Deputy O'Kennedy has been travelling over ground which we covered in the previous discussion. He made a few points on this amendment to the section which need a further answer because he does not seem to have taken on board the answers given during the course of Committee Stage debate. The first point I want to address is Deputy O'Kennedy's fear that somebody who gets a good price for his house will find he is being assessed for capital gains tax.
Finance Bill, 1984: Report Stage (Resumed) and Fifth Stage.
Debate resumed on amendment No. 34:
In page 66, lines 23 to 51 and in page 67, to delete lines 1 to 30.
—(Deputy O'Kennedy)
I did not say that.
As I said during the Committee Stage debate, that is not the case. The application of the tax comes about in very specific circumstances. There has not been any difficulty in applying the kind of criteria and considerations involved here in the situation which prevailed since 1975 when we began to apply different treatment to development land gains from that applicable to ordinary gains. I think I can say without great contention that the system has worked since then and it is obvious that there would be no great difficulty in applying it to the kinds of sale envisaged in the section now under discussion.
The definitions used for the purposes of this section are already well established. They were set out in the Finance Act, 1982, in most cases, and have proved to be applicable without great difficulty. The central one is the question of current use value. Deputy O'Kennedy seemed to suggest that there would be some difficulty in distinguishing between current use value and development value. As I have said, the notion of current use value was defined in section 36 of the Finance Act, 1982, which was brought through the House by my predecessor, Deputy MacSharry, without, so far as I can recall, any major reservations on the concept being expressed by Deputy O'Kennedy. I cannot really see why he should have great difficulty with it now when he did not seem to have any difficulty with it at that time.
As I said during the course of the Committee Stage debate, a transaction would fall to be considered under this section only if it showed certain characteristics and only if the examination of certain factors showed that there would be or there was likely to be a taxable gain for the purposes of this section. The first one I mentioned the other evening is the price. It is clear that this relates particularly to somebody who gets a good price for his house. There is obviously a margin which would apply before we would begin to consider that the price reflected a development gain. It is equally clear that if a houseowner is in the fortunate position of finding a willing buyer who will pay more than what might popularly be considered to be the market value of the house in question, and who is buying it for the purpose of residing in it, that is not the kind of case which would give rise to a liability for tax under this section. As I said the other evening, if somebody is selling a house for which he would normally expect to get £60,000 and finds a willing buyer who, for reasons of location, or convenience or whatever else, is prepared to pay £70,000 or £75,000 that would not give rise to a charge to tax under the provisions of this section.
The second factor which would fall to be considered would be the purchaser and what he was doing. Deputy O'Kennedy attempted to start off a scare by saying — I think I am quoting him fairly accurately —"but if the purchaser is a builder you had better watch out". Builders buy houses to live in just as anybody else does, but that is not the problem. If the house is being acquired as a residence by a buyer who is prepared to pay whatever the price, there is no difficulty in relation to the section, there is no charge to tax. On the other hand, if the buyer is a developer it is legitimate to ask if the price offered includes an element of value or gain which is attributable to an intended change in the use of the house in question. That is one of the factors that would give rise to a question as to whether there is a liability to tax under the section.
The third factor is planning permission. If a house is being sold and realises a price substantially in excess of what might be considered to be a fair market value and there is already planning permission for development in the area in which the house is situated or on the site, then it seems reasonable to expect that there might be some development gain involved. That is what the section provides for. If, having bought the house somebody gets planning permission to turn it all into flats or a shopping development then there is obviously the question of a change of use. I submit that those factors can be fairly readily established and would not create a situation in which the ordinary resident selling a house in the course of his life and moving somewhere else would have any worry. The fact that the revenue from the measure, as Deputy O'Kennedy pointed out, is expected to be in the region of £250,000 indicates how few cases are likely to be caught by it.
That is a guess.
It is, of course. One of the reasons for bringing in this measure has to do with concerns of equity rather than simple concerns of revenue. Those factors indicate that Deputy O'Kennedy is inflating the importance and meaning of the section far beyond what it deserves and the intention of the measure. For those reasons I do not think Deputy O'Kennedy can sustain the allegation that the measure is in any way an attack on the family or on the private residence. It is not anything of the kind.
