, Denmark £5 while Ireland's figure is £14 per litre of alcohol. I would not mind if we did not have an enormous employment content in this industry. I am putting forward this argument not to relieve the hard-pressed drinking classes of Ireland but because there are 38,000 people employed in this industry, and if we want more people to be employed we must allow the industry to breathe. We should never put any company in a position where they pay the Exchequer £17 million out of £22 million. If we do, that company will pull out of Ireland and set up elsewhere. If this company were established in the United States they would not be paying the Government £17 million — I am told the figure would be nearer £8 million. The privilege of staying in Ireland is costing that company £14 million, and that is only one brewery.

That is nonsense.

I would be glad to hear the Minister's reply and I would also be glad to furnish the House with the figures of the amounts one company has to pay in total taxation to the Government.

I have read many of the submissions which the Deputy has obviously had and is quoting from. I read a submission lately from a firm which is not involved in the drinks industry but in another area of the food industry. That company did what the Deputy is doing with figures, claiming that remittances of income tax and PRSI contributions made by the firm on behalf of their employees are properly attributable to the firm as their contribution to the Exchequer. If that is the way arguments are going to be made I dispair of ever having a rational argument about taxation. The £15 million to which the Deputy refers——

£17 million.

——£17 million rather, out of the £22 million includes that firm's payments of PAYE and PRSI contributions——

For the workers.

And the levies.

——on behalf of the employees to the State — and levies. It is not tax paid by the firm.

It is still tax.

It is tax paid by the workers in the firm.

To the State for the benefit of the community. It is not tax paid by the firm.

It is still tax.

For the Deputy to pretend that that firm are paying tax of £17 million out of their £22 million total turnover is disingenuous, to say the least.

That firm have labour costs——

Could the Minister on his own figures——

The Minister, without interruption.

That firm have labour costs which amount to more than that——

Of the £22 million, £17 million is going for tax, is that not so?

——out of their total turnover of £22 million and disingenuous is a very gentle word to describe it.

It shows what is happening in this country and the level of taxation.

The Minister, without interruption, please.

I shall try to discipline myself to staying within the bounds of the section.

Does the Minister think that the tax is too low?

A difficult job it is, too. All three Deputies on the opposite side have strayed very far from taxation on beer and into other areas. I am not going to follow them all the way, much as I am tempted to do because extravagant claims like those of Deputy Brennan——

These figures are accurate and I shall stand over them.

Of course, the figures are accurate. There is no doubt about that. It is only the name put on them by the Deputy which is inaccurate.

Taxation is taxation.

The Deputy knows that perfectly well. As far as the central issue is concerned——

Would the Minister please tell us where the £17 million is going?

It is going to the Government.

As far as the central issue of this discussion is concerned, the Deputies opposite have been making the very reasonable point that we should look very closely at the effect of changes in excise duties on total sales and the interaction between the specific level of duty and the total revenue gained from it. Much of that discussion would be greatly facilitated if those involved would define their terms a little more closely and use language a little more accurately than people do. Returns of revenue duty from any class of alcohol have not been falling since 1979. In 1979, for example, total take in excise duties from beer was £118.18 million. In 1983 it was £232.1 million. The total take from excise duties on alcohol in 1979, taking beer, spirits and wine together, was £212 million. In 1983 it was £371 million. We are not speaking over that period of a reduction in the amount of excise revenue, we are talking of an increase.

The central question is: is that increase proportionate, or what is the relationship between that increase and the increase in the specific duty? It is often suggested that, if we were to reduce the rate of excise duty, the effect of that on sales would more than compensate for the reduction in the specific duty, so that one would get an increase in sales. Multiply the effect of the increase in sales by a lower level of duty and one would get a bigger revenue. That is something which needs consideration. So far——

That is a very important acknowledgement. It is very significant that the Minister has said it and I am glad to hear it. He has said it for the first time.

It is not a very important acknowledgement.

The Minister never before made that admission.

That is not a very important acknowledgement, far from it. It is one of the things, as the Deputy might remember if he thinks back far enough, that every Minister——

The Minister has never said it before.

——for Finance must look at closely every year before he makes any proposals as to what he is going to do about excise duties during the course of that year. It is so obvious that for Deputy O'Kennedy to regard it as a major significant acknowledgement——

That the Minister said it.

——indicates that he feels he has made a discovery——

Not at all.

——when all the rest of us have had that as part of our intellectual baggage for years past and regard it as a normal part of the landscape.

For clarification——

Deputy, please. Please allow the Minister——

I have said that over the last three years and the Minister has contradicted me each time. He has always done so.

He is now acknowledging it to be true. That is the important element in what is happening today.

I have said that is one of the things which must be carefuly considered. The Deputy knows as well as I that this relationship is one which is examined every year in great depth. The Deputy also knows that excise duties on beer and alcohol generally are among the closely observed and examined, thought about and analysed excise duties in existence. Perhaps the Deputy will find this to be a great revelation, but it is part of my normal thinking about these things that if I found a case where the elasticities were such that I could feel with confidence that by reducing the amount of excise duty I would get an increase in the total amount of tax revenue, I should have done that long ago. There is not a Minister for Finance anywhere in the world so crazy who, if he had the chance of reducing the rate of tax and getting more revenue out of it, would not have done so long ago.

Except for the Minister's preoccupation with raising revenue.

There is not a single body of revenue commissioners or officials involved in that matter anywhere in the world who would not leap at an opportunity like that and say to the Minister "We have found it. Eureka. You can reduce the rate of tax on this item and you will get more revenue out ot it."

Paul has nothing on the Minister.

If it has not been done so far it is because neither I nor any of my predecessors has been in the position where we could find solid evidence that would allow us confidently to say to our colleagues in Government "We shall get that result if we reduce this rate of excise duty." I am prepared to say, because this is one of the occasions for carrying out an activity to which Deputy O'Kennedy seems very often to object — the activity of analysis——

I have never objected to analysis as long as there is some action to follow it.

The Deputy does not like this at all. At the very first moment when I find enough evidence to convince me that by reducing any kind of tax I shall get an effect on sales which will give me extra revenue, I can assure the House that I shall be only tripping over myself to do it.

As part of the exercise, would the Minister give us some volume figures?

The volume figures which have been quoted——

Please, let the Minister speak.

——are 20 per cent. Is that not something to help the Minister's analysis?

There is the next difficulty. At this point we are talking about excise duty on beer and I restrict myself to that because it illustrates the problem. All the submissions and discussions which we hear and all the presentations made attribute all the alleged ills of the industry to one thing — taxation. I can say honestly, and it is no disrespect to anybody in the industry or employed in the industry as consultants, that I have never seen any attempt made to try to distinguish between the effects of taxation on the one hand and what is happening to these sales in the rest of the real world on the other. All the analyses attribute all the reductions in volume sales and difficulties encountered by the industry to the one thing — taxation.

Not just to the one thing. There are other problems.

One would think there was not a recession, that there was no pressure on real income levels or decline in real income levels.

Who said it was the one thing? The Minister is saying that the problem is attributed to one thing. He must be precise.

I am sorry if I am getting under the Deputy's skin.

Not a bit. It is we who are getting under the Minister's skin, for a change.

I am not criticising anybody for what was said. I am simply pointing out some of the things which people do not say——

Would the Minister quote some person who has said that?

——and which seems to me to vitiate the validity of the arguments which the Deputies are using to make the case which they are putting forward here today. In terms of total tax level, taking a quick shot at it now, excise duties on alcohol for 1983 would have accounted for somewhere in the region of 8 per cent of total taxation.

Does the Minister know the figures for other countries, as a matter of interest?

I have not that information available here.

Would he accept that it is less than half in most countries?

There is a point there to which I intended to come in a moment. I do not know offhand the situation in other countries.

In fairness, the Minister should know. He has enough advisers available to him to give him that information. We have nobody but ourselves.

The Deputies are not doing too badly.

Would the Deputies please allow the Minister to continue?

We have only one typist between us. The Minister has a staff in the Department.

The Deputy should not let jealousy get the better of him. He used the machinery when he got 6p on the pint in 1980. The Deputy has been through it himself. It is very fine to take one particular bit of taxation and say that we are out of line and we are getting more as a percentage of taxation from that particular thing than most other countries are. It is quite true and depends on the one you pick. We can also pick other areas where we are getting no return and no proportion of taxation whatsoever.

They are not in this section.

I know they are not and that does not suit the Opposition's argument. While trying to stay within the section I want to reflect on something which seems nevertheless germane to the argument. We can point at other areas where we get a nil contribution to taxation while in other countries they are getting a proportion of taxation from specific taxes like VAT or even excise duties on these other areas.

Section 64 would be an example.

We would be fairly low in those kind of terms in relation to a number of other countries.

We could take other examples. Take rabbits or dogs, for instance.

I commend Deputy O'Kennedy for his imagination but he does not need to be as imaginative as that to think of areas where we do not get any tax return while in other countries they do.

Is the Minister considering new taxes in new areas?

No, I am considering some old taxes in a different kind of framework. At the end of the day it does not make a lot of difference to the particular argument we are having here. I was struck by one thing which Deputy O'Kennedy said when I suggested to him he was attempting to have his cake and eat it by giving us a long dissertation on this particular section and on alcohol taxes in general. He has not moved any amendment to any of those sections. His reply to that was to say that the reason for that was that these are all now in operation and he was being responsible in that he did not want to throw out the budgetary arithmetic. At the end of the day that is the bottom line here and that is the reason we are raising taxation.

I am glad to see that Deputy O'Kennedy has acknowledged this, first of all, by not putting down amendments and, secondly, by stating the reason for that was a certain responsibility on his part, which I applaud, in the context of the overall budgetary requirement. That about sums it up as far as this section is concerned. I want to repeat the point that the sensitivity and the product of the rates of duty in all of these areas are things which are very closely examined. If I could find convincing evidence that a particular kind of change in the rate of an excise duty would produce the desired result I would be the first and the happiest in carrying out that kind of action.

This has been very useful. As has been pointed out, we have underlined that the base of our case here is the reduction in volume sales. The Minister did not take issue with the figures we presented and has acknowledged that there has been a reduction in volume sales of the order of 20 per cent over the last four years. That would suggest to any Minister for Finance what he has now — for the first time, as far as I am aware — publicly acknowledged: that there are grounds for considering the case we have been making for some time for the reduction of excise duties to yield more revenue. That is very important.

The first chapter of St. John is a revelation for people who have never read the Bible.


The Bible would be very safe in the Minister's hands. If there were ever security for orthodoxy, Bible or otherwise, it would be in the hands of the Minister. Not one word would be changed. Even the interpretation would not be open to change. That is one thing this Minister will never be accused of. Now that he has at least acknowledged that there is a case for consideration may I point to him in the course of that consideration, so that we can look for a greater degree of enlightenment — there is evidence of that in the Bible as well, inspiration, conversion on the road to Damascus — may I point out to him that I believe he will be influenced by the following factors. First of all, there is the reduction in volume sales of 20 per cent over the last few years principally because of the huge imposition which the Minister made last year and has added to this year. Secondly, there is the leakage across the Border which will arise in this and other areas that have been referred to as black holes, which is quite a characteristic, as everybody else acknowledges. Thirdly, there is the important element, which the Minister cannot dispute, that in terms of the consumer price — we are talking about the pint only — in four years the Government's proportion of that has jumped from less than 44 per cent to 51 per cent whereas for the brewer who gives the employment it has gone down from 27 per cent to 21½ per cent and for the retailer by 2 per cent from 29 per cent to 27 per cent, thereby indicating that those who actually produce the product and distribute it, and from whom the Minister gets the taxes, are being penalised. It is reflected in the fall in the level of employment in these industries.

I also want to say, to underscore the point we have been making, that traditionally by comparison with other countries the number of those employed in the drink industry in Ireland as a proportion of the total manufacturing employment is higher than in any other country in Europe with the possible exception of Luxembourg. According to a survey done up to 1981 it was close to 1 per cent of the total population. In Luxembourg it was 1 per cent and everywhere else very much less. It was less than ½ per cent in some and the Community average was 0.4 per cent. Deputy Brennan's point is a good one. He is not claiming that the particular brewing industry have been in the business of sacrificing themselves, being generous in any sense or that they are actually paying out of their pockets what the workers pay out of their pockets. He is clearly saying that £17 million of the £22 million generated in that industry went to the Minister for Finance. That fact cannot be disputed. That is a measure of the imbalance we have.

Might I also point out that, because of the fall in employment in the industry in recent years, because of the impact of the inordinately high prices on tourism, we are losing out there as well. The Minister may point out to me that the figures in volume terms but not in real terms are increasing, that far from falling on beer they have increased from £118 million to £232 million. I am contending that if they were less in terms of the duty imposed the revenue return would be greater with less penalty on the industry itself and more employment and attraction for tourists. The Minister is fairly widely travelled also and if he travels only across the water to England he will see the difference there where, even in top class hotels, one can buy a pint — be it mild, bitter or anything else — at a lower rate than one will pay in the smallest pub in Ireland. The situation is similar elsewhere. France used to be regarded as being the most expensive European country in which to holiday. That is now a myth because it is now very cheap by comparison with Ireland and it is the level of taxes such as these which have given rise to that fact. In the course of the Minister's further consideration — which I am glad to note has now dawned on him — he should seriously consider what we have suggested.

It all happened a long time ago.

I might finish on this note. We have made this suggestion to the Government within the last 12 months on more than one occasion, when on each occasion the Government's response was to point out the irresponsible, typical attitude of Fianna Fáil, that we were dreaming up this idea of getting more money by reducing taxes. That is what was said, and by the Minister himself as well if I recall correctly.

No, it is perfectly consistent. I am just saying that conditions do not yet exist for that.

I have given the reasons I believe they do exist. In relation to why we are not proposing changes today, that is because the Deputy opposite is the Minister and obviously he must have regard to the total revenue yield. While all the information we have suggests that the argument we have made would be sustained, I must admit that my typist and I have been unable to research it all sufficiently in order that I could say with absolute conviction and authority to the Minister that for a reduction of tuppence he would receive £x million extra. I cannot say that because, even with the support of some of my colleagues here, I do not have that kind of information available to me, but the Minister does. His advisers are with him in the House today, they are over there in the Revenue Commissioners and in the Department of Finance. He has that information available and knows that the arguments we are presenting can be sustained. I hope in next year's budget — if not in the meantime — we will see the consequence of this reconsideration because, if we achieve that, we shall have achieved quite a lot.

Does the Minister have the volume figures? The Minister gave two figures of the takings from beer for 1979 and 1983 — in 1979 he said they were £118 million and in 1983 £232 million. Does the Minister have the corresponding volume figures?

In 1979 on 1,780,000 standard barrels the total excise receipts amounted to £118.8 million and in 1983 on 1,648,000 standard barrels the total excise receipts amounted to £232 million.

Excellent, now it is out.

That is what we have been telling the Minister.

That is no surprise. We have been talking about those figures for years.

I might put those figures on the record because they are very important, that in 1979 it was on 1,780,000 standard barrels of beer and in 1983 on 1,648,000 standard barrels of beer. That constitutes a reduction over a five-year period. The Minister was trying to suggest to the House that there has been no falling-off.

In that case, I withdraw those remarks. But the argument we are advancing from this side of the House is that consumption has fallen while the take has been increasing. The figures have risen by 33½ per cent in terms of take, £118 million as against £232 million, and they have concealed quite a substantial fall in consumption. That figure now should be approximately two million standard barrels. We wonder if anybody on that side of the House has taken this point about fall in consumption at all. If we might take the politics out of it for a moment, there is a relationship between the level of taxation and the demand created. I get the feeling from that side of the House that tax has to be got to pay the bills and that that is the first priority. I know that and it would be irresponsible of us to suggest anything else. But there is a relationship between the way one creates demand and the way one handles one's tax. I suggest that the message about quite substantial falling off in beer consumption now given to us by the Minister, which is quite a revelation to me, has not sunk home with the Government — that one can use taxation to stimulate demand. That is the basic concept but the Minister appears to be saying that it is irresponsible to do that. I do not think it is, because that figure for consumption would be much higher today were the tax a little lower. Those figures are quite a revelation. I am glad they are on the record of the House so that we can ascertain how they go in future years.

I do not like to be excessively critical of what Deputies are saying but I really must take issue with Deputy S. Brennan. The figures I have given should not be, and in the nature of things are not, a revelation to the House because every year we discuss these issues here. At various stages in the course of the year Deputies on all sides of the House have ready access to that kind of information. They can put down questions here, they can consult the drinks industry group, when they will get the information they require both on the consumption and revenue sides. Those figures are not a revelation, not by any means; they are well known to everybody.

They support our argument.

They do not. The Deputy is doing what I suggested he should not do, that is, attributing to one sole factor, taxation, what happened to beer consumption over that period. That is simply not an efficient way of presenting the argument. I do not seem to be getting the message across. Deputy O'Kennedy seems to find it a blinding flash of revelation, the good old "agenbite of inwit". I do not know if the Deputy has ever come across that one.

I would not be as widely experienced as the Minister.

There is nothing new in any of this. There is nothing new in what I have said today. I have said, and the Deputy knows perfectly well, that the sensitivity of the level of demand to changes in taxation is one of the central factors examined every year and at stages throughout the year always has been and, as far as I can see, always will be as long as we talk about taxation on products like this. That, together with the fact that all these figures are well known, are well dispersed——

And, having examined it, the Minister ignored it last year.

——there is one inescapable conclusion to be drawn, that is, that we cannot say simply that if one reduces the rate of excise duty one will increase total takings therefrom. That is not a conclusion that is dictated by this. I might trail the coat a little and ask Deputy S. Brennan why he has it in for the people who make home beer-making kits.

Because the Minister would get more tax if they bought it in the bar.

In submissions we asked the Minister the damage being done to this industry in a particular region. The Minister gave us the national figures illustrating that there had been an 8 per cent drop in the period mentioned. When submissions have been made to the Minister in regard to five counties. Border counties, on this issue it would be only right that the Minister would explain to us the damage done in that area. We claim that sales have dropped 50 per cent in some regions. To be fair the Minister should answer our question, which was: what was the damage done over the last 15 months now that the Minister has had an opportunity of examining closely the statistics, returns from VAT, sales and so on.

This is a subject I have discussed with the Deputy before. The figures I have given here in relation to total consumption are those we get from the returns on duty, movements out of bond and so on. I do not have figures for sales in a particular area as I do not have access to the volume figures from pubs in a given area with regard to beer. I would not even be able to infer figures from the VAT returns of those pubs. I am not objecting to the Deputy's concern in this regard but, with the best will in the world, I cannot put a figure on the change in sales in those areas.

The sales in bonded stores in Dundalk, Monaghan, Cavan and Donegal would give an indication. Does the Minister's Department not monitor the sales on an area basis? Border traders made a submission to the Forum regarding the imbalance in various regions and the Department should be monitoring sales at area level as well as at national level.

Question put and agreed to.
Sections 67 to 69, inclusive, agreed to.
Question proposed: "That section 70 stand part of the Bill."

Perhaps the Minister could tell us the trend in the level of duties on hydrocarbons during the period from 1980 to 1984. I should like to know the amount of duty paid in each year, especially 1980 and 1984, and what it represents as a portion of the total cost at the pump to the consumer. This is linked to the question which Deputy Leonard raised. When we received submissions — I know the Minister received them also — from cross-Border traders the matter stressed most was that the differential in petrol prices attracted people across the Border. They then made the most of their trip and bought other articles including television sets. Obviously, while we have to confine ourselves to discussing this section they are inter-related. It is the total level of excise duties which is causing the problem to which Deputy Leonard and I referred. You cannot isolate the impact of excise duty on one from the other or the total impact of all sales in terms of cross-Border trade particularly. It would be helpful if the Minister could make those figures available so that we could measure the magnetic attraction of the Border.

I appreciate that the Minister only keeps records at national level but I think he has received the schedule of retail petrol purchase and sales from Border traders for one country and the figures were startling. The only time the gap closed was when the Irish pound reached 89p against the pound sterling in April 1983. When the variation reached 20 per cent once more the sales dropped off again. By now the Minister should have examined the damage done in that area. He or his officials should drive up near the Border and see all the petrol filling stations which are lying unused or in disrepair. Just across the Border, in the North, he would see many new petrol stations constructed at massive outlay. They have very high capacity tanks which can store thousands of gallons. If duties were lowered local authorities would also benefit by the payment of rates. These petrol stations were fairly highly rated because they were doing a steady trade and were able to purchase high capacity tanks so that the petrol tankers would not have to deliver too often. With the reduced volume of sales the petrol stations are unable to purchase at their former level and do not qualify for discounts. There has also been a substantial reduction in the workforce and they are also working shorter hours. The only time they sell any large amount of petrol is at weekends, especially on Sundays, when some of the stations across the Border are closed.

Most of these filing stations were family businesses and their petrol sales were a great help to the family income. There is now, roughly, a 27 per cent variation in the two areas and it is very hard to expect the petrol stations on this side of the Border to survive. When petrol is cheaper north of the Border it is natural that people will avail of it. From the point of view of tourism it is also very important as petrol is linked to drink as far as tourists are concerned. The Minister has the capacity to give concessions in other areas. If he is not prepared to give a concession in this area he will have to make amends and provide for it in other ways if he intends to continue to inflict that type of imposition.

I am not sure in exactly what form Deputy O'Kennedy would like to get the information. In this area, as in the case of beer, we have the effect of specific excise duties and VAT.

Let us take both together.

In the case of petrol, which I presume is uppermost in the Deputy's mind, prices are basically denominated in dollars, and there are price variations on account of that. Taking the total tax content of the price, which is probably what the Deputy wants, I do not know how far back he wants to go.

1980 and 1984.

In February 1980 it was 75.2p per gallon; in January 1981 it was 91.5p per gallon; in July 1981 it was 97.8p per gallon; in September 1981 it was 107.2p per gallon; in March 1982 it was 115.5p per gallon; in May 1982 it was 121.4p per gallon; in January 1983 it was 139.2p per gallon; in March 1983 it was 151p per gallon; in April 1983 it was 154.1p per gallon; and in January 1984 it was 162p per gallon. Taking account of the most recent change in prices, the current position is that it is 161.4p per gallon. Taking the total tax as a percentage of the retail price, in February 1980 it was 50 per cent and the current position is that it is 56 per cent.

This underlines what I said on the beer issue. In 1980 75.2p was the total taxation per gallon on petrol. Four years later that has jumped to 162p per gallon. The argument we made on the beer issue applies with equal force here. An increase of that amount is also reflected in the fact that the tax take has increased almost exactly in line with the take on beer. It was 50 per cent in 1980 and it is 56 per cent now. That demonstrates that the same case we made in respect of beer applies in respect of hydrocarbon duties. I have to acknowledge that the dollar premium has an impact, but not on the amount of tax the Government get. Fluctuations in the dollar affect the price at the pumps.

And they affect the amount of tax.

I accept that. The Government's percentage per gallon has gone up from 50 per cent to 56 per cent of the greatly inflated price for whatever reason, dollar premiums, or world shortages, or whatever it might have been over the period. This demonstrates that perhaps we have reached saturation point here as well. The point Deputy Leonard made is all too obvious in the Border regions. There is no doubt that the petrol stations on this side are closing down. Those of us who have been up there know that, and some of us have been up there very often. On the other side they are expanding at a rate of knots. There is no doubt that this has an impact on tourism in the same way as other things have and contributes to the total increase in the consumer price index.

I hope we will get a few minutes to discuss the level of duty on motor vehicles, the cost of motor vehicles and the cost of motoring generally. That industry is also suffering in a way in which it need not suffer. We could generate much more revenue, activity and employment if we had a greater balance between the Government's take as a percentage of the total price and the cost to the consumer. Unfortunately, time constraints prevent us from going into this in greater detail. I hope the Minister will reflect on the impact of increased petrol prices.

There is a suggestion in the media that the Government are considering allowing further increases in the price of petrol. In view of these figures, the Government should be very slow to respond to any such demand because of an increase in the value of the dollar. Today it seems to be coming back again and tomorrow it may come back further. I do not know. Already we have reached the point where our petrol prices are well ahead of the average throughout the European community. If we want to attract tourists to generate employment and revenue, we should realise that tourists could add significantly to our consuming population between June and September and to revenue to the Minister. In the course of his full consideration of all these factors before the next budget, I hope the Minister will bear all this in mind on the same grounds as the grounds we submitted in relation to excise duty.

I want to ask the Minister a question. The points I made on the previous section in regard to the connection between taxation and volume still stand. I take the Minister's point that other factors impinge on demand and not just taxation, but I submit it is the major consideration. The central plank of the Minister's economic strategy is restoring competitiveness to Irish industry. Therefore, would it not have made sense for the Minister to avoid increasing the rate of duty on diesel in view of the amount used in industry? Would it not have made sense to exempt specifically the usage by industrial concerns of some forms of diesel and petrol?

In view of the Minister's determination to restore competitiveness is there not a case for introducing a scheme to allow Irish industry — apart from the tourist aspect which my colleague has mentioned — access to cheaper fuels at a lower rate perhaps? Am I reading the Bill correctly when I say that a reduced rate of excise duty on aviation gasoline is being allowed from 1 June? That does not affect us non-aeroplane owners very much. It would affect many people a good deal more if that type of exemption could be extended to diesel and petrol for industrial use. Surely a similar concession could be given to industry. The more people employed the greater the concession could be. I know there are major administrative difficulties involved. I concede that.

I have to drive home the point that, if the Minister's strategy is to improve competitiveness by reducing the costs of Irish industry, it is sheer nonsense in legislation to continue to drive up the costs of those industries. It is a bit like saying the Minister hopes for competitiveness but he is not prepared to take the action which would allow companies to be competitive. Here is a direct chance to give companies some kind of concession in relation to diesel along the lines of that given to the aviation industry.

Deputy Brennan should be aware that there is a separate lower rate of duty on heavy fuel oils used in industry which can be specifically identified as being used industrially. We already have that built into our taxation system.

On the question of aviation gasoline I do not think the Deputy should hang too much of his argument on that small area where there was an anomalous situation as between aviation gasoline and aviation turbine fuel. Two types of engines are used in small aeroplanes. Some use piston engines which use av-gas and others have turbine engines which use av-tur. The rates of duty on the two were very different and it was represented to me with a great deal of justice that this difference discriminated against those who operate piston engined aircraft as against those who operate turbine engined aircraft. I decided to try to sort out the situation as between the two and I have done so.

I accept that but could the Minister be as imaginative in attending Irish industry?

The Deputy is inviting me to go along a particular path. We have already made a distinction in favour of heavy fuel oil used in industry. This has been there for quite a few years.

The Minister could give them cheaper petrol.

We have to be pleased on this side of the House that in respect of our argument in relation to the excise duty on beer and hydrocarbons we have persuaded the Minister to acknowledge that we are at the point of diminishing returns.

Would he give serious consideration to it? The Minister's response indicates that we are talking about a 20 per cent fall in consumption.

The Minister agreed that less beer is being consumed.

I hope the Minister between now and the time for allocation of expenditure near the end of the year, particularly when preparing his budget, will give proof of the fact that he has given serious consideration to the arguments we made today by reducing the level of the excise duties. Strangely enough that would also mean an increase in tax revenue to the Minister. If that happens we will see the result we would all wish and for once the Opposition will have contributed more to the revenue of the Government than has been the practice.

In one way I must commend Deputy O'Kennedy's efforts to salvage something from the discussion that has taken place but he does himself more than honour making the suggestion that in some way he has added to the factors that are taken into consideration. Deputy O'Kennedy should know from his experience that all the factors we have discussed today, all the elasticities and sensitivities are factors which are already, and have been for many years, fairly closely examined.

Would the Minister like us to go home? He has all our submissions.

No, I am enjoying the conversation no end and if I can help to illuminate the Deputy further I will do so.

I assume that every Minister for Finance closely examines all these factors. Nothing new has happened with this Minister. However, there is a difference in that this Minister, having closely examined all the factors, decided to ignore them. I welcome the fact that apparently for the first time he is not ignoring all the persuasive arguments that demonstrate that by adding extra duties and taxes, direct and indirect, he is getting less money for the revenue apart altogether from the impact it is having on employment.

I am sure the Minister will agree that the 27 per cent difference in the price of petrol between here and the North has had a serious affect on this part of the country. It is the carrot which entices people to go across the Border to purchase other goods although there is not much of a difference in the price. When people cross to buy petrol they purchase groceries and household equipment although there is little difference in the price. The Border regions have suffered a lot of damage as a result.

Question put and agreed to.
Section 71 agreed to.
Question proposed: "That section 72 stand part of the Bill."

A number of items are grouped together in this, excise duty on motor vehicles, televisions and gramophone records. I shall deal with motor vehicles first.

The Deputy should try a gramophone record for a start.

The Minister has a habit of repeating himself also when the issues under debate keep recurring.

It is a record for the Minister.

It is a record that the Minister acknowledged what he did today. On the question of motor vehicles I should like to point out that when we entered the EEC we had every reason for trying to ensure that the native assembly industry would be protected. For that reason we negotiated a derogation to enable us to apply levels of duty on motor vehicles to protect our assembly industry. In effect, that meant that the cost of motor vehicles here was very much higher than elsewhere in the Community. That derogation will run out at the end of this year. People have been wondering what the Government will do there. Undoubtedly, the Community would welcome if we lined up with the free trade in the Common Market in regard to the sale of motor vehicles and I believe most people expected that that would happen. The assembly industry now does not represent what it did when we joined the EEC. In fact, by comparison the numbers employed are minimal. It would have been reasonable to expect that the Government at the end of this year would take a balanced view about this. That would leave a lot of latitude in terms of the level of duties to be applied after the derogation period expires. However, the Minister has decided to pre-empt any consideration or discussion by indicating that the Government are going to ensure that the level of duty will be such as not to reduce the price of cars in the beginning of next year. That seems to indicate clearly that despite the fact that our motorists would have an opportunity of buying vehicles at about the same price that prevails elsewhere in the Community the Minister will ensure that that does not happen. I do not understand why.

The Minister may tell the House that there is still a concern for protecting the assembly industry and we will have to take note of that but it does not apply to the same extent as it did before. What is of considerable concern is the fact that people are reacting against the price of cars generally and the cost of petrol. They are also reacting against the tax on cars, provided they are not fined too often while waiting to tax their vehicles. Those matters mean that compared to the rest of Europe our motorists face prohibitive costs because of the price of cars, the cost of petrol and taxation. The Minister has an opportunity to promote a new climate in this industry and reduce the cost which is very much out of line with the rest of Europe.

In regard to televisions and gramophone records, the Minister will have received many submissions from the electrical trade in the last 12 months, as we have had, pointing out that because of VAT and excise duty, which are very much in excess of those in Northern Ireland, the loss of employment in the trade has been drastic and that as many as 4,000 jobs had been lost. One has heard ironic stories about people who got redundancy lump sums in that trade and used them to go to Northern Ireland to purchase their televisions and video machines there. The dealers here have experienced in an extraordinary way how unemployment has affected them because workers in the trade who had received redundancy lump sums did not use them in Dublin but in Northern Ireland and a month or two later when the lump sums were exhausted there was not anything left to purchase anything here.

We have had a real fall in employment in that trade. I have not the time to give the Minister the figures. Because of VAT and excise duty a situation has arisen which should persuade the Minister to reduce the levels of VAT and excise, if not immediately at latest next year. As we told him when dealing with excise duty on beer and hydrocarbon oils, at the end of the day he would get more money and save many jobs at a time when jobs are so badly needed.

What will happen in regard to the price of cars after 1 January? Will the price of cars be changed as a result of EEC harmonisation on that date? Will the price of cars here be reduced because of the harmonisation? People who had intended to purchase cars have postponed doing so in the belief that the price of cars will be lower from 1 January. Will the Minister confirm if that is so? Will the Exchequer in some way take up the slack? There is a general belief here that the price of cars will come down.

As the Minister knows, there has been a serious decline in car sales, in the order of 40 per cent since 1981. We registered 100,000 cars in 1978. Now the figure is 50,000. There are 24,000 people employed but if registrations are plummeting the Minister can imagine what the employment position will be in the industry and he should do something by way of tax policies to bring down unemployment, because taxation has a direct effect on employment. If the duty is reduced sales will not be going down and employment will be stabilised.

Somehow, I do not seem to be getting my message across to the Minister of the effect of taxation on employment. Today in the car industry we are selling the same number as we were registering 12 years ago despite an increasing population and better standards of living. This industry brings in £700 million annually in taxation but it is in severe recession and the Minister's taxation policy will not help it.

I am surprised that Deputies O'Kennedy and Brennan should still be asking questions about cars. They are not referring to taxation. This is the third time I have dealt with this matter in the House.

The Minister is imposing the tax here through this Bill and now is the time for him to answer.

The Deputy's question was not about tax. I am amazed that he should think there will be some EEC harmonisation at the end of the year and that Deputy O'Kennedy should be thinking of taxation in this respect. Up to now people had to be authorised importers and a number of conditions had to be fulfilled. There were subsequent arrangements in the last three years as to the activities one could engage in to substitute for car assembly here. From 1 January anybody will be able to import a car——

At the same rate of excise duty?

——without getting authorisation. We will apply our taxation system to cars coming in.

It will be on the value of cars as they come in.

On the basis of what the tax rate will be when the car arrives here.

They will arrive here cheaper.

Deputies will be aware that the pre-tax price here is lower than it is in at least one other country and therefore that it is cheaper for people to come in here to buy cars and take them abroad.

The Minister is talking about excise duty, on the value in Ireland not in France or Italy. It is not as simple as the Minister suggests. Obviously the car will remain as expensive as it was.

Pass on the cheaper car to the public. They will be coming in here at a cheaper rate and if the Minister applies the same rate of tax to them the cost to the consumer will be reduced.

There is nothing to happen that would affect the value of a car as it arrives in this country. We will continue to apply our excise duty and VAT rates.

Question: "That the amendments set down by the Minister for Finance to section 77 of the Bill are hereby made to the Bill and in respect of the sections undisposed of in part 2 of the Bill that such sections and where appropriate such sections as amended are hereby agreed to", put and agreed to.
Sections 81 to 83, inclusive, agreed to.

Amendments Nos. 57a, 57b, 57c and 58a are related. Amendment No. d58a is partly related and these may be discussed together.

I move amendment No. 57a.

In page 74, paragraph (a), lines 36 to 43, to delete subparagraphs (i) and (ii) and substitute the following:—

"(i) by the insertion after paragraph (aa) (inserted by the Act of 1983) of the following paragraphs:

‘(aaa) 8 per cent. of the amount on which tax is chargeable in relation to the supply of goods of a kind specified in the Seventh Schedule, and

(aaaa) 15 per cent. of the amount on which tax is chargeable in relation to the supply of goods specified in the Eighth Schedule, and

(ii) by the insertion in paragraph (c) (inserted by the Finance Act, 1980) after lsquo;(aa)rsquo; of lsquo;(aaa)rsquo; and (aaaa)',".

These amendments relate to VAT levels. There are amendments dealing with VAT on newspapers, certain consumer goods and hurleys. Our amendment proposes to reduce the level of VAT on newspapers to 5 per cent. There are a number of social and economic factors to be considered. There is also need to protect the newspaper industry from unfair competition from abroad.

To take the economic aspect, there are approximately 5,000 people employed in the industry. Last year three out of the four main publishers of newspapers incurred a loss on their activities. That underlines the serious difficulties the industry is going through. The level of VAT throughout the EEC on newspapers ranges from a zero rate to a maximum of 7 per cent. Our industry is trading under unfavourable conditions by comparison with those operating elsewhere. If we compare our industry with that in Britain, in 1970 approximately 12 per cent of the daily newspaper readership was attributable to British newspapers and about 18 per cent of the Sunday readership. In 1983 the average morning circulation of Irish dailies was 412,000 and British dailies was 149,000. The proportion has grown to almost 40 per cent. That pattern is also reflected in the Sunday newspapers. It is estimated that the total circulation of Irish Sunday newspapers is 999,000 whereas the British Sunday newspapers account for 500,000. As a result of the level of VAT on our newspapers the British newspaper circulation here has increased enormously. In the same period there has been a relative fall-off in the circulation of our daily, Sunday and evening papers. Communication from abroad is always healthy, but when it becomes as dominant as this it is a matter of serious concern.

There will always be a conflict of interest between public representatives and the media but, whatever our views, the Irish daily newspapers reflect Irish values. The pattern which is emerging is that the "populars", as they are euphemistically called, are dominating the Sunday market. I recall, when travelling home from a visit to France, seeing on the front page of one of the popular English Sunday newspapers the following heading: Was his father; is now his mother. It related obviously to a sex change operation. According to that newspaper that was the big Sunday news in Britain. I think it was the News of the World and at present it represents 34 per cent of the Sunday newspaper circulation here. The People represents 21 per cent and The Sunday Mirror 20 per cent. Between them they represent 75 per cent of the 500,000 Sunday British newspapers circulating here. Whatever our view of The Sunday Telegraph and the orthodox and conservative view it takes, at least it stimulates us to think, analyse and perhaps react. They have succeeded in capturing 2 per cent of the Sunday market; The Observer, 3 per cent; and the The Sunday Times, 5 per cent. We must be concerned about the impact on our readership of these influences and values. Without trying to imply that we have better standards or are better informed than any other country, our papers are based on a different cultural inheritance and social background. We must all be concerned about the level of domination of the “populars” on our market. If The Sunday Times had 6 or 10 per cent of the market I might not be too concerned.

There was a time before we joined the EEC when we only had an Anglo-American influence on our thinking. We became aware that in Europe there was a new world with which we claimed to have a cultural and historical association. Whatever we may say about the EEC, it has done a lot to stimulate a renewal of our cultural awareness. That has been healthy. Prior to that we were dominated and almost suffocated by an AngloAmerican influence. That has changed. We must ensure that our independent newspaper industry is not put at further risk. In the last few years three of the main publishers incurred a loss on their activities. That would indicate that it is time to have another look at the whole question. There are 5,000 people employed and that is considerable employment. The case I make can be borne out by the fact that the level of advertising has fallen off because people are becoming aware of the fact that the level of circulation is not expanding as a proportion of the total revenue. This is a feature of both the national and provincial press. There has been a decline over the last five years in total circulation in the order of something like 550,000. I do not have the precise figures of what it was five years ago but there has certainly been a decline and a decline simultaneously in advertising revenue.

It may be said this is the law of the market place. Everybody accepts the law of the market place provided there is not unfair competition which is based on the level of VAT that we apply. In most other countries there is either a zero rating or a maximum 7 per cent. There is no free competition here because what is happening is that British papers are dumped here, an extra 200,000 or 300,000 on the Irish market at very little extra cost. One can obviously undersell the Irish competitor because basically one is running off an extra 200,000 or 300,000 and dumping that on the Irish market. VAT of course applies on these papers when they are sold here but they already have the advantage that normal production costs are operating in a much more favourable cost climate than their counterparts here and that is basically the cause of the problem in the Irish newspaper industry.

Newspapers do not expect politicians to defend them any more than politicians expect newspapers to defend them but we discharge our different roles in different ways. Having said that, there is a very strong case for the Minister to study the impact of these penal levels of VAT on the Irish newspaper industry. Lest it might be thought we were trying to win support from the newspapers I am not trying to curry favour from the newspaper industry. I respect the role the newspapers have but, while I respect totally the independent role of the newspaper industry, there have been changes in recent times which do not appear to me to be very healthy and possibly we ourselves have encouraged those changes. I am talking of characteristics that do not appear to exist in the newspaper world elsewhere and certainly not in Europe as far as I could observe.

In recent times we have seen here the growth of what might be called anonymous reports on back pages plus various comments, the kind of thing that is glorified by "The word is that", "Sources in Fianna Fáil, in Fine Gael or in Labour" suggest this or that or the other". "We hear that" on back pages and on front pages. That is not a feature of journalism I welcome. I would strongly hold that newspapers should test us rigidly and consistently but I object to so much personal comment on a personality basis, something different from anything that exists anywhere else in Europe. Perhaps we are not discharging our responsibilities as we should. Perhaps we should do better. Frankly we should ensure that we do not feed things about our colleagues to others. We have had far too much anonymous comment and it is very undesirable. On occasions back pages have been entirely taken up with comment of the kind to which I have referred.