During the course of the discussion Deputy O'Kennedy attempted to alarm by saying that if one happened to live near a road widening project, for example, one had better watch out. In the majority of cases where land is compulsorily acquired for road widening the local authority compulsorily acquire a section of the garden. We have provided in the section for an exemption of sales of up to £15,000. I believe that in a majority of cases where compulsory purchase orders are applied for purposes such as road widening a strip of garden is taken from a row of houses in order to allow room for road widening. Those cases will be exempted from the operation of this section by the limit to which I have referred. The extent and nature of the measure we are debating is not anything like as dramatic as Deputy O'Kennedy pretends. Certainly, it is not of a kind to give rise realistically to any of the objections or fears which Deputy O'Kennedy has expressed. For that reason I believe we should leave the section as it is.
When the Minister introduces a provision to raise tax for the purpose of equity, as he has indicated, amongst other reasons, he should have some idea as to the amount of tax he is likely to raise. It must be the first time a Minister for Finance has come here — apart from the instance of the residential property tax when there was also a guess — on the basis of a guess. That is not the way a Minister should go about his business. The other matters have been well thrashed out between us and only the application of the new tax will demonstrate which of us were closer to reality.
I am quite confident.
It is my guess that the yield will be considerably more than the Minister has suggested in his guess and that the net will embrace many more people than the Minister has suggested. There is little point in pursuing this any further.
Question: "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.
I move amendment No. 35:
In page 70, line 42, before "An officer of Customs and Excise" to insert "For the purposes of the provisions of subsection (3) and regulations under subsection (4),".
The purpose of the amendment is to specify the application of the relevant section of the Bill, to make it clear that the functions of the officers referred to in the section relate to the taxation provisions of the section. It is to delimit the functions concerned.
Amendment agreed to.
Amendment No. 36 in the name of Deputy O'Kennedy has been ruled out of order. It is not relevant to the provisions of the Bill as read a Second Time.
I accept the ruling of the Chair. The only intention in putting down the amendment was to ensure that Customs and Excise officers who are well equipped to watch trade across the Border would be given similar powers to those available to gardaí to apprehend people engaged in drug trafficking.
That cannot be discussed. I am ruling it out of order.
Will the Minister have a look at the intention in the amendment? We all want to curb illegal traffic in drugs and those people could help.
The Deputy got good mileage out of an amendment that was ruled out of order.
The Minister wants to be Ceann Comhairle as well.
I move amendment No. 37:
In page 77, between lines 3 and 4, to insert the following:
"(10) Section 2 of the Betting Act, 1931, is hereby amended by the insertion after subsection (2) of the following subsection —
‘(3) Where any person in contravention of this section is party to more than one betting transaction he may be prosecuted for each such transaction and shall be liable on summary conviction thereof to an excise penalty of £800 in respect of each such offence.'.".
The intention is to apply the same provisions for penalty and sanction in respect of unlicensed bookmakers for illegal transactions on betting to licensed bookmakers in respect of contraventions. As I understand it, a licensed bookmaker can be fined up to £800 in respect of each transaction on any day. We have had examples recently of bookmakers being fined considerable sums. I do not question that but if that applies to licensed bookmakers the same should apply to unlicensed bookmakers. Unlicensed bookmakers can be fined in respect of only one offence per day. The Minister should have a look at this and try to introduce equity to ensure that the same penalties apply to both types of bookmakers.
I assure the Deputy I appreciate the intention in the amendment but I would point out that it is not necessary because already the Bill provides for penalties of £1,000 each in respect of offences committed by bookmakers in unregistered premises. That is provided in page 76, subsection (8).
Amendment, by leave, withdrawn.
Amendments Nos. 38, 39, 40, 47 and 51 are related and can be taken together.
In view of the time factor I will not test these amendments.
Amendments Nos. 38, 39 and 40 not moved.
I move amendment No. 41.
In page 81, line 10, before "An authorised officer" to insert "For the purposes of this Act and regulations,".
This specifies the framework in which the authorised officer will co-operate for the purpose of the section.
Amendment agreed to.
Amendment No. 43 is related to amendment No. 42, amendment No. 44 is an alternative to amendment No. 43 and amendment No. 50 is consequential. All these amendments can be taken together, by agreement.
I cannot see why amendment No. 44 is deemed to be an alternative to amendment No. 43. We accept the ministerial amendment, No. 43 and I cannot understand why amendment No. 44 is an alternative. However, I do not question the ruling but having regard to the categories contained in amendment No. 43 and amendment No. 44 I do not see why they should be regarded as alternatives. We are accepting the ministerial amendment. I move amendment No. 42:
In page 82, line 44, to delete "and".
I will refer to amendment No. 44 and make a special plea to the Minister to repeal the VAT on hurleys, particularly because this is the centenary year of the GAA. None of us needs to undermine the role of the GAA and we do not need to apologise if we advocate exceptional provision for the promotion of hurling. There could be an argument that if we apply an exemption to hurleys we will be asked to apply it to other sports equipment. Even those who play golf or tennis will acknowledge that hurling had a special place here, not just as a sport but as an expression of the character of our people. It is one of the finest, if not the finest, field game in the world. Besides, we are commemorating the centenary of Cumann Lúthchleas Gael.
Ba mhaith liom a rá go bhfuil sé de dhualgas orainn a chur in iúl do Chumann Lúthchleas Gael and do gach éinne atá páirteach i CLG sa bhliain seo go bhfuilimid sásta sa bhliain seo taca faoi leith a thabhairt dóibh anois. Ba mhaith liom taca faoi leith a thabhairt don iománaíocht. Tá baint faoi leith ag mo chontae leis an spórt sin——
Bhíodh.
Bhíodh agus beidh. Tá muintir an Chábháin ag imirt na hiomanaíochta anois. B'fhéidir sna blianta amach anseo go mbeidh cluiche idir an dá chontae ach go dtí an lá sin ba mhaith liom a chur in iúl don Aire thar ceann Fhianna Fáil gurb é ár dtuairim gur ceart don Teach seo cabhair speisialta a thabhairt do CLG sa bhliain seo go háirithe.
Recently the Government acknowledged the special role of the GAA by having a special reception in Dublin Castle, a rather unusual setting for them. The GAA very much appreciated that gesture. This is not just a matter of promoting a particular game as a healthy activity — that can be said of any game — but hurling is a special game. Perhaps, as I have said, Tipperary might engage in deadly combat with Cavan — I hope we do — in an All-Ireland final. We in Tipperary have been living off our great memories. I hope that this year we will add to them by winning the All-Ireland final in Thurles, the birth place of the GAA.
It is appropriate that we here should acknowledge what has been acknowledged not only by the people in Ireland but around the world, the magnificence of this sport. On this occasion we should be very glad to join with the GAA in promoting the game of hurling in a way that will give pleasure to youngsters who play it and the many people who watch it. I, like other Deputies, have brought visitors from many countries to Croke Park and Páirc Uí Chaoimh and of all the entertainment provided for them on their visits the game of hurling gave them the greatest pleasure. The GAA have given time and effort to coaching and as a consequence we see counties like Cavan catching up on us in Tipperary, counties that traditionally had very little association with hurling. It costs quite a lot to coach young people in the game. That is not the essential point. Hurling is a vigorous, manly game. A hurely is used to get the ball from an opponent. Hurleys tend to get broken. This happens more so in this game——
What about croquet?
Not to the same extent. It sometimes happens with tennis rackets. The yield to the Revenue from VAT on hurleys will be £700,000 this year. If that is the yield to the Revenue it is also the cost the youngsters playing this game must pay. It is too much. Surely in this year it would be a great opportunity for the Government to win a degree of support from the GAA. We would be happy for them to enjoy that support if it came.
I do not know if many people would agree that we had a proprietorial interest in the GAA.
I did not say that. The fact that I played hurling for a considerable time is one thing, perhaps not with any great degree of success but with some, nonetheless.
The Deputy was clean and not at all bad.
Recently RTE decided to show some of the games held in the recent past. They showed the 1968 All-Ireland Final recently. Tipperary were beaten in that match by Wexford. It was probably one of the most exciting spectacles of sport ever seen. This is what we want to promote. Hurling is part and parcel of rural Ireland and is taking root in the city and even in the Glens of Antrim. We should do all we can to promote the game.
This case was made to me when I was Minister for Finance. I was not able to do what I am asking the Minister to do now. The GAA have been making this case for a considerable time. I asked the Revenue Commissioners how much we were getting from VAT on hurleys. When they told me I gave a grant which was the equivalent of the amount we received from VAT on hurleys to the GAA. That was not in a centenary year. We must acknowledge the role of the association and what they have done. Hurleys are very expensive. If the Minister cannot meet me all the way he should at least de-rate VAT on hurleys for juveniles which would be on hurleys up to 34 inches. These are provided free of charge by the GAA to youngsters. The game of hurling is now being promoted in every county even in places where it was never played before. I see no reason why we should make such a big issue out of such a small sum.