We all recognise we have a role to play. We all have obligations. The newspaper industry has a very important role and a very honourable role and I hope it will look to itself in this area. We respect those journalists who put their names to articles and give their opinions, irrespective of whether or not we like those opinions. We do not respect the anonymous comment and when Irish newspapers descend to this kind of practice they are not acting according to the best standards and traditions of the Irish newspaper industry. Of course that kind of comment sells. That is why the News of the World and the Daily Mirror sell. Now we all have a role in trying to improve the situation. Of course there are satirical journalists in Europe but they do not present themselves as commenting anonymously or concentrating on only one issue.

Our industry needs to be protected. It needs to be vindicated against unfair competition. At national and provincial level newspapers represent the values we have. We may have contributed a little to the cynicism that is rampant in Ireland today, but maybe we can enter into a new pact with journalists because some standards of reporting have contributed to this cynicism as well. We should aim at the highest standards. We could then protect an industry which has made a very important contribution, and which in future will make an even bigger contribution to the community. Many other facts will be mentioned by my colleagues to underline this proposal and I hope the Minister will give very serious consideration to it. We have considered this for some time and we believe that, allowing all the decisions which we might come to and in what areas we might propose a reduction in VAT, such a reduction is very necessary in this area.

I would like to clarify the present position. We are discussing amendments 57a, 57b, 57c, d58a and 58a together by agreement.

I would like to make a few brief comments on this section. It is very hard for politicians to be objective about this section. There is a temptation to say this is a very good idea because we do not want to get a bad press but to take that line would mean that we are cynical about journalists. Unfortunately there is a growing cynicism about a minority of journalists. It is very difficult to raise this issue without getting everybody's back up. I am not afraid to do that, but I do not want to because everybody does not deserve the same criticism. Deputy O'Kennedy asks who is to blame for this cynicism. Many of us are to blame. Within the parliamentary parties there are press officers, information officers, Government press officers, branch public relations officers and so on, and all are very publicity and public relations conscious. We are all falling over backwards to ensure that we are not reported as saying the wrong thing.

I had an experience of accusing a journalist, quite rightly, of being a manufacturer of news because of what was published in what was alleged to be a serious newspaper. Everybody knew about whom I was speaking, including the journalist concerned, and I have been getting a very bad time from him ever since but I stand over my comments. It is time journalists, who are very good at lecturing politicians, looked at their colleagues who are undermining their profession. We have to take criticism but who examines the journalists? Journalists should undertake a study of their own role. In the past I have suggested that it might be a very good thing if a media council were set up to protect journalists and everybody else.

If what happened with The Observer were to happen here what would be the outcome? Would the editor be able to stand up to the proprietor in the same way and win the day? Do we have the same defence of our media and the rights of journalists and editors? Are they properly protected? What is our attitude to monopolies? Before we ask ourselves about VAT on newspapers, is it not time we examined the role of newspapers in the community? We should know what their role is and that role should be protected. The way to do this would be through a media council. I am having great difficulty in getting anybody to support that idea but I think it would be a good idea because it would protect journalists and it would be controlled by the journalist profession.

Recently I asked a number of my constituents what Sunday newspapers they bought. I buy all the Irish newspapers and one British newspaper. Many of my constituents buy The Sunday Mirror and that type of newspaper, because they are much cheaper. We should ask ourselves if the imposition of VAT on our newspapers is putting them at a disadvantage and if it is reasonable, given the role they should have? In my view an examination of this question has not been carried out. It is a popular suggestion for the media to say that VAT on newspapers should be reduced or abolished, but we should examine the situation to see if this imposition is justified.

I have been reading a lot in the newspapers recently about rationalisation. There was a report in The Irish Times of the annual general meeting of The Irish Press. When two people proposed as directors were asked their credentials they said they were Fianna Fáil supporters all their lives. Everybody thought that was natural — I suppose given the history of The Irish Press it is. This has not affected the role of The Irish Press in the community. I do not want anybody to take me up the wrong way because The Irish Press, the Evening Press and The Sunday Press are very good and worthwhile newspapers but I would like to know how independent are the journalists and the editors of proprietary control and what is their role in the community? All these matters should be examined when determining if we want to improve competitiveness. The way to do that is through a media council. I would include on the media council not just the Press Council but RTE.

I read in a newspaper — I do not know if it is to be pursued — of the possibility of VAT being imposed on British newspapers. If so, I wonder how that will affect this argument. If an examination of the media were undertaken by a media council we would be in a better position to make a fair and objective assessment of this proposal. At the moment all it has in terms of status is pressure by a section of the community, but if they could make a special case along the lines I have been suggesting, it could be considered. At the moment I do not see any such case emanating from what has been said so far.

The newspaper industry is a labour-intensive industry and, as such, has all the difficulties and problems associated with a labour-intensive industry. These difficulties I have brought to the attention of the Minister on a number of other occasions — the level of PRSI, high telephone costs, costs associated with a labour force. I have called time and time again on the Minister and do so now to look at a tax regime — and the newspaper industry is an ideal example — which makes a distinction between those firms which are labour intensive and those which are not. Labour intensive industries such as newspapers, clothing, hotels and construction should not, in sense, be treated precisely the same as industries which might be heavily capital intensive. These latter have anti-employment policies and I call for pro-employment policies. Deputy O'Kennedy's suggestions are one way of helping the industry but there are others like tackling the high rate of pay-related social insurance because of the numbers employed in that industry. This fits in with the Minister's own theory of competitiveness in an industry which is not only labour intensive but telephone intensive with enormous costs in terms of telephone and electricity charges and all the associated overheads. That type of industry must be put in a competitive position and the Minister might consider assisting them in that area.

If the Minister is inclined to assist in the VAT area he might bear in mind that a large number of newspapers do not have a high cover price — indeed, some have no cover price, being largely local give-aways. In that regard, particularly in the city of Dublin and other cities where one does not have the provincial newspaper arrangement, this type of newspaper is very important to the community. As these do not have a cover price, any move to reduce VAT would not be of assistance to them. However, they could be helped in the other ways mentioned. There is also the question of cinemas, new stations and the whole communications industry generally. Newspapers traditionally draw their revenue from the cover price and from advertisements. The Minister might consider that VAT on advertising income is a very valuable source of income to the newspapers. In many ways, the cover price is not the essential income, which tends to be the advertising income. Reviewing VAT on that is equally important.

In relation to the number of foreign newspapers ending up here at present, could the Minister enlighten us as to the VAT regulations in regard to newspapers and magazines coming in, particularly from Britain? Would an adjustment on VAT on our newspapers put us in a distinctly better position than the present competitive arrangement with British newspapers in particular? VAT apart, there appears to be a considerable amount of commercial dumping of foreign newspapers on to our market. That may be a feature of the fact that they have enormous volumes and can let the tail-end of those be dumped here for a cheaper price, or it may be a genuine commercial reduction — I have my doubts. I suggest that there is an element of commercial dumping going on and perhaps the Minister should look at that in the overall context of trying to help our newspaper industry.

Deputy O'Kennedy's suggestions are valid ones. Like every other labour intensive industry, the newspaper industry has enormous electricity costs, telephone costs, PRSI costs and increasing costs all round. If the Minister attempts to stay true to his philosophy of restoring competitiveness he should help to get the cost of Irish industry down, particularly labour intensive industry. He could do very well indeed by starting with our newspaper industry which employs so many.

This amendment on our behalf in the name of Deputy O'Kennedy seeks to reduce VAT on newspapers from 23 per cent to 5 per cent. We in Fianna Fáil have put down this amendment after very careful and mature consideration of the issues involved. We held detailed discussions with the interests concerned. In particular, we listened to the views of the newspaper industry comprising the national and provincial newspapers and also the printing trades group of unions. We asked for, received and studied a detailed professional objective economic analysis of the situation.

We did not put down this amendment lightly because we realise that there is a considerable cost involved to the Exchequer in granting to newspapers the reduction on VAT which we propose. We approached the matter with a full sense of responsibility, weighing the different arguments — and there are some conflicting arguments involved — but weighing all the arguments carefully. On matters of this kind, where there are major financial implications, we are always conscious of the fact that when we propose something in opposition we must be prepared to follow through when we are in Government, unless there is some major change in the surrounding circumstances in the meantime.

The case for this reduction of VAT on newspapers can be put fairly, clearly and succinctly. The Irish newspaper industry argues — and in this it is supported by the trade unions involved — that if it is to overcome the combined effects of the economic recession, escalating costs, declining advertising volume and revenue, increasing competition from radio and television and unfair competition from British newspapers and survive, it must secure a major reduction in the burden of VAT that it has to bear. It is claimed that the newspaper industry has now reached the point where the level of employment is seriously at risk. We in Fianna Fáil accept the validity of the newspaper industry's case, that the survival of the domestic newspaper industry as we know it today is under serious threat and that some remedial action is urgently called for.

It is perhaps useful to state, if it is necessary to do so, the principle that a free press is an important safeguard of our democracy. In a democracy, people need a free press to keep them fully informed about Government policy, current issues, developments and all the many happenings which go to make up our political, social and community life. Newspapers also play a very important role in our political domain. They provide a channel through which political parties and Governments can explain their policies, a medium through which public reaction to those policies can be gauged and a forum where political developments can be independently monitored and evaluated. This role of a free press in a democracy is recognised throughout the western world. There can be no argument about the need for a healthy, vigorous, domestic Irish newspaper industry. Were it to disappear, or even to be reduced to a position subservient to the imported product, that would represent an irreparable blow to our Irish identity, culture and way of life. The quality of Irish life would be diminished and one of the things which Irish people have had access to for over a century would be taken from them.

Irish newspapers pay VAT at 23 per cent on their cover price. In West Germany, Belgium, Luxembourg and the Netherlands the rate varies between 5 and 7 per cent. Through all of Europe 7 per cent is the highest rate of VAT on newspapers and in Denmark, Italy and — most importantly of all from our point of view — in Great Britain, newspapers are actually zero-rated, as compared with 23 per cent here. Because British newspapers are zero-rated in Britain, it is attractive and possible for these newspapers, in effect, to dump a marginal part of their production on the much smaller Irish market. It is now possible to buy two British dailies here for the price of one of our national dailies. The House knows that there are seven Irish national newspapers — four morning and three evening. There are four native Sunday papers and some 52 provincial papers.

During 1982 the average daily circulation of the Irish morning papers was about 417,000 and of the evening papers about 298,000, while the weekly average sales of the Irish Sunday papers was about 999,000 pushing up to one million. Sales of the provincial papers are currently estimated to be between 550,000 and 600,000 per week. The turnover of the industry is well over £100 million. The total direct employment in the industry is about 5,000 people, or approximately half of the total employment in the printing and publishing sector in Ireland. This does not take into account at all the very large number of people indirectly employed in various ancillary ways. Those figures give some idea not only of the economic importance of this industry but also of its importance and its impact on our social and cultural life.

It is on circulation that the impact of VAT is principally felt by our newspapers. VAT is also levied on advertising but that is a different problem because the income involved in advertising goes through the VAT machinery generally. The real burden of VAT as far as newspapers are concerned is the 23 per cent VAT levied on the cover price of the newspapers. The prices of Irish newspapers have risen by about 30 per cent on average over the past three years in real terms. That rapid increase in newspaper prices in recent years is not solely attributable to VAT increases but VAT increases have added very significantly to the increases which would otherwise have incurred. It is reasonable to calculate that, if you allow for other factors, about one-fifth of the absolute increase in newspaper prices over the period from January 1980 to March 1984 is directly attributable to rises in the level of VAT over that period.

That brings the newspaper industry into one of those very depressing downward spirals. VAT has caused an increase in the price of newspapers and that increase in price brings about a falling off in circulation. Newspaper proprietors try to make good that fall by again increasing the price and so on. The whole newspaper industry, particularly the national industry, is in this very serious difficult spiral situation. As far as I know, the provincial newspapers are also in a declining circulation situation. The difficulty the newspapers find themselves in is falling circulation, increased prices to compensate for that and increased VAT charges contributing to a further fall in circulation. That is the principal internal difficulty which the Irish newspaper industry faces.

There is also the very real and very serious threat posed to our domestic newspaper industry by British imports. British papers have always sold in this country. They are also liable for VAT at the same rate as our domestic newspapers but that is a very simplistic way of looking at it. Inside that overall statement of the situation there are a number of complications and anomalies which have to be looked at, all of which operate to the detriment of the domestic newspapers. I suppose none of us would wish to discourage the circulation of British newspapers in this country. It is an unusual situation internationally to have such a major importation of the newspapers of one country into another but there are many very excellent high quality British newspapers which we would always welcome. Perhaps even the more popular rubbishy papers also have a place in our modern society. It is one thing to have these imported products available to our people who wish to have access to them in some reasonable measure but it is another thing when the importation of newspapers actually gets to the point of threatening the viability of our native industry.

That is what is happening at the moment and I want the Minister to be fully aware of this situation. It is not an imaginary situation and not one I am exaggerating. We had a very careful detailed objective professional economic analysis made of the situation. The importation of British newspapers into the country is now of such an extent that this represents a serious threat to the continued existence and the viability of our domestic newspapers. I want to put that into perspective because it would be easy to make some sort of wild suggestion that we should completely prohibit the import of some of the particularly outrageous type of English newspapers being circulated here. That is not our business, but we have an obligation to see that our domestic newspapers are able to compete on a fair and equitable basis. That is not happening at the moment because VAT levels contribute indirectly to the price advantage of the cheaper British papers in a number of ways, firstly as an ad valorem tax levied as a fixed percentage of pre tax retail price. High VAT rates increase the absolute price difference between the cheaper and the dearer newspapers.

Secondly, the existence of a zero VAT rate on British newspapers in their home market is almost certainly having a positive effect on their circulation and selling price, helping to keep down their unit costs relative to our Irish papers. Of course British newspapers are also zero-rated for advertising. Therefore these British newspapers, in their home environment, are in a very favourable situation compared with the environment in which the domestic Irish newspaper must operate. That favourable environment base, from which the British newspaper operates, helps them greatly to compete on price with their Irish counterpart. It is very directly an off-shoot of the different VAT situations in both countries. I am making the point that even though, in theory, the same rate of VAT is levied on the imported newspaper as is levied on the domestic newspaper nevertheless, because of the market situation prevailing, this very high rate of VAT operates very definitely and distinctly in favour of the imported product against the Irish product.

There is another point about it — Deputy S. Brennan asked about this — and it constitutes also a kind of anomaly involved in the situation, that our Irish newspapers pay 35 per cent VAT on newsprint that they import, the newsprint they use for the production of their papers is subject to VAT at 35 per cent at point of entry. Of course that presents them with a certain funding problem because there is a considerable time lag between the import of the newsprint, the payment of the 35 per cent VAT and its ultimate recoupment from sales. There is another aspect of it, that is that the British newspaper comes in here as a newspaper, not as newsprint. Coming in as a newspaper it is subject to 23 per cent VAT only on its ad valorem price. Again, from that point of view, there is a distinct financial funding advantage to the imported product as against the Irish product.

The cost to the Exchequer of a reduction in VAT on newspapers must be viewed against the losses which will occur if present trends in the Irish newspaper industry continue. It is officially estimated that in 1984 VAT on newspaper cover prices will bring in approximately £22 million. That means that a revenue loss of just under £1 million would be involved in every reduction of 1 per cent, that is a total of £18 million loss to the Exchequer in our proposed reduction to 5 per cent. Again, that is not as simple as it might seem, because newspaper circulation has declined by approximately 10 per cent in real terms. If that trend continues — and there is absolutely no reason in present circumstances with all those market forces about which I have been talking operating — why that trend will not continue and indeed be exacerbated in the years ahead — there would be a loss to the Exchequer, apart from anything else — if prices remain the same and so on — of approximately £2 million between 1984 and 1986. That is, of course, just if things keep on going as they are. But if there are major contractions in the Irish newspaper industry, or major closures, as could well happen, then the loss to our Exchequer would be much greater. For example, there would be the losses of PAYE, PRSI contributions and, if there is unemployment, that would add to our Exchequer bill. Therefore it is not a simple calculation of the cost of this reduction in VAT to the Exchequer. An estimate of that cost would have to be curtailed and pruned by those other factors very much present in the situation.

I might summarise by pointing out to this House that the Irish newspaper industry is in a perilous condition at present. That is a fact we must face up to. It is not a matter of party political positions or anything of the sort. It is a simple statement of fact which can be ascertained objectively by anybody reviewing the situation. That domestic newspaper industry has its internal difficulties. For example, it must compete with the electronic media who do not pay VAT on an ever-increasing scale of intensity. It is being seriously undermined by the unfair competition from British newspapers in the way I have outlined. Its survival in its present form is in doubt. That is the solemn warning I would give to this House, the survival of the general corpus of our newspaper industry, as we know it today, is in doubt unless some urgent remedial action is taken. I believe that the disappearance of our newspaper industry, as we know it today, or indeed any severe diminution of it as our national newspaper industry would represent a major setback, is something that we in this House should take note of and act to remedy. I believe that immediate remedial action is necessary and that the only effective way such remedial action can be applied in present circumstances is through a major reduction in the level of VAT. The newspaper industry will argue irrefutably that it is the 23 per cent rate of VAT which is not alone causing them increasing difficulties of an internal nature but is also placing them in an impossible competitive position in so far as imported British products are concerned.

This amendment is put forward by us with the full knowledge of all aspects of the situation and in the light of the urgent need, as we see it, to save the Irish newspaper industry in the only way it can be immediately and directly saved from the very serious difficulties it encounters at present. I recommend this amendment to the House with full appreciation of all the factors involved and very much aware of the implications it has from the point of view of the Exchequer.

Having waited throughout the afternoon to get in on section 73 — which was then guillotined; that was the betting tax area — I want to avail of this opportunity of getting in on amendments to sections 84 and 88. I am becoming somewhat confused by the debate so far because I had been under the impression that we were also dealing with VAT on clothing but nobody seems to have mentioned that; it seems to be all about newspapers. Of course the amendments can be quite confusing — all these little "a"s, and "aa"s as if one were on a visit to the dentist. I suppose one could contend that "aa" means an 8 per cent VAT, that a 23 per cent rate would be "aaa" and 35 per cent "aaaa".

However, we are dealing firstly with VAT on newspapers in respect of which I support the amendment proposed by Deputy O'Kennedy. It is a natural follow-on to the decision made to remove VAT on books about two years ago which was a very progressive move. Newspapers could be regarded in the same light as books because we are a great newspaper reading people. Many people do not read books but voraciously read their local newspaper, the free newspapers and also purchase a daily newspaper. The cost of newspapers now is out of the reach of most of the unemployed. They have to get a loan of a newspaper or go to their local library to see what jobs are advertised. The daily newspapers are suffering most from the effects of VAT and the increase in the numbers of pretty lowclass British newspapers which are sold here. Newspapers such as The Sun, The Mirror, The Star and so on are increasing their circulation mainly because they are cheap although they also sell well because of their coverage of sport. There is a very strong case to be made for the reduction of VAT on newspapers, not merely because of the employment they generate which is very important but also because of the educational factor. Newspapers raise people's consciousness, correctly or incorrectly, and affect their thinking on various topics. They give them information about what is happening and enable them to make judgments which they could not do if they did not read newspapers. I support the reduction of VAT as proposed by Deputy O'Kennedy.

This section also deals with the implementation of the budget order of 8 per cent VAT on clothing. If the imposition of VAT had been made during a boom period or even at a time of normal unemployment it would have been bad but not quite as disastrous to many families as the imposition will be now. The number of people on the poverty line is increasing enormously. It is estimated that 105,000 of the total number unemployed are now on social assistance. They find it increasingly difficult to feed and clothe themselves and their children and the imposition of 8 per cent VAT now is going to be an enormous burden.