Many joiners and craftsmen are involved in the manufacture of hurleys. People who would otherwise be unemployed are gainfully employed. I know many of them. The Minister should bear that in mind. At present we are promoting self-employment and here is another method of achieving that. We do not need to apologise to anyone. I will join with the Minister in defending the case of the GAA before any other sporting organisation. They will understand that in this year and it is not only a gesture but an indication of our support for this game which is being promoted in every county and hopefully will extend further.
The Minister has not given an inch on any of the amendments. Perhaps he will consider doing so on this one. There are 100,000 juvenile hurleys being subsidised by the GAA each year in addition to juvenile hurleys bought on the open market. There are a further 200,000 senior hurleys issued through the GAA. VAT at 35 per cent on these is a prohibitive factor in the GAA's efforts to further the game especially in weaker counties. In Northern Ireland the VAT on hurleys is only 8 per cent. Not only would it be a gesture, as Deputy O'Kennedy said, if the Minister accepted this amendment but it is absolutely necessary that he do so in order to preserve and promote our national game. I appeal to the Minister to drop the bombshell at this stage and announce to the House that he is prepared to reduce this rate of VAT to zero.
I do not intend to make a long speech on the game of hurling but I endorse what Deputy O'Kennedy said. The cost of hurleys is one of the greatest obstacles to the development of the game. Everyone was delighted to see the upsurge in Roscommon recently and would wish to see it expanding further. One of the greatest problems for clubs, particularly juvenile clubs, is providing hurleys for juveniles. A move such as this or a considerable reduction in the rate would be a grand gesture this year.
There is a series of items on which there is VAT and many questions could be raised about them. Last night we discussed VAT on newspapers. That is another important area where VAT should be reduced. Of all the areas where VAT has been imposed, VAT on clothing is of the greatest significance and will have the greatest effect on households. While I would like to see VAT reduced or eliminated on hurleys, newspapers and other items, I ask the Minister to reduce it on clothing from 8 per cent to 5 per cent, as it is on other essential items such as coal. It would be a great help if the age at which the VAT is levelled, ten——
The Deputy is moving from the amendment.
——was increased to 16. I support the reduction of VAT on hurleys but if it were to be reduced on clothing I would have it imposed on everything else.
I support Deputy O'Kennedy's plea to the Minister. The important points have been made. There is a big promotional move as of now in this the GAA Centenary Year and there has been renewed interest in small craft developments. If the Minister sees fit to follow what is laid out in this amendment he will give a fillip to those concerned and help employment. There was a tradition in Inishowen, County Donegal, and in the Glens of Antrim, where they had their own special shape of hurley. I saw Raymie Dowling, the Kilkenny goalkeeper, making hurleys many years ago — I think he is still in the business. If the Minister accepts this amendment he will be helping employment and this game. I am making a strong plea to the Minister to prove he is a credit to Coláiste Mhuire and agree with Deputy O'Kennedy's amendment.
I wondered why Deputy O'Kennedy should have chosen to make part of his case on this amendment in Irish, but did not utter a single word of Irish about any other amendment over the last few days. I do not intend to follow his example because I honestly do not believe in that kind of "shamrockery".
That is not a fair point. That is a cynical rope ladder comment.
The Minister, without interruption, please.
That is an entirely fair comment. It is completely in keeping with the Deputy.
There is not a drop of humanity in the Minister.
I am prepared to conduct the rest of this afternoon's business in Irish if the Deputy wishes. That might have a little more meaning than what Deputy O'Kennedy did a few moments ago.
I missed what the Minister said.
I do not intend to follow the Deputy's example much as I might be tempted.
Why not? Is the Minister making some point because I spoke in Irish?
The point is a very clear, simple and direct one. The Deputy does no honour to his case by that kind of playing to the gallery which he hauled out for this occasion——
What is the Minister talking about?
——in the context of a very nice, down home, folksy kind of discussion.
The iceman cometh.
There is not a bit of ice. If Deputies on the other side would like to finish the debate on the Finance Bill as Gaeilge, I will be very happy to do so and it might mean a little more than to follow Deputy O'Kennedy's line.
The reason Deputy O'Kennedy, when Minister for Finance in 1980, did not remove VAT on hurleys has not been fully explained but I have a shrewd suspicion that some of the reasons might have been along the following lines. First, we do not have a separate account of the VAT taken in on hurleys. They are classified like other goods at the 35 per cent rate and are not separately distinguished. Not a pound arrives at the Revenue Commissioners with a tag that says "VAT on hurleys" from wherever the sale took place. They are not separately distinguished.
Maybe they should be.
They are sold with other sports goods which are subject to VAT at the 35 per cent rate. A different but equally valid case could be made for the other sports goods. The sports in question might not have the same national importance or tradition or other associations as hurling but many of them are just as good for one's health, and some of them may be just as bad for one's health, if one happens to meet a Tipperary hurler who is not quite as clean as Deputy O'Kennedy.
It would make a man of the Minister.
I know this probably does not happen to quite the same extent in Deputy O'Kennedy's end of Tipperary, but there is a famous tradition of hurling around Cashel which is not quite as gentlemanly as Deputy O'Kennedy's background in the sport.
That is all the Minister knows about it.
I seem to have got under the Deputy's skin this time. He is getting annoyed.
As I said, a case could be made for other kinds of sporting equipment and I suspect that was one of the reasons Deputy O'Kennedy decided in 1980 not to remove the VAT on hurleys.
May I ask a question?
Deputy Fahey had the facility during most of this debate to turn down the monitor if he did not like what was going on, but now that he is in the House he has to listen, the same as the rest of us.
I suspect another reason Deputy O'Kennedy did not take the VAT off hurleys was a concern with the Revenue, although he said he gave a grant that year roughly equal to the VAT which the Revenue Commissioners suspected they were getting on hurleys.
After discussions with the GAA.
I can fully understand his position at the time because, not surprisingly, I came to a very similar conclusion this year. A case was made for the reduction of VAT on hurleys and, while I wanted to mark the centenary of the GAA, I realised there was a more appropriate and perhaps more convenient way to do it than creating another snarl-up in an already complicated system of value-added tax. For that reason we decided to make a special grant of £100,000 to the GAA, in addition to the annual grant they get from the Department of Education.
How will that compare?
Those are the considerations which come to mind when we speak on this amendment. In my view, the arguments for doing it the way I have done, and as Deputy O'Kennedy did in 1980, are more convincing, and perhaps more convenient, than pursuing the line the Deputy is pursuing this evening because nothing has changed. The technicalities are the same as they were in 1980. There may be one or two differences. For instance, as Deputies on the other side of the House have said, there is a conscious and very sustained effort to promote the game throughout the country.
And overseas.
That is something we must all applaud but I wonder if it is really in keeping with the arguments Deputies opposite have been making right through this Bill to say that the only way to help in encouraging this sport is by way of a grant, in other words, to say that the taxpayers must provide the additional money?
We did not say that.
I say that in the knowledge that this year I have asked the taxpayers to provide £100,000 to mark the centenary of the GAA but I am not so sure that we should always take the view that we must do something with the tax system if people around the country decide, for their own good reasons, that they wish to promote a particular activity or game. That way of putting the case does not seem to me to be at all convincing. In saying that I am not in any way taking away from the very steady and conscious effort being made to promote the game.
I have broadly the same reasons for not accepting this amendment as Deputy O'Kennedy had in 1980. I have come to broadly the same conclusion as he reached then and have done roughly the same as he did.
I should like now to make a point that will not be without interest so far as Deputies on the other side of the House are concerned. Having regard to the amendments concerning VAT, Deputies opposite have proposed a reduction of VAT on electrical goods to 15 per cent. They have proposed also a reduction in VAT on newspapers to 5 per cent as well as the elimination of VAT on hurleys and a reduction of VAT on hotel accommodation. We have not come to that one yet but I have put all these proposals together for the purpose of the argument. The overall gross annual cost of accepting those amendments would be in the region of £56 million.
The Minister said earlier that he was not in a position to calculate the VAT on hurleys.