The maintenance of the zero rate on children's clothes is some help but it is an attempt by the Government to show that they are caring and compassionate. However, when a child reaches 11 years of age the VAT on clothing will come into force which will be a tremendous burden on families who are trying to clothe older children. There is no need to go into the complications that may arise as far as the purchase of clothes is concerned but the imposition of 8 per cent VAT will be a burden on many families.

The Minister should tell us what revenue he expects to get from this imposition. I do not think it will be worth it because an increasing burden is being placed on health boards, especially the Eastern Health Board, who have to pay supplementary benefit to people who are unable to survive on their current welfare payments. The board have to pay ESB bills, and provide money for food because people are unable to meet their bills. Therefore, the money taken in by the imposition of VAT on clothing will be going out through the health boards and centres to supplement people's incomes. People will need supplementary benefits now to purchase clothing. I wish to emphasise my objections to VAT on clothing and to support Deputy O'Kennedy's amendment for the reduction of VAT on newspapers.

I also support this amendment. I realise that there is a cost factor involved and that it is very easy for us to propose measures for reduction in taxation. The Minister has to find sufficient revenue to keep the economy going. However, as has been pointed out, this is one of the most fundamental and farreaching amendments ever to be put before the House.

As Deputy Haughey said, we have given this careful, mature and considered thought and deliberation before we put down this amendment. The estimated gross cost of the amendment would be about £18 million but this is not a true figure because there will be an increase in the total VAT returns arising from increased circulation and, if employment is maintained, there will be an increase in receipts from PAYE and PRSI. The reasoning behind this amendment is very simple. We have an independent, native, local Irish newspaper industry which, to use the slogan, is part of what we are and we cannot afford to lose it.

Deputies have spoken about penetration here by British publications. "Penetration" will not be the appropriate word in a few years' time if this trend continues because the Irish market will be overwhelmed by British publications. Deputy Haughey referred to the quality-type British publications and many of them can be so described.

Deputy O'Kennedy was too polite when he referred to some of the more rubbishy British publications as representing a different set of mores, a different set of values, from the values we grew up with and to which we are accustomed. My view of some of those rubbishy publications is that they represent the lowest possible form of trash, the lowest form of journalism imaginable. Those are the publications which are now flooding the Irish market as a result of an increasing lack of competitiveness on the part of the Irish newspaper industry.

I recognise that there are reasons other than the 23 per cent VAT rate for the erosion of competitiveness in the Irish newspaper industry, but everybody must recognise that the level of VAT is a very significant factor. If the Minister considers that our amendment is too costly I crave him with all the urgency and sincerity I can muster to come at least part of the way with us. Of all the amendments proposed to this Finance Bill this is the most fundamental. We do not shirk from the cost aspect of it. We fully recognise the impact on the Exchequer in the short term, but the long term impact will be much more marginal. I assure the Minister that the beneficial social consequences of accepting this amendment or coming part of the way to meet what we propose will easily outweigh any short term economic disadvantage.

I think I was listed to speak after Deputy O'Dea.

I was told by the previous Acting Chairman that I would be called after Deputy O'Dea. I have not got a great deal to say on this amendment. Perhaps my short career in politics has made me a bit cynical, but I thought it was surprising that the longest speech on this amendment was made by Deputy Haughey, a typed out speech incidentally from the look of it, on an issue which undoubtedly is fundamental so far as publicity is concerned. I hope I will be forgiven for being cynical. I could not help smiling to myself. I wonder if we were dealing with something which was not so directly related to publicity would we have had such a long speech and so many interventions on this amendment?

Speeches in support of the removal or lowering of VAT could be made about any item which has VAT on it at any percentage. We would all like to see VAT removed. Many other items have a VAT rating of 23 per cent and 35 per cent which could be considered more essential to our day to day lives than newspapers. It would be easy and probably beneficial for me to say the most fundamental item in this whole list of amendments is the proposal to remove or reduce VAT on newspapers. I would probably be guaranteed a few lines every week in the Drogheda Independent, the local newspaper in my area.

The Opposition have not made their case strongly enough. Deputy O'Dea said they did not shirk the cost aspect. He is not in Government and he does not have to find the money.

We explained all that.

Fianna Fáil did not explain a word of it.

We explained it all. I am sorry the Minister was not listening.

They did not indicate exactly where they would find the money and in which other areas they would increase tax to make up for a reduction in VAT on newspapers. Deputy Haughey made great play about competition against Irish newspapers from trashy — to use his word and the word of other Deputies — newspapers coming in here from Britain. In many instances these papers could be referred to as page three newspapers. If you told the normal purchaser of these newspapers that we had reduced the price of the Irish Independent, The Irish Press and The Irish Times to 20p and the price of The Daily Star or whatever page three newspaper he bought was also 20p, I wonder which paper he would choose.

I hazard a guess that he would stick to his page three newspaper unless the Irish papers introduced a page three as well and gave a different format to their racing page. Those papers are read because of those pages. If you see papers abandoned in buses or in cinemas those are the pages which are open. We are being naive if we think the sales of Irish newspapers are falling off because of unfair competition. It is the content of those page three newspapers which sells them. Perhaps the newspaper industry need to look to their own laurels apart from crying out for VAT to be reduced or abolished as if that were a panacea for all their ills. I would love to be able to tell people this Government managed to reduce VAT on newspapers and many other items which have become essential such as cleaning powders, and so on——

They removed one today under pressure.

——and other essential aids to a woman's job in the house. This is not possible. I had to smile to myself when I heard Deputy Haughey——

Deputy O'Dea did not say a word about clothes.

——talking about VAT on newsprint at the point of entry. It was the Government under his leadership which introduced that. Therefore it is farcical for him to complain about VAT on newsprint at the point of entry and the burden it is putting on newspapers.

That is irrelevant.

He should have left that point out of his typed up speech. Probably about 80 copies of it have gone to the provincial newspapers guaranteeing enormous coverage for him and his party for the next few weeks. Reducing VAT on newspapers from 23 per cent to 5 per cent is not the answer to all the problems. It might help. Reducing VAT on anything might help to increase sales. Many other factors are causing a reduction in the sales of newspapers which have to do with the new technological age, with radio and other forms of communication. It is a much more complex matter. It is easy for the Opposition to put down an amendment to reduce VAT on newspapers and call it the most fundamental issue in the whole Finance Bill.

It is a good place to start.

Acting Chairman


I wonder what will happen by the time we get to the last amendment. What other word will they come up with which represents more fundamental than most fundamental? I do not know where they will get a word that will be more fundamental than most fundamental. This is becoming ridiculous.

Most means most.

They believe in the inflation of hyperbole.

Deputy O'Dea mentioned the loss of the tremendous beneficial and social aspects of newspapers. The provincial newspapers play a very important role because they are local. I firmly believe that even if they cost 50p local people who want to read their local news will buy them. I do not think their sales would be brought up by any great margin if the price was brought down to 42p by a reduction to 5 per cent VAT. They want to read about their local area and their local Deputies, if they are interested in them, and they will buy their weekly provincial paper even if it is a few pence dearer with a 23 per cent VAT rating than it would be with a 5 per cent VAT rating.

Obviously, the main area where they are being caught is the VAT on advertising. Perhaps the advertising has decreased. That area should be looked at. The question should be asked why advertisers discontinued or cut down on the amount of advertising. It does not have anything to do with the cost of the paper but concerns many other areas. It has to do with the utilisation of other methods to get across the message about products. Frankly, the amendment is a cheap way of getting a lot of publicity and a lot of provincial newspapers on the Opposition's side. We could introduce similar amendments or take the Fianna Fáil one on board and get a lot of free publicity for a few weeks. There are some local papers in the Minister's area and I am sure that if that occurred he would bask in a little glory over and above the other Members in that constituency. I do not think that is what we are about nowadays.

It was irresponsible of the Opposition to describe this as the most fundamental amendment to the Bill and to say that if the change is not made we will witness the demise of many newspapers. Obviously, I have more confidence in the newspapers than the Opposition have. They are prepared to move with the times. We have quality newspapers and I do not think they want to follow the pattern of the page three type of newspapers. They are prepared to accept that by not going into that area they will lose some sales but for the sake of quality they are prepared to keep their standards. I welcome that. We are debating this matter for purely cynical reasons.

I regret the tone of Deputy Owen's comments. Our leader, Deputy Haughey, tabled this amendment through Deputy O'Kennedy — it was approved by the Fianna Fáil Party and is now party policy — to reduce VAT on newspapers from 23 per cent to 5 per cent. We did not take that decision lightly.

Fianna Fáil do the same thing every year.

The matter was discussed by the Fianna Fáil Front Bench on many occasions. We had discussions with interested parties and they are continuing. In fact, I will be representing the party at a meeting of the newspaper owners in the west of Ireland to consider the crisis they are facing. We should face the fact that those newspapers are experiencing a crisis. Deputy Owen does not appear to have any consideration for the many newspapers that are under threat.

Many business concerns are under threat.

Many people will be unemployed if newspapers have to close.

The same will happen if business concerns have to close.

Acting Chairman

The Deputy should be allowed to continue without interruption.

I do not mind interruptions because they do not confuse me.

We cannot hear what the two Deputies opposite are saying because they are speaking at the same time.

Our decision to seek a reduction in the VAT rate on newspapers is consistent with the decision by a Fianna Fáil Minister for Finance, Deputy Mac Sharry, to remove VAT on books. In 1982 we took that decision because we held the view that VAT on learning was wrong. Today's amendment is a consistent extension of our policy in relation to publications and newspapers.

Deputy Owen referred to Deputy Haughey's support for this amendment and tried to undermine the sincerity of his submissions. Deputy Haughey put forward a well researched argument for consideration by the Government and the Minister. I do not think any Irish politician since the foundation of the State, or before, suffered so much vilification at the hands of the media. However, he is realistic to know that even if we advocated a zero VAT rating on newspapers the approach of newspapers to him would not change. His concern is for the staff of the newspapers who may be without a job if the 23 per cent remains. Deputies opposite should realise that and give credit where it is due. I do not know of any politician who had his obituary published in a Dublin newspaper before its time. We are all aware of that but Deputy Haughey accepts that we must support an industry that means so much to our people.

Existing newspapers are under threat because of the 23 per cent VAT rate. British newspapers are being dumped here. They are being bought by many people in the cities and are introducing an alien culture. They are influencing public opinion against important issues such as the Forum report. British newspapers are now in a position to influence public opinion here because they enjoy a big circulation. We must remember that there is not VAT on newsprint or newspapers in Great Britain with the result that those publications are produced at a very low cost.

It is unfortunate that because of Government inactivity we do not manufacture our own newsprint. We do not hear anything about the reopening of the mills in Clondalkin although a promise was made to do so here some months ago. Our newspapers are printed on imported newsprint and that represents an extra cost on local publishers.

Is the Deputy suggesting that people should pay more for their newspapers than they are now? If that is the case he should put that on the record.

I would expect that there would not be any question of their paying more for Irish productions. Surely the Minister is not saying that we are not in a position to produce newsprint here at a competitive price?

Is the Deputy now saying that that should be a condition of producing newsprint, that it should be cheaper? That is a good principle.

I am saying that the paper mill in Clondalkin should be opened as promised by Minister of State, Deputy Eddie Collins. Had that promise been kept we would have our own newsprint. The imported newsprint is subject to 35 per cent VAT at the point of entry. All the advantages lie with the British publishers who are taking advantage of the position and flooding the market. As a matter of emergency the Minister should consider our well reasoned amendment. Why is he throwing so much cold water on this reasonable proposal which was put forward in a responsible and mature fashion?

Where will the money come from?

Our leader explained the position.

I did not hear Deputy Haughey say where the money would come from.

Bearing in mind that this matter has been given serious consideration and that it is now Fianna Fáil policy to be implemented on our return to Government, I believe the Minister should examine the matter again. I have been advocating a change in the VAT rating for some time because of the threat to the newspaper industry. We should remember that the 52 newspapers are in different centres throughout the country. In my constituency we are serviced by about six newspapers and some of the them have been in existence for more than 100 years. We have such newspapers as The Roscommon Champion, The Roscommon Herald, The Leitrim Observer, The Connacht Tribune, The WestmeathOffaly Independent, The Longford News, The Longford Leader and others. All these are under threat and will have to discontinue publication because of VAT.

The Government promised that after 12 months they would bring to the House a Bill for the licensing of an independent radio authority which would enable the establishment of a number of local radio stations — 30 according to Deputy Nealon and seven according to the Minister, Deputy Mitchell. Whatever kind of agreement is reached between Labour and Fine Gael in relation to that Bill, the local newspapers will be faced with a further threat on its enactment. We hope the new Bill will be before the House before the recess and that licences will be available, but that will pose a further major threat to the continuation of many newspapers, which will fall like ninepins. Therefore, we should be supporting the consolidation of local newspapers. At the moment we have an impossible situation because many unofficial radio stations, who do not pay licences or taxes, are competing with newspapers for advertising revenue. The sooner we get the independent radio Bill before us the better from that point of view, but we must remember it will pose a further serious threat to the local newspapers.

Why did the Deputy not do something about the Bill for local radio when he was in office?

I appreciate that bringing in the Bill and establishing local radio stations will pose a major threat to newspapers and that is why I advocate the elimination of VAT in respect of newspapers, or at the very least a reduction in the rate by at least 5 per cent. The Government should look positively at the effect of our amendment.

There is another threat to Irish national and provincial newspapers. I refer to the British newspapers circulating here. They not only present a danger to Irish newspapers but they threaten Irish manufacturing services because they carry British advertising advocating British goods and it is very difficult for the Irish Goods Council to promote the sale of Irish goods while there is such widespread circulation of British newspapers here with British based advertising of British goods. It is having a serious effect on the Irish manufacturing industry as well as on Irish advertising revenue promoted by Irish agencies. It may be more attractive now for some Irish firms to advertise in British newspapers because of their increasing circulation here.

As I have said, 52 provincial Irish newspapers circulate here which are under severe threat of being closed. In face of that the IDA recently refused a rationalisation and re-equipment grant to a major group of newspapers and I suggest that the Minister should look into it because the IDA were set up to support improved technology throughout industry and I do not see why newspapers should be disqualified because they, too, have to compete with new technology in Britain and elsewhere. Therefore, I suggest that the IDA decision in this instance cannot be supported. The Minister for Finance should consult with the Minister for Industry, Trade, Commerce and Tourism to discuss this proposal. The cost would be high, but our leader has outlined what the situation will be from the point of view of jobs, PRSI and PAYE revenue if action is not taken. The loss in revenue would be far higher than the cost of the necessary grant. Apart from everything else, local and national newspapers make essential reading for the Irish people but at present people cannot afford the price of Irish newspapers because of the VAT content. Our amendment is reasonable and we are asking the Minister to treat it as a serious proposal. He should agree to some reduction in VAT.

I have never heard so many Second Stage speeches on the Committee Stage of a Bill. This is craving the Minister to accept their sincerity and I do not wonder why people have begun to doubt the sincerity of politicians generally. We have not seen any sincerity whatsoever here. Deputies Haughey, Leyden and others obviously have been putting forward their own interests rather than that of the newspapers, and of course this amendment has not a hope in hell of being accepted. As I have said, the amendment is to promote the Deputies' interests rather than that of the industry. As an alternative, they do not suggest any way of assisting the Government to raise the lost VAT revenue.

The same case could be made in respect of many other industries. The Deputy now in the Chair will know the difficulties facing pubs in Border areas, but we have not heard three-quarter-hour speeches about unemployment in that industry, nor have we heard a word about people employed in breweries. We have heard supposed sincerity and craving. It is the worst nonsense I have heard. Deputies opposite have turned the newspaper industry into a political football. It is self-promotion rather than promotion of the industry.

If the Fourth Estate, as the Americans call it, has a difficulty and has a role to play let it show its special case, but all that has been said here today on that industry could be said about any industry here today. Rather than doing a service to the newspapers Deputies opposite have undermined any case there may be. Nothing has been said that would show that if we were to reduce the rate of VAT on newspapers it would create employment. Anything that has been said is true of industries generally. The same case has not been made of a reduction of VAT in regard to medicines because people engaged in that industry do not have the ability to advertise the Deputies.

I have sat listening to this debate longer than any Government Deputy. I contributed to this Bill section by section. Where I thought the Deputy's amendments were right I said so. I supported some of Deputy O'Kennedy's amendments. It would not do me any harm to support this amendment but no sincere or worth-while contribution was made apart from the over-reactionary nonsense we get from Deputy Haughey. When the temporary publicity which might give the Opposition a little leg up dies down——

We do not need any more.

I am sure representatives of the clothing industry, publicans and other groups will be interested to know why the Opposition cannot make exceptions for them. Deputy Leyden will probably be disappointed to know that my information from the workers in Clondalkin papermills is that the mills are likely to open soon and, if the test run goes well, there will be substantial employment there again.

I am delighted to hear it.

As regards VAT at the point of entry, Fianna Fáil introduced that. It brought £240 million from one year to the next.

Do not shed crocodile tears.

Do not interrupt the Deputy.

When Fianna Fáil were in Government they brought down the rate of VAT on books. That was a good move. They did not take the opportunity to do the same for newspapers, so let us cut out this crazy sincerity business.

At least we made a start.

The phrase used to be that we on this side were uncaring. The newspaper industry may well have a case to make but it will not be made by being aligned to one political party who are promoting themselves rather than the industry. If there is a case to be made, let it be made on the basis of the role of newspapers in society. We will listen to it. If we agree that something should be done and bring forward proposals we would expect the Opposition's support in finding revenue somewhere else.

Feicim an ciniceas atá ag teacht ón taobh sin ar an gceist seo. Bhí mise san áit ina bhfuil tusa, a Cathaoirligh, cúpla blian ó shin agus chuala mé na daoine sin ag iarraidh ar an Aire a bhí ansin an rud atáimid ag brath a dhéanamh anseo. Níl mé ro-chinnte ach sílim gur chuala mé an tAire féin ag iarraidh an cás a dhéanamh.

Chuala na Teachta í mise ag cur i gcoinne an ruda a bhí á dhéanamh ag an Teachta Ray MacSharry ar na leabhair.

Those of us who remember this time of the year when we were at school will recall teachers rightly or wrongly anticipating questions that might come up on the leaving certificate English paper. Invariably one that they provided for was the power of the press. A similar anticipation operates today.

I was surprised to hear a Deputy like Deputy Owen advocate that the remedy to the incursion being made by English newspapers in Ireland today was that Irish papers should adopt what she euphemistically called a third page.

The Deputy obviously missed what I said. Perhaps he was not here.

That was her answer.

The Deputy is misrepresenting what I said. I complimented the newspapers for keeping the quality——

I listened very carefully to the Deputy. The record will show that the Deputy reflected on people who go for those newspapers because they are popular, provide sport and all that they want and because they have a page three. Page three is that which euphemistically refers to frilly dollies, half-naked——

So the Deputy buys these newspapers.

That is the answer Deputy Owen would give to the House.

On a point of order, that is not what I said. A Deputy of such experience as Deputy Tunney is wrong to misrepresent another Deputy in the House. I ask him not to misrepresent me. I will send him a copy of the "blacks" when we finish the debate.

The Deputy has been put off his stride by the frilly dollies.

That is a poor defence.

The Official Report will not be interfered with and the Deputy will see that at the beginning of her speech — towards the end she tried to restate her case — she said the answer to the incursion of the British media was for the home media to pursue a similar line.

That is just not true. It is rubbish. Perhaps the Deputy should have remained speaking in Irish.

Deputy Mitchell was looking for a reason why we should be concerned about protecting the high standards of our native press. There is every reason why we should do so. The Minister will be familiar with the investment that is made in our educational system. I hope the Minister and Deputy Owen will listen to a relevant proposition.

I always listen to the Deputy when he is relevant.

The investment in education amounts to £1 billion, apart from money we give to the Arts Council, to protect what is native to us. We do that because we regard it as essential and desirable to our way of life. If we accept that we must accept the logical conclusion of being on guard against anything which tends to make little of that investment. I ask Deputies Owen and Mitchell and the Minister if they are quite happy that these page three documents will provide to those who may be so disposed an opportunity to read matter in the Irish language. Can they look forward to reading matter regarding our sporting activity? Will they get fulsome reports on Croke Park, Dalymount or Lansdowne Road?


I am not so impoverished as to have to rely on Deputy Owen to help me make my contribution.

The Deputy is persisting in misrepresenting what I said. I am trying to correct the record.

If the Deputy's understandable desire to protect her Minister is escaping her she will have to bear with that. Backbenchers often find themselves in that position. I am endeavouring to demonstrate that without our newspapers we are putting the investment we make in the educational system at risk. The generous moneys that have been given by successive Governments to sporting and athletics organisations and to the arts will also be at risk. I do not accept that these matters can be dealt with by scribes who are not in sympathy with or who have no interest in our education, culture or sporting activities. That is what is at risk if we tolerate the everincreasing arrival of foreign newspapers on these shores.

I am not opposed to but rather would welcome what is described as the better English newspaper. Unfortunately it is not attractive in price to the person who might read it here. We are concerned with the cheaper English newspaper in matter and price which, because they enjoy protections not afforded to our native paper, are rapidly removing our newspapers from the scene. We have had people advocating local community newspapers and I agree with that. But surely the logical extension of that is that you show in that concern a concern for the national papers, the national dailies and the national weeklies.

I have been amused at the allegations made by people on that side of the House that our concern is based on some narrow political reason. It has been stated here, and I am happy to state the fact again, that we do not think the day is too far removed when we will be back on that side of the House. We have always honoured our commitments unlike the experience on the present Government side of the House. We have always honoured our commitments in the past and we shall honour our commitments in the future. Every commitment we give today will be honoured to the full.

Has the Minister accepted the fundamental sincerity in what we are saying in regard to the importance of protecting our newspapers against that which has been and is being imposed on our Irish readers? Every worth-while teacher suggests to his students the importance of newspapers. That should be part and parcel of every school curriculum and, if it is not, it should be. Every teacher should endeavour to create in the minds of the students the proper approach to the press and explain how important it is that they should cull and evaluate up-to-date news.

I remember a time when it was said we could make promises and say what we intended to do, but I think that Deputy Gay Mitchell will accept that in respect of the area to which he referred we had already made a move and the next logical step was to remove misleading material. I can say that in the face of the typical mistrust that exists, I know that was the intention. We did not do it because we hoped to ingratiate ourselves with the ladies and gentlemen of the press. We do not think things can be done that way. Naturally we have a concern for the people who are employed in the industry, many of whom have come to us, as I am sure they have gone to Deputy Gay Mitchell, who normally has no difficulty in making his case but who seems on this occasion to think he is not able to make a case. He expressed concern for their employment, a very grave concern.

Now in the field of education there is an investment by us in journalism under the auspices of the city of Dublin VEC of which Deputy Gay Mitchell is a member. That is money invested in a vital service. Is it the intention now that we say national newspapers should no longer exist? They are to be replaced by the documents that come to us from across the water and we must now educate our prospective journalists so that they will not serve the high standards of our traditional journalism but must adapt to that which is provided from across the water and sent over here for popular acclaim. These are the things that concern me, the things I see happening in our newspaper industry now. I believe that we get from young people the result of the fruits with which we feed them. Are we advocating here that instead of their reading the Times, the Press or the Irish Independent they concentrate on page three of the imported press, because that is the page we are told they are interested in? Do not give them that which might be good for them; give them that which, it is alleged, appeals to their taste, the taste we will continue to cultivate. That is the adult reading, the page three type of newspaper, we will have in our schools. Is that a development Deputy Nora Owen wants for her children? And all because of the fact that it is not possible for her Minister for Finance to provide the necessary money.

The Minister should look well at that area. As far as I am concerned this is the clause of this Bill in which the Minister must make adjustments and provide for a situation where he will at least do more to provide for a situation rather than a mere acknowledgment in words. More is required than an expression of sincere concern. He is making vast funds available to his different Ministers in their appropriate Departments so that we can protect the development of certain national standards. What he should be doing here is no more than providing the necessary complement to protect what should be protected and, in doing so, get full value for the money spent.

What is the economic reason for making vast investments in the Irish language if at the same time there are people in this House who advocate that the students and parents of Ireland should be happy reading what is provided for them by journalists and editors who are alien to it and ofttimes opposed to it? If the Minister and his vocal backbenchers can say that my case is weaker than theirs I will be very happy, but in the absence of their doing so I can only accept that their utterances are nothing but the blind loyalty of backbenchers to a Minister for Finance.

I have listened with interest to the contributions from both sides of the House. Any argument to reduce VAT, particularly such a high rate as from 23 per cent to 5 per cent, is in principle to be commended but the difficulty arises when you realise that so many goods and services carry high VAT rates. Like any other Member I can make a very good argument to reduce the VAT rate on any item because I could point to business difficulties, lack of business and so on, but how does one replace the money? To be fair Deputy O'Dea realised the Minister had difficulties because he had to keep the country going, he had to pay for all the services he provided and he had to raise the revenue, but he did not say how the Minister could raise these millions of pounds.

Read what I said in the report.

The Deputy did not put forward one single suggestion.

I am sorry the Minister did not listen to me.

That, unfortunately, has been the difficulty with the Opposition party. They have many simple solutions, gifts, commitments and promises going back many years but the reason the Minister introduced such high VAT rates is that he is paying back the debts incurred some time ago.

Unfortunately, Deputy Tunney had one of his poorer days here. He seems to have brought the issue to page 3 versus The Irish Times. He misquoted what Deputy Owen had to say. The fact is that if the Minister brought in a zero VAT rate or the 5 per cent which is recommended, the British newspapers —The Daily Mirror, The Telegraph, The Times and so on — would still come in here and be sold. We should be addressing ourselves to the imbalance in relation to the VAT rates.

As I said, it is easy to make a case for the reduction of any high VAT rate. Last year the Government went some way towards helping the motor industry. They recognised that some people were driving defective cars because they did not have the money to have the necessary repairs carried out. I hope this Government will gradually improve our economy so that we can have lower VAT rates all round. To come here with a simple solution — reduce the VAT rate to 5 per cent and everything in the garden will be lovely — is not on. This has been the problem over the past few years in relation to simple solutions to simple problems. Let us cast our minds back to motor tax and rates. It was grand to say in the manifesto that these would be done away with overnight.

Like the £9.60.

The difficulty has been that they were done away with overnight but nothing was thought out——

It was not even brought in.

Over the next few years the money will have to be found to help finance local authorities. We know what happened with the abolition of the motor tax.

Let the Opposition be constructive and say exactly where this money will come from and say who will make up this difference. I have great sympathy for the newspaper industry, and many other industries, which are facing difficulties. This is a very difficult time to be in business because of the recession and of technological advances, but I hope we can move towards a solution. For the Opposition to say that we can reduce this VAT rate overnight without giving an indication where the money is to be found is irresponsible. It will be interesting to see where the Opposition say the money will be found if the VAT rates are to be reduced. Now that Deputy O'Kennedy is here perhaps he would say where the Minister will find this money.

I have had representations from newspaper people and know that this industry is going through very difficult times, but I hope these newspapers will remain viable. In my view we should not come up with simple solutions, with more commitments and promises, which Deputy Leyden seems to be able to come with so easily. I agree with the principle involved but we must look at the VAT rates. We all know they are too high but we cannot reduce them overnight to 10 per cent, 5 per cent or zero.

Was this not done this morning?

May I refer briefly to Deputy Tunney's remarks? He has reached another first today, the art of misrepresentation. He went to great lengths to misrepresent what I said. What I said — and I want this on the record — was that even if The Irish Times, The Irish Press and the Irish Independent were to adopt a quality and a type of paper such as is available in the British papers coming here and if they were to charge the same prices, those British papers would still be bought. The Opposition are saying that it is the cost of the Irish papers which is stopping their sales.

They would have to have a page three.

If The Irish Press and the Irish Independent were to reduce their prices to the same price as the page three papers, more papers would not be sold and the British papers would still be sold. That is a fact. The British papers sell to a certain type of market and that market will always exist. Reducing the price of Irish papers will not get rid of that market. Deputy Tunney, who hopes to go to the European Parliament, should be careful in case he misrepresents. As an ex-schoolteacher I would be appalled if I were in one of his classes and he made that type of misrepresentation.

The Official Report will show what the Deputy said.

I will gladly send the Deputy a copy of the Official Report.

Deputy Owen is advocating a page three for Irish newspapers.

I think Deputy Tunney has invented a new kind of page three here tonight and we will be looking for it tomorrow.

There may be a little confusion. If I may, I should like to specify precisely which amendments we are speaking of.

This is not to take issue at all. It is so that we may clarify the proceedings. The Leas-Cheann Comhairle was here when these amendments arose and suggested that they be grouped together. Among those——

And it was agreed to.

Yes, it was agreed to. Among that group was this particular amendment on which almost every Deputy has agreed. Perhaps we could conclude the discussion on this amendment first, before coming to the others which we shall have to move as well.

What I was about to say was that on amendments c58a, d58a, e58a and f58a, which are the ones dealing specifically with newspapers——

——the terms of the debate are very familiar ground. I have been examining this case now for quite some time and the Opposition have faithfully reproduced the case made to them. Indeed, the Opposition have faithfully reproduced the advice — I cannot quite remember the words which Deputy Haughey used to describe it — independent, objective, economic advice. I have the same report here in front of me. We start off on common, well known and well trodden ground in that respect, even if we had to have Deputy Haughey in the credit instead of Deputy O'Kennedy.

The essential question here is whether or not the difficulties of the newspapers can be ascribed totally to VAT. I said a few things earlier on this afternoon in connection with other sections, particularly concerning beer and petrol, which indicate — and I believe it to be a reasonable statement of the case — that there is always a temptation, particularly in discussing a Finance Bill, but even on other occasions, to take one element and say that all troubles stem from that when, in fact, it is very clear that difficulties come from a much wider and larger number of reasons. I want to quote, if I may, from the report to which I think Deputy Haughey referred, which was prepared for the Dublin Newspaper Managers' Committee, Thomas Crosbie Limited and the Provincial Newspaper Association of Ireland on VAT on Newspapers in Ireland dated March 1984. In paragraph 3 of this report, part of the Summary and Conclusions it is stated:

The worsening fortunes of Irish papers over the past five years have very various causes — the overall recession, rising costs and increasing competition from electronic media and from lower priced British newspapers.

Then comes the following reflection:

An important factor has been the high level of VAT ...

That is from the report prepared for the newspapers which, accurately in my opinion——

Would the Minister please quote the full sentence?

It sets out the point that there are a number of causes of the difficulties, not just one.

Of course.

Some of those other causes are matters that would not be affected one way or the other by implementation of the amendment put down here in the name of Deputy O'Kennedy. The temptation to ascribe all the difficulties to VAT is overpowering in a discussion on a Finance Bill.

As has been pointed out by a number of speakers on this side of the House, the proposal before us to reduce the level of VAT would produce an equal proportionate change in the price of the competing British newspapers, not an equal absolute change — it would be a smaller absolute change for an equal cover price. It would not make any difference to any of these other factors mentioned here. It is clearly mentioned in the report itself that a reduction in VAT would not, of itself, resolve the problem.

The report was limited even in its own terms of reference in that it deals only with the economic factors that affect the newspapers here — the ones that I have mentioned. It says nothing at all about the content of newspapers or the factors which lead to people here buying imported newspapers. It does not analyse any of the demand factors.

They were engaged purely as economic consultants.

It simply deals with these economic factors——

That is what they were asked to do.

——and points out that, even taking the economic side alone, the difficulties cannot all be ascribed to that. Of course, as many speakers on this side of the House and indeed the other side have said, we would all like to see a reduction in VAT rates and a number of anomalies removed from the VAT system. There is, however, a corollary to all of that. There is very little point in comparing the rates of VAT on particular commodities here with those charged on the same commodity in other countries without looking at the wider context of the VAT system. We have a wider coverage of zero rates than most other countries in the Community. We have a different coverage of zero rates, having chosen to zero rate things on which other countries put a positive rate and to have a positive rate on a number of things, including newspapers, on which other countries have zero rates. That is a deliberate choice we made in our operation of the system and that is one of the matters bringing us to the situation in which we find ourselves today. It is clear that we will have to rationalise the system of VAT and that is part of a wider question than the simple, straightforward question of VAT on newspapers.

The cost of the measure has been mentioned. The cost of this proposal would be £17 million in a full year and about £5½ million this year. That, in any terms, is a fairly substantial sum. At this point in the year it is a very substantial amount of money and if one thinks of replacing that revenue from another source it is a very large amount. While there have been statements from the opposite side of the House to the effect — and I believe that Deputy O'Dea used this statement — that they acknowledge the cost, there was no proposal as to how to replace that revenue. I do not think that even Deputy O'Dea in his interpretation of what Deputy Haughey said earlier could pretend that the benefits to which he referred would produce extra revenue of that amount during the course of this year.

I did not say that it would be produced in one year.

Another point to which I should like to draw attention is also mentioned in the report carried out for the newspaper industry. A great deal is rightly made of the difficulties that Irish newspapers have in competing with British newspapers. I do not honestly believe it to be accurate to say that the point that newspapers are zero-rated in the UK has a direct bearing on the fact that they can compete on our market. However, to the extent that it appears that there is a practice which Deputy Haughey called commercial dumping involved here, it is open to the newspaper industry — and I have said it to that industry on a number of occasions and it is pointed out in this report — if they believe that to be the case, to approach the EEC authorities to investigate whether or not the British newspapers are abusing a dominant position involving unfair trading practices within the Common Market. If it is found to be the case, there are remedies available against that. I do not know why the newspaper industry has so far chosen to ignore that fact. Perhaps it feels that it would not be able to sustain a case. If that is so, then that would seem to me to be an admission that there is no foundation for the accusation in the first place that unfair competition is causing problems. The aggrieved parties are the only ones who could take up that case and I would urge them, if they believe it to be part of the problem, to take that matter up and let us see if there is any avenue which can be explored and which might, if successful, deal with part of the problem.

A great deal more has been said on both sides of the House about different aspects of this problem. I shall confine myself to the essential elements which have been put forward and to answering the main points which have come across from the Opposition. I oppose the amendment.

Nobody from this side of the House suggested that all the problems of the Irish newspaper industry can be ascribed to the VAT issue. The Minister in replying does not need to misrepresent the position. We have quite clearly mentioned a number of other factors — Deputy Haughey in particular did so — in relation to the problems of the newspaper industry. The Minister would be better advised to meet the case that has been made rather than the case that has not been made. The Minister stopped, when he referred to the particular report, in mid sentence. Those people were asked to advise on the economic aspects of the question. Obviously the other issues which have been raised by us here were not within the terms of reference of these consultants but they are very important issues. The report said that an important factor has been the high level of VAT which accounts for a significant proportion of total price increases since 1981. The Minister omitted to quote that part of the report. That is a significant factor. That is the first point. The trend in circulation either of dailies or provincials, which are downward, can, to a considerable extent, be ascribed to that factor.

The fact that 20 per cent of the price increase over that period has been taken up by VAT has nothing to do with the effect of that price increase on circulation.

Would the Minister please wait a moment. If one is paying a percentage VAT on a lower base, as happens in the case of the English papers which are being dumped here, as we suggested, then obviously the VAT element is not as heavy a burden on the English papers coming in here as it is on the Irish papers that have to bear all the other costs. We acknowledge what the report says in relation to the impact of the recession, high prices and all the rest of it. We do not want to go back into the general argument of the contribution the Minister has made to that through his indirect tax increases and matters of that sort as well as the general level of inflation. That is a fact. At the same time these newspapers find that this particular VAT level, in competition with a country which has a zero VAT rating, is such as to prevent them maintaining their market share in our market.

They are not in competition with a zero VAT rating.

Of course they are and the facts bear it out.

They are in competition with imported newspapers that pay VAT at 23 per cent.

The Minister has not made any comment on the fact, for instance, that the British Sundays have just about exactly half the circulation of the Irish Sundays. That is a matter of concern.

That is not relevant to the point the Deputy is making. The Irish newspapers are not in competition with a zero VAT rating. They are in competition with other newspapers which also carry 23 per cent VAT.

Which are zero-rated for the bulk of their sales and production.

Surely the Minister acknowledges that where the bulk of their sales, production and everything else, as Deputy Haughey said, is zero-rated it gives them a cost advantage in terms of their production costs generally over the Irish newspaper industry, which is bearing these VAT rates on products as well as on the actual newspaper. If the Minister cannot see that then no amount of argument from this side of the House will convince him.

That is the reality and it is underlined by the fact that the growth of circulation of British newspapers particularly here has been of such dimension in the last few years that now the Sundays represent half the circulation of the Irish Sundays. The daily papers represent a very considerable proportion, about 40 per cent. With regard to the figures, the Minister said that the cost this year would be £5,500,000. That is a very great cost. That is assuming that if the Minister lifted the burden, as we suggested you would not get an increase in circulation of the newspapers, and that you would not get, because of the argument we have made here on almost every issue in relation to indirect taxation, a response to the lower level of tax. Of course you would. There is no doubt, whether you can identify exactly why everybody makes a choice between an English and an Irish paper, some maybe for racing correspondents and other matters, there is no doubt that the price factor is significant in it. The reality is that on that basis this gross cost would be greatly reduced because the Minister would get a higher proportion from the VAT he would be levelling on increased sales. The Minister knows that is the reality. The cost for the remainder of this year or for a full year would be very much less than the gross figures we have mentioned. Nobody can say with any precision what the cost will be in any one year but we can say with precision that, having regard to the trends in the Irish newspaper industry recently — we are not debating how they are managed, the technologies they have or matters of that sort, which are matters for themselves — in relation to advertising, which is also subject to this very high VAT rate, they have been losing. Three of the four main publishers are losing in relation to their publication activity. They showed a loss last year.

The Minister should bear that fact in mind. This level of VAT has become critical because of the increase the Minister imposed, which brought it up to the current level of 23 per cent. It was at a very much lower rate than that a few years ago but when the Minister brought it up to 23 per cent that caused the problem which is now all too prevalent in the Irish newspaper industry. Three years ago they were not screaming. They may have been making a case for a reduction in VAT. They are certainly screaming now. The Minister has got the same submissions we have got. We considered them and came to our judgment on economic issues as well as the other factors that have been mentioned by this side of the House. The Minister did not choose to respond to these. It is another matter whether he feels it is appropriate for a Minister for Finance to do so. It is on that basis that we are pressing the Minister.

We can spend the rest of the evening talking about this.

I appreciate that. Even a response from the Minister on that general point would have been welcome. I do not suggest we should spend the rest of the evening on it as we have other matters to discuss as well. It is on that basis we press the Minister to accept our proposal. The Minister is already working on diminishing returns. The same arguments we made on other things will apply. If there is a lower circulation there will be less VAT, and less PRSI from those employed in the industry which is also at risk. It is time the Minister looked at the employment element as well as everything else with 5,000 people employed in the industry.

I must confess to being somewhat disappointed about the tenor the debate on this amendment has taken. I am quite disappointed that some of the Fine Gael backbenchers have taken the attitude they have, because we took a very serious and responsible attitude on this matter. I should like to point out that we did not put down this amendment until quite late in the day because we were carrying out a very careful and detailed investigation, examination and study of all the factors involved. Indeed, we went to considerable lengths to satisfy ourselves about the validity of the case. We debated it long and earnestly among ourselves before deciding to act. I want to make it clear that when we in Opposition put down an amendment of this sort which involves a change in taxation we are conscious of the fact that we may be called upon in six months' time, as Government, to follow through what we are proposing.

Three years.

That is a very intelligent comment to make. That is exactly the sort of silly remark that denigrates debates in this House. I was saying that we are conscious of the fact that we may at fairly short or longer notice be called upon to follow through and implement in Government what we have proposed in Opposition. I believe we adhere to that principle. We are adhering to it on this occasion. That is why, if I may point out to those Fine Gael backbenchers who have intervened, we did not just blithely and blandly go for zero-rating on newspapers. We also carefully considered that aspect. We looked around Europe and we saw that in those countries which have not got zero-rating the average was around 5 per cent, 6 per cent and 7 per cent. So we judiciously suggested to the Minister 5 per cent as something he should consider.

In my speech on the amendment I made it quite clear that we were aware of the cost of implementation of the amendment and that in putting it forward we were conscious that we were asking the Minister to make this adjustment in his budgetary arithmetic. But it is quite ridiculous for Fine Gael backbenchers to keep on that we do not suggest where the money can come from. With all due respects, that is not our job. If we were to limit ourselves in that way we would not be doing our job as an Opposition. It is our responsibility here, if a case is put sufficiently strongly to us as an Oppositions to put it as strongly as we can in this House. Of course it is the Minister's duty and responsibility to put up all the arguments against it and perhaps at the end of the day say he just cannot afford to do it. But surely that should not prevent us, if there is a good and reasonable case, from putting it to this House. I deplore these Fine Gael backbenchers who try to personalise and trivialise everything in the way they have done. This is a very serious matter for the Irish newspaper industry and we on this side of the House are approaching it seriously and responsibly.

In order to court cheap popularity with particular sections there are countless other things about which we could have put down amendments on this Finance Bill. I might point out that when Fine Gael were in Opposition they did not hesitate very much to put down amendments left, right and centre seeking reduction of taxation of one kind or another. But when they get into Government they do not follow through with positive action what they supported when they were in Opposition. I was often on that side of the House having to argue against totally irresponsible proposals put forward by Fine Gael when they were in Opposition.

The Deputy is doing the same thing now.

I would be very grateful if the lady would not interrupt me. So, let us please not have any more of that——

It is part of our heritage of democracy.

Deputy Haughey, without interruption please.

——sort of petty, political, partisan bickering.

The Deputy is a dab hand at it himself.

This is a serious matter. We have approached it in a very serious and responsible way and have carefully considered and deeply researched our arguments to the Minister about the matter. We have not succumbed to the temptation to bombard the Minister with appeals for reduction on this, that or the other front. We have not done that. We have decided very carefully, maturely and responsibly what amendments we will put down and what reductions in taxation we will seek. We acknowledge that we are asking the Minister to undertake a difficult task in accepting these amendments because he must find the money somewhere else — after all, that is the job and responsibility of the Minister of the day. It is our job to put as clearly as we can the argument for some proposal and perhaps persuade the Minister that our argument in favour outweighs his difficulty in finding the money somewhere else. That is the only possible way in which this House can deal with a Finance Bill. For anybody to suggest otherwise is, to my mind, to be destructive in their arguments.

Of course we as an Opposition must accept the responsibility of transferring taxation from one area to another when we propose amendments of this sort. But, having carefully considered it all, we think that in this case the arguments in favour of the reduction are so overwhelming that the Minister should face up to them, accept them and seek to make some other adjustment in his budgetary arithmetic, difficult though that may be.

In my argument in favour of the amendment, had I wished I could have been a great deal more emotional. I did not at all mention the aspect of tax on knowledge — that is what a large number of people would advance as the principal argument against VAT on newspapers, that one was taxing knowledge and information and that politically, socially and culturally that is a very undesirable thing to do. I did not make any point of that, but nonetheless it does constitute an argument. I wanted to confine myself strictly to the economics of the industry as such. This is a Finance Bill. We are dealing with the hard facts of economic and financial life and I wanted to try to approach it on that basis.

There is another argument I did not use, that is, that the trade unions made a point to us that in their anxiety to protect their jobs in the future they were prepared to accept new technology in the newspaper industry. They feel that one of the ways in which this new technology could be financed is through a reduction in the amount of VAT newspapers have to pay. For their part they are quite prepared to ensure that whatever benefit accrues to the newspapers through a reduction in VAT, if that comes about, would be made available to finance the new technologies those newspapers must have.

I could also have made the point about the IDA assistance for newspapers having been withdrawn — another significant fact. But I tried to put a very rational, economic, balanced argument in favour of our proposals. I want to reject completely the suggestion from those Government benches — as far as I have heard the Minister has not made them but others have — that we were putting down this proposal without regard to its implications for the Exchequer and otherwise. We were fully aware of those. We still think it our duty to put this case and I would ask the Minister to consider it very seriously.

Deputy O'Kennedy made the point, which I had intended making, that the Minister is misinforming himself — I am sure in all sincerity — in looking in a too simplistic way at the question of British newspapers being zero-rated and Irish newspapers paying VAT. Because they are operating at zero-rating they have a great advantage from the point of view of production, sales costs, overheads and so on and they can transfer those advantages into the Irish market. Any objective examination would persuade the Minister that, although there are other factors involved, the application of VAT operates competitively to the detriment of domestic newspapers.

I want to reinforce the arguments that have been put forward from this side of the House and to assure the Minister that they are put forward in perfect good faith and after very mature consideration. He should consider them very seriously because they are not put forward in response to pressure put on us or in an endeavour to please any section of the community. They are put forward because the situation demands attention and the Minister should face up to it.

I do not want to speak at any great length but I have sat here quietly and listened to what amounted to a Second Stage speech from Deputy Haughey which lasted for about an hour. We listened with courtesy to all the points he made, but the argument he made against VAT could apply to any industry in need. If the case is against VAT on industry generally, it is a good point. Of course it would cost hundreds of millions to implement but perhaps we should be thinking about it. That was his only argument.

If the newspaper industry have a special case — and they may well have — it is not being put forward by the Opposition. They are arguing against VAT which they are then relating to the newspaper industry in the hope that it will rub off well on them. That is the only balanced view to take of what has been said. I am the only Government backbencher to have sat here right through the Finance Bill. I have agreed with suggestions made by Deputy O'Kennedy. I pursued my own Minister on occasion when I thought it was necessary to do so. I suggested that the Minister should accept amendments which Deputy O'Kennedy proposed because I thought they were fair and the Minister has accepted some of them. If there is a case to be made for the newspaper industry let us hear it and then we will be able to make a decision. The case has not been made.

The same case could be made for public houses in the vicinity of the Border as they have similar problems with regard to revenue. There are a number of other industries to which it could also be applied. For instance, I would love to see VAT reduced or zero-rated on goods which disabled people have to purchase. Many areas could be singled out and we are being mild and moderate on this side of the House in our response to what Deputies have put forward. I have not heard anything in the arguments put forward today that could not be related to many more important things which would be more beneficial to families, especially the unemployed. If there is a special case to be made for newspapers let us hear it.

From the discussion we have had it is obvious that we are all working from the same case which has been put by the newspaper industry. We are all working from the same interpretation of what has happened in the industry over the last few years. Equally, it is fair to say that we are all operating from the same basic concern to see that as far as possible we continue to have a healthy newspaper industry here with at least the present number of newspapers being produced. That is common ground in our perception of this problem. I have met people in the industry and considered their case very carefully, as have the Government. We have concluded that this is a change which, in the circumstances of this year, we cannot make. For that reason, I oppose the amendment.

I shall confine my remarks to provincial newspapers because the president of the Provincial Newspaper Association is from my constituency and I have had very long conversations with him about the parlous state of some newspapers. I am not talking specifically about his newspaper, which in terms of provincial newspaper circulation is quite large.

Deputy Mitchell said that the argument could apply all round. This may be so, but I do not think that he is giving due weight to the fact that there is substantial employment in the newspaper industry and that many of the papers are in serious danger. They chronicle the events of their own locale and are a permanent social and economic record of many areas. I should like to emphasise this because people are talking about local radio and very expensive storage methods. These chronicles will not be available if the provincial newspapers are allowed to die. Other people can speak from deeper knowledge about the newspaper scene in general, especially the national newspapers, but I had occasion once in Colindale Library, which is a newspaper storage library in London, to spend quite a long time doing research on provincial newspapers in the last century. From doing that I came to realise the value of provincial newspapers. I was convinced by Mr. O'Hanlon, who was for a long time the chairman of the Provincial Newspaper Association, that some provincial newspapers are in serious financial difficulties and will die. There are other threats to the industry as well as the heavy VAT. I am putting in my few little words on the side of a reduction of VAT from my own experience.

In view of the fact that a number of these amendments are being taken together, I want to indicate to the Minister that we will be pressing this amendment we have just been debating to a vote. Obviously in terms of the Order Paper, another amendment comes before it. I propose to move the other amendment which relates to the proposal to reduce the rate of VAT on electrical goods, televisions and kitchen utensils to 15 per cent.

The argument we have made consistently in relation to excise duties and the diminishing returns to the Revenue holds good, and probably more so in this case than in many others. Because of the penal level of VAT here in comparison with that in the North of Ireland, we have seen a major loss to the Revenue. That is not my only preoccupation. I want to say to Deputy Owen that many of the arguments we have been making from this side of the House have focussed on losses to the Revenue. If she was here earlier today she heard the Minister acknowledge that he will consider the case in respect of duty on beer and matters of that sort.

Sometimes by proposing a reduction we may succeed — and I believe we will — in getting a bigger return to the Revenue. I do not know whether Deputy Owen was here when the Minister for Foreign Affairs was the Fine Gael spokesman on Finance and I was Minister for Finance. When he was sitting in this seat he did not cost anything. I told him the cost of the accumulated proposals he put to us when we were in Government. Would Deputy Owen be surprised to hear it was over £600 million? We made no such outrageous proposals on this occasion. The record will show that.

We are now focussing on this very important industry, the employment involved and the Revenue loss accruing. From detailed studies which have been conducted on behalf of the people engaged in the electrical trade industry, and even from the most casual observation around this city and cities and towns elsewhere, it is quite clear that the trading loss has resulted in very significant job losses. It is the conclusion of those who have studied this — and the electrical industry committee set up special structures to examine this and got advice from consultants — that already approximately 4,700 jobs have been lost in this consumer durable section of the electrical industry since 1979, and a very considerable proportion of those was lost in the past two years.

We can all rely on economists and analysts, but I would invite any Deputy to go to any electrical trader in this city and ask him if he was employing ten people last year how many is he employing this year. He will tell you he has reduced his employment by at least 40 per cent. He is lucky if he is employing six where he was employing ten. That is the reality. We then have to take into account PRSI and the levies lost, the unemployment and redundancies benefits which have to be paid. The time factor prevents me from underlining that, but it is a fact. We cannot afford job losses and Revenue losses of that kind because of the level of VAT on the electrical trade and on consumer durables. I do not want to personalise this. We propose that the most essential items in the most humble home, pots, pans and teapots, which are manufactured in the home town of the Leas-Cheann Comhairle and myself, should be taken out of the luxury category of goods which every young married couple require——

Single people need them too. They also drink tea.

And single people as well. They should be rerated, not derated, into a new category of 15 per cent. I do not want to make a special case, but that industry is in obvious difficulties for that and other reasons. There is no single factor in any one case. In the course of this debate I have never said there was just one factor. Life is not as simple as that. No single factor will solve the problem any more than competitiveness alone will solve the problems of our exports. There are a number of factors. That is why I have taken issue with the Minister when he focussed exclusively on competitiveness as the only factor.

We are also talking about the Revenue loss. I have mentioned the loss of employment. It is estimated that up to £4,500 million is likely to be unaccounted for in 1982, and up to £15 million in 1983 in terms of unaccounted trade. The Revenue loss which will accrue this year as a consequence of that leakage is estimated to be of the order of £6 million. I have already spoken about the black trade, the black market, illegal trading and smuggling which have become a characteristic of the Irish scene, not the business scene. We must all be very conscious of the way it is undermining not just legitimate traders but also the whole basis of legitimate business. Illegal traders, smugglers, people who have actually stolen television sets and so on and people who are receiving them are selling them on the cheap in various places. We can ignore it if we wish, but we know as a reality that goods are being offered for sale which have been smuggled across the Border or "knocked off". As legislators we must cope with that reality.

I am not saying this single measure will solve that problem. I hope the Minister will not tell me I am suggesting this is all we have to do to solve the crime problem. I am saying it is a very significant factor. I know it is not deliberate, but excise duty and VAT together are almost encouraging some people of a certain disposition to break the law. Considerable pressure is put on legitimate traders to consider whether they should engage in what they would regard as fair trade by buying goods which they know have been smuggled across the Border. The pressures must be enormous.

I will give some examples of the difference between Border towns and towns at a distance from the Border in terms of actual sales in 1982. The disparity has grown and was worse in 1983 and 1984. Tralee has a population of 16,500 people, or had in 1982. The total retail sales for colour TV sets in Tralee amounted to £615,000 in 1982. Dundalk has a population of about 26,000 people and the total retail sales of TV sets in Dundalk in 1982 were about a quarter of those in Tralee at £170,000. We can go on and compare Monaghan with Killarney, which are roughly the same size. In Monaghan sales amounted to £80,000 while in Killarney they were £310,000. In Cavan sales amounted to £75,000 while in Bandon, a smaller town, sales amounted to £229,000. Those figures convey the reality that Border towns have been badly hit. Dublin city has been particularly badly hit.

We hope that in accepting the amendment the Minister will see that the return to the Revenue will recover next year and probably grow considerably the following year. The decline in total demand for TVs from 1979 to 1982 was 30 per cent and, as far as one can guess, it was at least the same again from 1982 to 1984. The decline in demand for colour TVs in the same period was 40 per cent and that has probably increased in the meantime by the same figure. The projection is that it will be 45 per cent up to 1984 over the 1982 figure. That trade is at great risk. Revenue is falling from it and smuggling is rampant. Illegal trading and crime are being encouraged, not deliberately, and jobs are being lost. I cannot put the argument stronger than that but I hope it is fairly persuasive. If the Minister cannot meet our point now I hope he will consider it between now and next year. I believe all this trouble started with the zeal the Government had to close the budget deficit by virtue of extra taxation, particularly indirect taxation. We are now seeing the consequences of that mistaken decision. I hope that even at this stage the Government will begin to correct it.

I do not know what excuse is used in Great Britain for smuggling, which is a big problem there. For instance, in the last 12 months in Great Britain a judge was removed from the bench for smuggling whiskey. Smuggling is not confined to Ireland although it is part of the problem we face. It is not all to do with the VAT rates although I accept that those rates contribute to it. The essential problem we have is that the Government are spending something like 60 per cent of GNP on services. That means that we are collecting money left, right and centre from the public at large through income tax, VAT and various charges to spend on behalf of the people. Deputy O'Kennedy knows that there are two things we can do: cut taxation and cut the VAT rate by cutting public spending. We should be thinking about doing that because when people are spending their own money they take greater care of it. They seek better value rather than when their money is being spent on their behalf by a third party. Nobody is as careful with somebody else's money as they are with their own. If we were to consider specific public expenditure cuts which we could then relate to cuts in VAT people would be happier. They would be better off and would have the funds in their possession to decide what to do with them.

There is no doubt that we have contributed to some extent to the black market and dishonesty by some of the VAT rates, not because people want to be dishonest. I should like to outline the case put to me at my clinic recently by two families in my constituency. In one family the husband was working, they had to pay a mortgage and could afford meat only once a week. In the second family the husband was working and there were four children to be cared for. They were just about able to get by. Those honest people found it difficult to get by without buying a television, or whatever it happened to be, on what we term to be the black market. The reality is that they cannot afford to buy them otherwise. That is the difficulty we face.

The alternative to cutting public expenditure and thereby reducing VAT and, perhaps, PAYE, is to introduce a single rate of VAT. We could have a VAT rate nearer to 15 per cent if that rate applied to everything. The problem with that is that once we try to implement it the Opposition will tell the public and the public will complain that items that were zero-rated before will now be subject to the 15 per cent rate. What will be forgotten is that the 35 per cent and 23 per cent rate will be reduced to 15 per cent. What will be promoted will be the items increased to the 15 per cent rate because we are into that type of propaganda game.

In order to do something about the problem which Deputy O'Kennedy has highlighted — he has done a dutiful service in highlighting it — we have but two alternatives, a single rate VAT on everything, which will have the effect of bringing down the higher rates, or cut Government spending and thereby reduce VAT. There is no point in putting forward the argument for cutting VAT without mentioning what needs to be done to fund that. There is no possibility of funding that through PAYE because that area needs to be reduced. I urge the Minister to accept that there is a case for reducing VAT and PAYE rates. The only way to do that, because of our borrowing situation, is to cut Government spending, particularly in wasteful areas. If that is done the Minister should link those cuts specifically to VAT and PAYE cuts. Sooner or later we have to get Government spending down and it is in the interest of the people that we do that.

In the course of his argument against our last amendment Deputy Mitchell seemed to have the idea that our case for our amendments could be construed as a general argument against VAT. That is not so. We do not propose to eliminate VAT but we have decided that selective reductions in VAT will give maximum benefit in terms of the quickest possible return and employment creation activity. That is the gist of our approach to the budget and the Bill. Deputy O'Kennedy put forward a cogent argument to show that the 23 per cent VAT rate on electrical goods meant that we have gone beyond the point of diminishing returns. Our modest proposal seeks a reduction in that rate to 15 per cent and

I hope the Minister will consider it in the spirit in which it was intended.

I welcome the section. Deputies opposite will find willing ears over here. I agree that the difference in prices between North and South undoubtedly has the consequence that people are going North to buy these electrical goods and are thereby putting jobs here in jeopardy. This applies both to the manufacturers and retailers of these articles.

On paper, there seems to be a strong argument in favour of the amendment, but I suspect that if the direct result of its acceptance would be to boost employment and to recover revenue the Minister would have done this. I hope he will outline what exactly the effect would be on the market here and on employment if he were to reduce the rate of VAT. Would the increased sales that would result bring in the same amount of revenue or, indeed, increase it? If so I am sure the Minister would have done it himself.

The thinking behind the amendment seems to be good. The rate of VAT is being spoken about in every shop that deals in these articles. Possibly it would stop people from going North if we equalised our prices. Already it is no longer worthwhile to go North to buy food because our prices have become competitive here. As well, people have begun to feel the effects of the effort and the cost and the wear and tear at customs posts, etc. The flood going North has been reduced and I accept that those still persisting are jeopardising industry in the Republic.

I do not think I would be in favour of still another rate of VAT. What we should be trying to do is to have a uniform rate which would render administrative work easier. If we now bring in a new rate it will only confuse administration further. That may be a simplistic argument but from a non-economist's point of view one rate of VAT would make administration easier. Therefore I do not agree with the introduction of a new rate.

The Government have shown that they are deeply concerned about this problem and I am sure if there was some way in which they could get over this they would have done so. They have gone as far as they can to discourage cross-Border traffic, they have increased manpower on the Border and they have appealed to people's patriotism. They have told them of the dangers they are risking for themselves and their children.

Deputy Mitchell said that the only way we could make up this loss of revenue would be to cut expenditure. We are not in a position to do that because of our high rate of borrowing, etc. If the Minister is able to tell me that we could get in the same amount, or more, of revenue by increasing sales I believe the amendment could be accepted but, as I have said, I am not in favour of introducing still another VAT rate.

I support the amendment because we have seen the destruction of normal trading practices in Border regions and there is no business in the country in which it is more pronounced than in radio and TV. VAT on these articles has given a boost to smuggling, particularly in the last couple of years. Following the war we had a boom in smuggling but gradually prices became level. Following our EEC entry we thought there would be a further levelling off of prices but in the past couple of years an enormous imbalance has appeared.

Radio outlets in Border towns have only about a quarter of the sales of those 50 or 60 miles away. Therefore, businessmen who have high overheads, staff and so on, have not the same returns and as a result many such outlets have closed down. A serious side effect is that people who bought washing machines and other such electrical goods find that spare parts are not available. Of course the cause is the high VAT rate and we have been asking the Minister to design some structure to rectify this. He must look at the problem on a long-term basis and he must realise that if he persists in this he will not only lose revenue but endanger employment.

Many of those who still go North to shop cannot see the wood for the trees. They purchase items which they do not save on and do a great disservice to this part of the country in terms of employment. I hope the Minister will give serious thought to the reduction of VAT rates.

In his budget speech the Minister said he would look at a fundamental restructuring of the VAT system with the aim of "narrowing disparities in the rates charged on most goods and services". This is a wish which has been put forward by other Government speakers. Clearly that is the direction in which to move but unfortunately this Bill goes in the opposite direction. It does not take the correct steps to achieve what the Minister said he would like to do. It is directly contrary to stated Government policy.

There is an increasing reliance on indirect taxation and VAT. Four years ago VAT accounted for 18 per cent of all tax collected. That figure is now moving towards 25 per cent of total taxation. Where is the basic restructuring that was promised by the Minister in his budget speech? If that trend continues it will be increasingly difficult to get the restructuring the Minister has committed himself to. I support that commitment because it is the correct direction in which to go.

In his speech, the Minister said the main rates of tax were rather high. That is putting it mildly. It has come to the stage, as other speakers have indicated, where they are counterproductive, have an adverse effect on employment and output and on the cross-Border capital flow, with, as Deputy O'Kennedy pointed out, upwards of 4,000 jobs in the electrical retailing industry under threat. A more constructive approach is needed in this area towards sorting out the sea of anomalies which any housewife can tell us exist in the VAT area. The Minister might ask his officials to concentrate on trying to iron out these anomalies particularly those which are causing hardship or retarding growth in the economy.

The Minister gave £4½ million in VAT concessions. That has been far outweighed by losses in the area of cross-Border trade. Deputy Mitchell said that the only solution was to cut and control public spending. I agree with that but the Government have not made any attempt to do that. The result is that spending is higher now than when the Minister came to office. If that is the direction of Government policy it has not worked. It is not good enough to say VAT must continue because public spending is high. The Government have said that public spending must be reduced but that has not been done. The Tánaiste is on record as saying that he is in favour of a continuing high level of public spending. What is being said is that taxation will never come down. When will Government policy regarding public spending be implemented?

The discussion on this section so far has followed the same pattern as the one we had on earlier sections with perhaps a little more emphasis on the difficulties in Border areas arising from our levels of taxation. Deputy Brennan is a grand reactor to a sprat. I thought my little understatements in relation to the levels of the VAT rates might evoke a reaction. It did not happen on budget day but has taken this long to come through. I said that quite deliberately for reasons which are similar to those advanced by Deputy Mitchell and in order to bring home the fact that there are two sides to taxation.

The difficulties referred to by Deputy Leonard, which we have discussed on a number of occasions, are beyond dispute. There is no doubt that our tax rates and those in the UK create problems. There is equally no reason why our tax rates should be the same as those in the UK. We have a different economic and population structure. That is clearly seen in our levels of taxation. Every time we make a point here which comes to the conclusion that a particular tax is too high, what we are saying is that we, as a community, have chosen to organise things in such a way that our tax rates have to be high. In this case we have chosen to so organise our affairs here that our tax rates on a number of goods are higher here than across the Border. There is no getting away from that. For every £100 million of consumer goods we zero rate we create more pressure on goods rates at 23 per cent or 35 per cent.

In my budget speech I said that it was essential to reorganise our VAT system in order to reduce the disparity between the VAT rates. I did not say I would do it this year. I would have been happier to get an improved VAT system going this year. I have not worked out the system and there are a number of other reasons why it was not possible to bring it into operation this year. That is the direction in which we must go. We will not do that by introducing yet another VAT rate into the system. Neither will we do it by picking out particular products in a piecemeal way as this amendment would do. It has been said in relation to these products — Deputy O'Kennedy will not be very impressed — that 35 per cent is not a luxury rate but rather the standard.

It is the highest rate.

It is the standard rate. This is the essential point because since we first introduced VAT people have made good cogent and, in some cases, tear-jerking cases that have been accepted from time to time by Governments that this particular product or service should not bear VAT at the standard rate. The inevitable consequence of that is that if you pick out products and put them at a lower rate the standard rate has to keep increasing and before we know where we are not only does the standard rate increase but the lower rates also increase. That is the situation Deputies on both sides constantly describe and complain about and the one I have in mind to regulate by reorganising our VAT structure.

The cost of this amendment, taking all the goods covered, would be in the region of £30 million in a full year, or about £10 million for the remainder of this year. It is suggested that some at least of that cost would be met by the stimulating effect on sales of a lower rate of VAT and the part compensation that would give in terms of higher total revenue from a lower rate. In order to bring about a situation in which we reduce VAT from 35 per cent to 15 per cent and obtain the same total revenue from the goods covered, there would have to be 133 per cent increase in sales — simple mathematics. I do not think we could expect to see as an immediate response even between now and the end of this year of that magnitude in the sales of these products arising from that kind of a change.

While we could see a tendency more or less marked by an increase in sales and consumer reaction, it would not be of a size or speed that would compensate this year for the loss of revenue. For that reason if for no other — and it would not be a sufficient reason in itself — we would not find it possible to make that kind of a hole in the revenue particularly when we take it with all the other suggestions which have been made and are included in this series of amendments. For those reasons I oppose the amendment.

We will be pressing this to a division in conjunction with other amendments we have down to VAT. The Minister spoke about improving the system of VAT and VAT rates. He is making it more difficult to do that because he has increased the VAT rates, and particularly last year, to the level that has brought about the anomalies he is talking about; and, despite all the arguments we made this year and last year, he persisted in that course. He is ignoring the effect this is having on employment and on revenue loss. He did not comment on the point I made that there is at least a £6 million loss to the Revenue as a consequence of these rates and on the great gap between the rates which apply here and in the North. Perhaps because of the time available to him he was not able to comment on the impact this is having on smuggling, illegal trading and so on, which must be of grave concern to the Government and everyone in the country.

The figures the Minister gave were gross figures. The gross figure of £30 million can be broken down to a net figure of £20 million. Then we can subtract the £6 million which is already being lost, and probably more because the figures I have given relate to towns near the Border compared with towns further south. These figures demonstrate graphically the level of purchases in those areas. I acknowledge that the Minister might not make up all this money this year or next year through indirect taxation, buoyancy, blocking the seepage to the North and so on. I want to put it on the record that we do not begrudge the traders in Newry or the Border towns the boost they are getting from this disparity of rates, but what we do begrudge is the impact this should be having on our Revenue and the fact that this money is going to the British Exchequer, the fact that the manufacturers are British and that everybody who is benefiting from this cross-Border trade, or smuggling as the case might be, with the exception of the distributors in the Border towns, are British in every sense of the word. We would like to see that money accruing to our Revenue.

The Minister said he is examining the VAT system and excise duties; but if he cannot see fit to accept our proposals this evening I hope that in the course of his examination and at the latest in next year's budget, he will show us the fruits of that examination and take a different trend. A U-turn in this case would be very welcome and would not be the subject of recriminations from either side. Because of the time factor and the way the motions were put down I do not propose to call a vote on this now. We have only another 20 minutes and I know Deputy Flynn wants to move an amendment dealing with the hotel industry. I do not know if we said we would discuss it with these amendments, but if not, perhaps I might make a brief reference to it.

There are certain amendments under discussion at the moment and we cannot discuss any others until we dispose of them.

We have only dealt with VAT on newspapers and electrical goods and certain household and kitchen ware.

We are discussing amendments Nos. 57a, 57b, 57c, d58a, e58a, f58a and 58a.

Amendment No. b58a——

I understand the amendment dealing with tourism is amendment No. 58b and is not under discussion at the moment.

Amendment No. 58a deals with the VAT on clothes and footwear. The other amendment can be moved on Report Stage.

On a point of order, would I be right in assuming that since amendment No. 58b is not directly connected with all the others, we cannot begin to discuss it until we have disposed of the other amendments?

Yes, that is what I was pointing out.

If an amendment is not moved this evening it cannot be taken on Report Stage tomorrow.

If it is not in the group we are discussing it cannot be discussed now, but if it is caught in the composite resolution which may be moved later it can be moved again on Report Stage, if it is put down.

Is the Ceann Comhairle saying that amendment No. 58b, section 93, to reduce the level of VAT on hotels, is not in the group of amendments which we are discussing now?

No, it is not.

On a point of order, is this the amendment 58b which is on a white page, or is it printed on the green document?

It is printed on the Order Paper. Might I suggest that we dispose now of some of these amendments which we have been discussing?

On a point of order, may I take it that 58b is not one of the amendments being moved in this case?

That is right.

When would be the appropriate time to move it or have it discussed?

When we have disposed of the group of amendments which are now being discussed, if disposed of before 9.30 p.m.

If it is not disposed of before 9.30 p.m. do I take it that it can be re-entered on Report Stage?

That is right.

Unless it is passed over between now and then.

That is hardly likely to happen.

In the short time available to us we have been dealing with those which the Chair has outlined, the newspaper industry, electrical goods and certain domestic ware. So far as the amendment to which Deputy Flynn has referred is concerned, obviously it cannot be taken at this point. One which is included in this list relates to clothing. I want to say some brief words in relation to that and then we can take them on a composite basis at 9.30 p.m.

In relation to the amendment which we have put down regarding clothing, I ask the Minister to bear in mind two or three important factors. Firstly, this is an industry which is obviously in difficulties and has been for some time. It is in particular difficulties now. We are seeing the level of decline in the manufacturing industry generally to the point that as we now debate this issue a total of about 17,000 people are employed here in the clothing industry. What that figure hides is the fact that between December 1979 and June 1983 there was a direct loss in that industry of from 14,800 down to 10,800 — 4,000 jobs. That is a very considerable loss of employment which is continuing to the extent that it is now probably nearer to 5,000 over 12 months later. Similarly, within the knitting section of the clothing industry which has been all but decimated, in December 1979 the total number employed was 7,700. As of June last year it was reduced to 3,700 which represents a loss of 4,000 jobs — almost 50 per cent in that section of the industry. I want to point out, as a consequence of that, some fairly self-evident facts.

Firstly, an industry which has taken such a hammering is not one to be penalised further by a level of VAT being reimposed — which is the important thing — at this stage. I remind the Minister — perhaps he may not remember, because he was not part of the team which made this commitment — that one of the main commitments of the Coalition Government which preceded the Minister in 1973, in the view of many being the reason for that Government being elected, and one can check the records on that, was that they would zero-rate clothes. I do not want to go into what happened on a certain budget issue on a very historical night in this House, but after that and even allowing for the fact that the position of the industry has become if anything more acute in the meantime, the Minister still insists on going ahead with introducing VAT on clothes.

There is another factor which we need to bear in mind. That is a labour intensive industry. When the Government proclaim that our manufacturing industry is doing quite well and our exports are going well, we had better acknowledge that that is particularly attributable to the high technology industry introduced by us in Government some years ago to the pharmaceutical industry. Ask any of the promoters of the indigenous industry — and we are speaking now about clothing and footwear, particularly — and certainly they are not making a contribution——

Is the Deputy not speaking on the section now rather than the amendment?

We can deal with the section.

We are almost at the conclusion. They certainly made no contribution to this export buoyancy which we welcome in the manufacturing industry. Finally, because this industry is labour intensive and, as Deputy Brennan underlined in the case of the brewing industry, pays to the State through PRSI, levies and so forth a very major proportion of its total cost, whether by way of wages or overheads, the Minister should reflect on the impact of this not just on the clothing industry in general but also on revenue. Could I remind the Minister, as he will be aware from recent studies, that we have now reached the point where an employer finds that, particularly in a labour intensive industry, every £100 that he pays to a worker, costs him at least £180. Every £100 he invests in a machine, because of grants, aids and incentives, only costs him about £40 to £45. What we are witnessing in relation to this industry is a penalty on employment. That is something which the Government must look at very carefully, having regard to the dramatic fall in employment in the industry and in its capacity to expand in the way necessary if it were ever to capitalise properly on developments in the market.

Our clothing industry has had a great tradition. Also, internationally, given the right climate here, it has presented the image of Ireland very well. Our designers — some of our grand names are famous throughout the world — also represent a tourist attraction here. While I could make a very much more detailed contribution if there were time, I ask the Minister to reconsider his decision on the imposition of VAT on clothing. He indicated that he will be introducing an amendment, which we welcome, on Report Stage to exempt certain medical products from this imposition. I suggest that when considering that he might have gone all the way and exempted all clothes from a level of VAT which, frankly, the industry cannot support and which will result in even further job losses.

I want to emphasise the particular problems created by the level of VAT in the Border areas on electrical goods, radio receiving sets, video recording equipment, gramophones, radio gramophones and so forth. The loss to the State has been emphasised by other speakers, so there is no need for me to repeat it. It is a very obvious loss of revenue to this State.

I must emphasise the distress being caused in those businesses in the Border areas. The distress and pressure on people who are employing fewer or more employees depending on the size of their business is great at a time when the financial institutions are not showing the kind of liberal-minded approach they should be at this particular time. I do not believe they ever learn anything because probably, as George Bernard Shaw said, they do not understand exactly what their position should be at a time of recession. That is the time when they should not be looking for their money with the same assiduity as they should be when times are good. For that reason I believe they still have a great deal to learn. People thought they had learned after the banking debacles of the twenties and thirties but obviously this is not so now.

I would like to emphasise also the great temptation there is now to the smuggler. As the House knows only too well smuggling got a fillip from the heavy imposition of VAT on the range I have mentioned, which are the bottom of page 20 in the list of amendments before the House. The loss of jobs in those businesses should be highlighted in the House. We have been emphasising in all our educational pronouncements and all our pronouncements about industrial development how important that area of electronics and so forth is and we led young people to believe that this was the area in which they should be operating. Technicians who have qualified feel now they have been fooled. People who are apprenticed in the various areas and fitters in the various areas covered by the amendment on page 20, who are now qualified find themselves useless with all the frustration that implies. Electrician apprentices, people who are electronic technicians and so forth now find that they are two a penny and there are no jobs for them. Deputies who are receiving young people at political clinics throughout the country know that what I am talking about is a very serious problem. It is for that reason that I again appeal to the Minister to have a look at this whole area. He may not be able, as Deputy O'Kennedy said on another matter, to change his whole strategy at this stage but we hope for a penetential start so that things can be rectified in the not too distant future.

The clothing industry and the hotel industry are two of our most labour-intensive industries and that is why I regret that Deputy Flynn's amendment cannot be moved tonight because it is directly related to what we are discussing here, the maintenance of employment and how best we can use the tax system as an implement to encourage the creation of employment.

The economic effects of this decision to impose VAT on clothing and footwear have already been outlined by Deputy Wilson and Deputy O'Kennedy. I recall when the Minister was making his budget speech — I am sure if he looks back he will be able to see the relevant quotation — he stated that one of the criteria to which he would be working was simplicity in the taxation system. Let us look at the concepts and distinctions that this decision has introduced into our revenue laws. We have the concept of a build of ten years and more. Surely there is no legislation in any democracy which puts age and build in the same category? They are two entirely different things. Here we are describing one by reference to the other.

We are introducing distinctions between clothing and footwear, between boots and shoes, between boots without soles and boots with soles, boots with soles adapted for skating and boots with soles adapted for swimming. We are talking about distinctions between clothing and clothing made of fur. It is different again if the clothing is only trimmed on the outside with fur provided that the trimming does not cover more than 20 per cent of the surface. I ask the Minister, in the interests of simplicity and equity in the taxation system, and on the much more serious economic grounds, which have already been outlined by our main spokesman, to withdraw this which has made us a laughing stock and which will further depress employment prospects at this particular time.

I would hate the Deputies opposite to feel that their case was going by default. There are two brief points I would like to make in respect of the Deputies opposite in relation to VAT on clothing. Nobody likes to see products now being taxed which were not taxed before. Deputy O'Dea would not even be worried so much about the archaic features of the VAT system, which are there already, if we were not looking at new ones. It is curious how people seem to find things to wonder at, to laugh about or to emote about in one way or another when there is a new measure. We have had things there for years which are just as complicated or as difficult and they do not emote about them at all most of the time because they do not know the things are there when they are not involved in the business and never even talk to people who are in the business. Leaving that aside, nobody likes to see new things being taxed, nobody likes to bring new things into the tax net but this would be an inevitable and a necessary part of any process we undertake to rationalise the operation of this system. I said it before and I will say it again. The more things there are outside the tax system untaxed, the more things that are zero rated, the heavier the burden there will be on the items which are inside the tax net. If we are to rationalise it, it means we must broaden the basis as far as we can so that we can go with a lighter touch on the things that are within the net.

The argument so that the Minister can go with a lighter touch on the things within the net will not hold. If we thought that was the case we would be happy but the Minister is doing quite the opposite and with his track record it is quite the opposite he will continue to do. It is not a lighter touch where you impose what he calls the standard rate, the highest level of 35 per cent, on the most basic commodities in any home, pots, pans, kettles and kitchen ware. That is the Minister's light touch.

The standard rate has been on those items for many years including those when the Deputy was Minister.

Will the Minister allow me to conclude? It is the highest rate of VAT and higher than anything which exists in any other country. It is not a lighter touch when we discover the effect it is having on Border traders and electrical goods. We have clearly demonstrated that it is killing not only those traders but also losing money to the Revenue and encouraging illicit trading which is a serious matter. That is not a lighter touch. If we thought there was going to be a lighter touch we might be able to listen to the Minister but, unfortunately, he has downfaced every one of our proposals this evening. He has even acknowledged that, in the final analysis if not immediately, next year he will get more revenue at a lower tax level. I believe we have convinced him but we have not at the same time managed to get him to agree. Therefore, we will be pressing our amendments.

If Deputy O'Kennedy says that often enough he might begin to believe it.

As it is now 9.30 p.m., in accordance with the order of the Dáil of 8 May, I am putting the following question: "That amendment No. 58 set down by the Minister for Finance is hereby made to the Bill and in respect of sections undisposed of in Parts III and IV of the Bill that such sections are hereby agreed to".

The Committee divided: Tá, 68; Níl, 56.

  • Allen, Bernard.
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Myra.
  • Barry, Peter.
  • Begley, Michael.
  • Bermingham, Joe.
  • Boland, John.
  • Bruton, John.
  • Bruton, Richard.
  • Carey, Donal.
  • Connaughton, Paul.
  • Cooney, Patrick Mark.
  • Cosgrave, Liam T.
  • Cosgrave, Michael Joe.
  • Coveney, Hugh.
  • Creed, Donal.
  • Crotty, Kieran.
  • Crowley, Frank.
  • D'Arcy, Michael.
  • Deasy, Martin Austin.
  • Desmond, Barry.
  • Donnellan, John.
  • Dowling, Dick.
  • O'Brien, Fergus.
  • O'Brien, Willie.
  • O'Leary, Michael.
  • O'Sullivan, Toddy.
  • O'Toole, Paddy.
  • Owen, Nora.
  • Pattison, Séamus.
  • Prendergast, Frank.
  • Quinn, Ruairí.
  • Ryan, John.
  • Doyle, Avril.
  • Doyle, Joe.
  • Dukes, Alan.
  • Durkan, Bernard J.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • Flaherty, Mary.
  • Glenn, Alice.
  • Harte, Patrick D.
  • Hegarty, Paddy.
  • Hussey, Gemma.
  • Kavanagh, Liam.
  • Kelly, John.
  • Kenny, Enda.
  • McCartin, Joe.
  • McGahon, Brendan.
  • McGinley, Dinny.
  • McLoughlin, Frank.
  • Manning, Maurice.
  • Mitchell, Gay.
  • Molony, David.
  • Moynihan, Michael.
  • Naughten, Liam.
  • Nealon, Ted.
  • Shatter, Alan.
  • Sheehan, Patrick Joseph.
  • Skelly, Liam.
  • Spring, Dick.
  • Taylor, Mervyn.
  • Taylor-Quinn, Madeline.
  • Timmins, Godfrey.
  • Treacy, Seán.
  • Yates, Ivan.


  • Ahern, Bertie.
  • Andrews, David.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brennan, Mattie.
  • Brennan, Paudge.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Byrne, Hugh.
  • Byrne, Seán.
  • Calleary, Seán.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Cathal Seán.
  • Daly, Brendan.
  • De Rossa, Proinsias.
  • Fahey, Francis.
  • Fahey, Jackie.
  • Faulkner, Pádraig.
  • Fitzgerald, Liam Joseph.
  • Flynn, Pádraig.
  • Gallagher, Pat Cope.
  • Geoghegan-Quinn, Máire.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Kitt, Michael.
  • Lenihan, Brian.
  • Leonard, Jimmy.
  • Leonard, Tom.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McEllistrim, Tom.
  • Mac Giolla, Tomás.
  • MacSharry, Ray.
  • Molloy, Robert.
  • Nolan, M.J.
  • Noonan, Michael J.
  • (Limerick West)
  • O'Dea, William.
  • O'Keeffe, Edmond.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond J.
  • Ormonde, Donal.
  • Reynolds, Albert.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Walsh, Joe.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wyse, Pearse.
Tellers: Tá, Deputies Barrett(Dún Laoghaire) and Taylor; Níl, Deputies B. Ahern and Briscoe.
Question declared carried.
Sections 100 and 101 agreed to.

Before I move amendment No. 59 I should like to give notice of a further Report Stage amendment which I propose to bring forward tomorrow and which is a technical amendment to paragraph 2 (1) of the Second Schedule and is consequential to a Committee Stage amendment to section 14 which has already been passed.

I move amendment No. 59:

In page 82, subsection (1), line 31, after "discretionary trust" to insert "(which expression has in this Part the meaning assigned to it by the Principal Act as amended by section 101)".

This amendment is designed to ensure that the amended definition of a discretionary trust in section 101 of the Bill will have effect from 25 January last in relation to discretionary trusts which will be subject to a charge for tax under section 102 of the Bill.

Amendment agreed to.

I move amendment No. 60.

In page 83, between lines 14 and 15, to insert the following subsection:

"(4) Where, apart from this subsection, property or property representing such property would be chargeable under this section with tax more than once under the same disposition, such property shall be so chargeable with tax once only, that is to say, on the earliest occasion on which such property becomes so chargeable with tax.".

The purpose of this amendment is to ensure that in the case of discretionary trusts which are taxed under this Bill the tax will be charged only once on the same property in a trust.

Amendment agreed to.
Section 102, as amended, agreed to.
Sections 103 and 104, inclusive, agreed to.

Amendment No. 61 in the name of Deputy Mac Giolla is not in order.

It is not in order?

You were informed accordingly.

Amendment No. 61 not moved.
Question proposed: "That section 105 stand part of the Bill."

I am entitled to speak on this section even if my amendment is out of order. I am opposing the section. This section is complicated and difficult to comprehend. There are a lot of reservations about what is covered and what is not covered. I know the Labour Party have been pushing for this for some time. It is an area which was wide open to tax evasion and was used widely for that purpose.

I welcome the sections on discretionary trusts although they are very circumscribed. It is doubtful that very much revenue will be achieved because of the various sections which are excluding various trusts from the effect of the Bill. After all the explanations about what will be covered, what will be eventually covered under this section will be computed at a rate of 3 per cent. If we go to the trouble of inserting this in the Finance Bill for the purpose of achieving revenue, or even for the purpose of covering off tax avoidance loopholes, 3 per cent seems to me to be derisory. That is why we suggested that it should be altered to at least 5 per cent which is still a minimal amount.

Although the amendment was ruled out of order I still argue that point with the Minister. If the figure is left at 3 per cent we might as well take out the whole discretionary trust area. I doubt that the section covers the points made by the Labour Party a couple of years ago. The small number of people who would be caught under this should be charged at a rate of 5 per cent at least.

Question put and agreed to.
Question proposed: "That section 106 stand part of the Bill."

Now that we are coming to the end of Committee Stage, it is quite in character with the approach of the Government to this legislation that the last argument we are having on Committee Stage is on a section where the Government are introducing taxation by stealth.

On a point of order, the Deputy has just made a statement which is out of order, Sir. The reason this is the last discussion we are having on Committee Stage at this hour of the evening is that this is the way the Governin ment and the Opposition have agreed to handle the Bill.

We have reached agreement on a time table.

If the Deputy has a case to make he should make it on its merits.

We decided to focus on this section where the Government are introducing taxation by stealth. In other areas they were honest enough to say what they proposed to do in the budget. During the course of the budget debate and the debate on the Finance Bill we have argued our side of the case. In many instances we have persuaded the Minister to some extent, but not to the extent of acting on our proposals. Let me remind the House what the Minister said about capital acquisitions tax in his budget statement.

He said he would be introducing provisions in the Finance Bill to tidy up the method of computation in respect of capital acquisitions tax, or words to that effect. I have not got the Minister's statement with me but I recall the understanding everyone had at the time. He indicated that he would raise the level of capital acquisitions tax. I remember the impact that had on us and on everybody else.

If it would help the Deputy I can quote the exact passage. Under the heading Capital Acquisitions Tax I said:

The capital acquisitions tax provisions are very fragmented and there is need for a reorganisation. I propose to provide in the Finance Bill for a common table of tax rates ranging from 20 to 55 per cent and for aggregation of all gifts and inheritances.

There is a little more than that but those are the operative parts of the paragraph. For the life of me I cannot see how the Deputy can conclude from that that there is any degree of stealth involved in this. I said quite clearly there what I intended to do and that is given effect to in this part of the Bill. There is no question of stealth.

On a point of order, could I suggest that we take sections 106 and 107 together because they are both related?

We agree to that. The Minister has acknowledged that he said capital acquisitions tax provisions were very fragmented and needed to be reorganised. We are doing a lot more than that here. Let me illustrate what we are doing. Let us see what the effect of reorganising the tables would be at this point.

And aggregation of all gifts and inheritances.

The capital acquisitions tax on inheritances or gifts was introduced in about 1974 or 1975. The exemptions then applied were £150,000 for a spouse and that the tax would apply to deaths occurring after 1 April 1975 and gifts occurring after 28 February 1974. I want to underline the fact that we have not proposed any unreasonable or irresponsible amendments in the course of this debate. We are not proposing that we should index the exemption from capital acquisitions tax in line with inflation since 1974 or 1975. If we were doing that, the exemption in respect of a spouse as of February 1984 would be £620,000 which is the equivalent in today's terms of £150,000 in 1974-75. We are not proposing that.

There is a reasonable case to be made for some level of indexation but, in current circumstances, we are not pressing the Minister to do that. We are objecting to the Minister actually increasing by stealth the level of taxation and reducing the thresholds introduced almost ten years ago. Because of the revised computation, as it is euphemistically called in the Bill in Chapter II, sections 106 and 107, there will be different thresholds from those which have operated up to the moment. The Minister can tell me if I am wrong, but I believe that the threshold for grand-children is reduced from £30,000 to £20,000. If the Minister tells me I am wrong, I will be happy to accept that. He is not telling me I am wrong. Therefore the threshold has been reduced and that is not just the tidying up operation. The Minister is reducing the examption from the application of this to inheritance by grandchildren.

Will the Deputy remind me of any increase he made in the threshold?

I will be glad to. Had the Minister asked his advisers before he put the question to me he would have learned that in 1981 when I was sitting in his seat I increased the thresholds on this tax in respect of farmers because of the effect it was having. That information was available for the Minister had he checked. In the Bill the Minister is doing the opposite and increasing the thresholds for everybody, farmers and others.

Will the Deputy remind me of any change he made in the thresholds he has spoken of today? The fact is that he did not increase them.

Now that the Minister did not expect to get the first answer he should not put his paw out for a second answer. The Minister is increasing thresholds in certain categories where I increased them. In respect of certain exemptions up to the time this Bill was introduced, because of the separate tables that applied whether one got a gift from a parent, a grandparent, an uncle or aunt, the total to which one was entitled under the aggregation of the exemption limits was £210,000. The Minister has decided to tighten that up by having one take with a maximum threshold for exemption of £150,000. It does not matter how many gifts one gets from different sources. The threshold, after a tidy bit of reorganisation, has been changed. We will now have taxation by stealth.

I have respect for what the Minister has found himself obliged to do in many areas. I acknowledge his consistency although I do not always agree with his policy. Certainly, I disagree with the impact the policies are having on the economy. Since February last year the approach of the Government in imposing extra taxation is not only reducing revenue but damaging the economy and its capacity for growth. In this measure, without clearly acknowledging what he proposed to do, the Minister is introducing a new level of taxation by stealth on what is a normal procedure of inheritance or gifts within families. We have already got evidence of the Minister's attitude towards private residences on less than one acre if they are sold. We must remember that most sons who inherit a business today inherit as many problems as there are opportunities. Many of them are tempted to realise their assets, clear out and rid themselves of the headaches they will have if they continue to run the business. This measure will worsen the headache. Somebody has found a nice way of doing two things at the one time. The legislation is being tidied up and that is not a characteristic of Finance Bills, which are more important as avenues for raising more tax. This represents taxation by stealth and will result in undesirable consequences. We are strongly opposed to these sections.

What will the percentage rate of increase in tax liability be due to the proposed change? Has the Minister an approximate figure? The section is tantamount to the return of the old death duties. For example, if an elderly man and his sister living on a small pension inherit the house they are living in when their mother dies it is clear from the calculations in the section that they will have to sell that property in order to pay the capital acquisition taxes. For example, in the case of a house valued at £120,000 the survivor will be entitled to an estate of £60,000. Of that amount under the new section £20,000 is exempt from tax leaving £40,000 taxable. The tax on that will be £11,000. A house valued at £120,000 left to a surviving partner will have a tax element in it of £11,000. If one assumes that that elderly person has £7,000 or £8,000 saved and has furniture valued between £10,000 and £12,000 increasing the value of the estate to another £20,000 one arrives at a figure of another £6,500 tax. That means that a pensioner or a surviving elderly partner, could have a tax liability under this section of £17,000 or £18,000 on a house which may pass at £120,000.

Where will an elderly person get £17,000 or £18,000 without selling the house? This is bringing us back to the worst of the old death duties. In the course of the debates on the problems caused by death duties many years ago speaker after speaker put forward the argument that the property would have to be sold to pay the tax. All agreed that it was an unjust tax and should be got rid of. Clearly death duties are being brought in overnight in this section. The example I have put forward is a real one. That is an unjust and inequitable situation.

Inheritance can pass between spouses to the tune of £150,000 without paying either of the capital acquisition taxes. That figure was set in 1974 and, as Deputy O'Kennedy has said, £150,000 in 1974 is equivalent in 1984 terms to more than £600,000. However, instead of the threshold going up it is being brought down. This is a dynamite section because it has tucked into the Bill what is really a time bomb. It is difficult to emphasise the type of time bomb it is. The Minister has aggregated all the thresholds into one table although in the past there were four tables for various categories of relatives. Under the old system one could get inheritance up to £210,000 if they happened to fall in the right categories but that has been reduced to £150,000. That £210,000, with inflation and so so, should have been increased to £300,000 or £400,000. The measure is regressive and represents a return to the worst elements of the old death duties system. It will mean that a lot of people will have to put their property on the market. It is a neat piece of legislative work but it is so complicated — the most complicated piece of legislation I have seen in regard to financial matters for a long time — that it will have all the professional advisers and accountants tearing their hair out trying to implement it in a reasonable fashion. According to my calculations the rate of percentage increase in tax liability under this could be of the order of 300 per cent.

It is inaccurate to say that accountants and tax advisers will be tearing their hair out because of this section. There are many sections of Finance Acts about which people could tear their hair out, but this is not one of them. This section simplifies things to some extent. The purpose of section 106 is not to change in principle the new exempt thresholds in section 107 which are substituted. There are three thresholds instead of four.

There is only one table.

That is so, but there are three thresholds, £150,000, £20,000 and £10,000, depending on the relationship. The thresholds provide for the relationship one might have, with a stranger, with a father or with an uncle. There are two different allowances in the last two cases. It would have been possible to continue with the old system but a proportion of our revenue comes from income tax and we are looking for equity within the tax system. It is very hard to explain to people that over and above the exemption limit of £150,000 we will now continue to allow other gifts which will not be aggregated.

Given the very difficult circumstances and the need for revenue, this provides for three different gifts, from a stranger, from a father or from an uncle. They would be aggregated and the only threshold would be the highest of the three. If one gets gifts from only two such people, the threshold will be the higher. That is not unreasonable. The scheme introduced in 1976 provided for the calculation of the tax on the accumulative total of all gifts and inheritances between the donor and the donee. That was changed by the 1982 Act which provided for an accumulative total from all donors of all four classes and it provided that for the purpose of calculating the tax on benefits after 2 June 1982 all previous provisions should be forgotten about, meaning that all accumulations now go back only to 2 June 1982.

These are very reasonable and generous provisions. If a man has three sons he could leave each of them £150,000 without any tax liability whatsoever. Given the circumstances we are in, I repeat that this provision is quite generous. We must remember that people in the PAYE class are being screwed. They do not fall in for gifts or inheritances of £150,000. There must be a sharing out of the tax burden.

I regard this as dangerous legislation. The effect of the provision may seem quite reasonable to Deputy Mitchell who may know of examples of people receiving gifts from their fathers or their spouses, but we must consider a person who receives a gift from a stranger or somebody in one of the other categories of relationship. One can see then the effects of the changes in more graphic form. Deputy Brennan gave some examples of difficulties to which this can give rise. I am extremely worried and frightened by these provisions. The tax shelters previously available to a donee have been abolished and now there is simply one depending on the exemption thresholds applied to a person from whom he gets the benefit.

This is confiscatory legislation. I cannot describe it in any other terms. I say that bona fide. We would expect the thresholds, the bands, etc, to be running with inflation but here the Minister is running away from inflation. I ask him to have a serious look at it and perhaps to take some advice from people other than civil servants about how this is likely to operate in practice.

I will ask the Minister one practical question. There may be an inheritance from a discretionary trust which has already borne tax at 3 per cent. If somebody inherits from that discretionary trust and thereby becomes liable to inheritance tax, will the amount of the inheritance tax reflect the fact that the capital in the trust already bore a 3 per cent tax?

I will take up a point made by Deputy Brennan with which I agree wholeheartedly. I refer to the complexity of this piece of legislation. It is unacceptable that a piece of legislation that raises taxation from citizens should be so utterly inexplicable not only to practitioners of accountancy and law but to those more specialised in this field. This trend has increased over the decade and it is to be deplored. Taxation of any description, whatever the nature of the tax, whether income tax, corporation tax or whatever, should be so drawn that the average citizen will be able to take it up and, after some concentration and care, be able to unravel how it affects him. He is entitled to be able to know what that law is. It is said that ignorance of the law is no excuse, and if that is so the law should be framed in such a way that the man in the street will be able to have some measure of understanding of it.

As the years go on, and Finance Act follows Finance Act, the law becomes a maze of misunderstandings and it becomes increasingly impossible to unravel it. In the time available to me I have found some difficulty in getting to the base of these two sections and the amendments to them. I should like the Minister to clarify the aggregation provision. For example, if a widow inherited £10,000 from a cousin, the lowest of the three categories, and thereby exhausted that category, and sometime later inherited £10,000 from her husband, under the new aggregation definition would she then become liable to pay tax on the £10,000 inherited from her husband, having previously exhausted the limit under paragraph (c)? I should like the Minister to clarify that point. Is that the intent of the section? I understand the Minister to indicate that it is.

I agree with the point made by Deputy Mitchell that these thresholds are generous. They are too generous. Reference was made to estate duties or death duties. We lived with them for about 30 years and they did not cause the State to collapse. We survived them. Just like everyone who has to pay tax today those who had to pay that tax were very upset about it and so the tax was abolished. That was the beginning of a drift towards lifting off taxes on property. It only assists a small proportion of the population who have property. The result has been that the amount of capital tax has been consistently reduced over a decade from 11.4 per cent to 4 per cent today. Various examples of hardship caused to a person with a house valued at £150,000 who has to pay property tax were given. It was said that the person would have to sell his house, as if he could not buy a couple of other houses. The hardship is only relative and this is particularly so as far as the person who has no property is concerned. His income is taxed at a rate of 35 per cent without ever having the possibility of getting or giving a gift.

We consistently see the abolition of tax on property. There has never been an abolition of tax on income but rather it keeps increasing. The old estate duties were to be replaced by a similar type of taxation but that never happened. The same applies to rates. When they were abolished it was understood they would be replaced by some other kind of local taxation related to property and income of a fair nature. That never happened. The resource tax has never been replaced on farmers. We cannot accept the arguments put forward about the hardship caused to people with property who have to pay these taxes. The thresholds are still too high and the rate of taxation is too low. The minimum average rate of tax that should be paid is at least 30 per cent. That is still below the lowest PAYE rate of 35 per cent.

We oppose this section on the grounds that it is too generous. It is amazing to hear the tremendous opposition of the Fianna Fáil Party to the relatively mild attempt made by the Minister to bring in a more understandable level of capital acquisition tax. The debate illustrates the difficulty a big mass of people outside have in relating to what happens in here. All they hear are the same arguments about the same small group of people who have property deciding the fate of everyone else. That is what is happening in the discussion on this Bill and that will be seen outside.

In relation to Deputy Brennan's question about the increase in tax liability, I cannot give a specific answer because it would depend on each case. It would not mean a lot to say that in any given case there would be an increase of X per cent in tax liability as a result of the provisions of this Bill. The total revenue increase from this will be about £4 million in a full year and £1 million this year.

What was the corresponding figure for last year?

Total revenue in 1983 was about £14½ million.

With an additional £4 million from this?

In a full year, yes. Deputy O'Dea asked if there would be a capital acquisition tax liability on an inheritance taken from the distribution of a discretionary trust which had previously been subject to the tax already provided for in the Bill. The answer is "yes" but the amount distributed from the trust would have been affected by the amount of the tax liability on the trust itself. The distribution of the trust becomes a beneficial transfer and falls to be considered under the capital acquisition tax rules.

Deputy Taylor referred to the case of a person who had taken an inheritance of £10,000 from a cousin and subsequently an inheritance of £10,000 from a husband. The first gift will be tax free at the point of taking the gift. When the second £10,000 gift was given we would aggregate the two gifts. Therefore there would be an aggregate of £20,000 and £10,000 of that would be taxable as a gift from the cousin. The tax in that case would be £2,000.

The idea that there is a tax free threshold from a husband to a wife of £150,000 is an illusion in a case where the widow would have taken quite small gifts from an outside source. Here is a case where a widow succeeds to £20,000 and becomes liable for £2,000 in tax. Another widow succeeds to £130,000 from her husband and is not liable for tax. Where is the equity in that?

We have three different thresholds. The legislation provides that in the event of a gift from a husband to a wife or a wife to a husband there is a threshold of £150,000. Following on the Deputy's example the tax liability in that cases is £2,000 on the gift from the cousin. That liability would remain the same at any stage from a £10,000 gift from the spouse up to a £150,000 gift from the spouse. The situation the Deputy mentioned arises from the fact that there are three different thresholds depending on the source of the gift.

I appreciate that. However, I understood that the whole emphasis of the capital acquisition tax system, which is reasonable enough in its basis, is that it looks to the acquisition from the point of view of the donee rather than the old death duty system which looked at it from the point of view of the estate being donated and from the point of view of the donor. From the point of view of the donee, here we have a situation where unfortunate widow A living in a council house has been left £10,000 from a cousin. She then succeeds to the council house which is worth £20,000. She finds herself with a hefty tax bill, inheriting not more than £20,000 or £30,000 in all; whereas widow No. 2 succeeds without any trouble to £140,000, completely free of tax. It seems a most incongruous, illogical and inequitable situation.

Deputy Taylor can present it in that way but, as I said, that situation arises from the fact that we provide for three different thresholds. One can conceive equally well of a widow, whose only inheritance that is calculable for these purposes is, let us say, £15,000 from a cousin who will pay tax, and another widow——

I am putting the question——

That is the consequence, as Deputy Taylor pointed out——

I am sorry, but I must put the question. As it is now 10.30 p.m., in accordance with the order of the Dáil of 8 May I must put the following question: "That the amendments set down by the Minister for Finance to sections 107 and 109 of the Bill are hereby made to the Bill, and in respect of the sections undisposed of in Parts V and VI of the Bill, that such sections or, as appropriate, such sections as amended are hereby agreed to, and that the Schedules to the Bill and the Title of the Bill are hereby agreed to".

Question put and declared carried.

When is it proposed to take the Report Stage?

To-morrow morning, by agreement.

Report Stage ordered for Thursday, 10 May 1984.
The Dáil adjourned at 10.30 p.m. until 10.30 a.m. on Thursday, 10 May 1984.