The Deputy may know that I answered a question in the House some weeks ago by saying that we could not with any confidence put a figure on the amount of VAT we get from hurleys. Indeed, it is difficult to put, with confidence, a figure on the amount of VAT we get from anything because we do not require people to make their returns in such a way as to indicate that, for instance, in a certain period they sold 200 hurleys at 35 per cent VAT, 75 tennis rackets and ten pairs of football boots. However, the overall cost of the proposals I am talking about would be of the order I have mentioned. That would be equal to nearly twice the yield of 8 per cent VAT on clothing. It is a fair comparison to make. An amount of £56 million in a full year is fairly substantial and one might ask reasonably of Deputies opposite what, if anything, they would put in the place of that revenue. What promotions should we discontinue in order to accommodate that kind of a reduction in the tax revenue?
Incidentally, if we were to adopt the Opposition's proposals we would have a further two rates of VAT — 15 per cent on electrical goods and 10 per cent on hotel accommodation — making the system even more complicated than it is both to administer and also to operate by those who are involved in it on a day-to-day basis. If we were to adopt the notion that we should not have an 8 per cent VAT on clothing, the total cost in terms of revenue lost through accepting the amendments would be of the order of £85 million. To compensate for that we would have to bring up to about 47 per cent the 35 per cent rate while the 23 per cent rate would have to be increased to about 25 per cent unless we were to find reasons for not spending the £85 million.
Those, then, are the reasons for my not being in a position to accept this year the amendments that have been put forward.
Perhaps the Minister can tell us what in money terms the £100,000 in 1980 would mean in 1984?
At least £200,000.
Not quite that amount.
First, I wish to refer to the Minister's reactions to my addressing the House in Irish. I know that the Minister's fluency in our own language is at least of the same level as mine but if on any occasion that any Member of the House decides to address the House in Irish on any issue it can be interpreted as in some way playing to the gallery then we are even bigger shoneens than I thought we were.
The Deputy should speak for himself.
There is no need for us to apologise to any commentator or to anyone else for speaking in our own language whenever we choose to do so. I should like to hear Irish spoken much more often in this House. The Minister may smirk at that but I am being very serious. It would be regrettable that the Minister should see fit to make a snide remark while I was referring in Irish to an association who have as their fundamental aim the promotion of our language, culture and games. There may be some who will suggest that I was playing to the gallery. That is their prerogative. People are capable of making judgments as to what kind of country we have and should have, but anyone who understands the place of this game and this organisation will understand why it is natural and right that any of us who chooses to do so should address the House in our own language in respect of this.
The "cúpla focail" mentality never did much for the language.
I was not engaging in a "cúpla". If I address the Minister in Italian will that somehow make it more acceptable?
(Interruptions.)
I would not have to apologise if I spoke in Italian or in French but if I speak in Irish I get a snide response.
The Deputy might be able to speak in Greek.
Perhaps. I hope that never again will we hear a Minister respond as the Minister did today. I intend to conclude quickly on the issue. The Minister is surmising why in my time as Minister for Finance I did not exempt hurleys from VAT. Let me tell him why I did what I did, which was very much more generous than what he has done in this centenary year, and that was not a centenary year. First of all, the request was made to me very late in the day and at the time it was made to me I was not very long in the Department. I had not the opportunity with my advisers of working out what the impact would be elsewhere. It was that and no more. The request was made very late in the day, as the GAA and others will recognise, and on that basis I could not do it immediately and I decided to inquire from the GAA and the Revenue Commissioners roughly how much was involved. I applied at least the same amount by way of grant as we estimated would accrue to the Revenue in that year, and that is considerably more than the Minister has done this year. Another big difference is that in the meantime the game has been promoted throughout the country, particularly, as Deputy Fahey and Deputy Wilson said, juvenile hurling, in places where it was not played previously. The support for the scheme, the Coiste Iomána, Féile na nGaedheal and many other things, obviously cost the GAA much more. As I have indicated, the little craft industries and promotion in the making of hurleys have also developed. Things are different now from what they were then. Finally, this is centenary year. The Minister has referred to technicalities and his response, I regret to say, has been predictable, but the snide remarks in response to my contribution in Irish were not predictable. That surprised me. I did not quite know what the Minister was at. We are going to apply technicalities even to such things as our own culture and games. I regret that that is so and I will leave it at that.
I want to make a final comment, before my colleague Deputy Flynn comes in, on the final issue in relation to the total figure of VAT of £56 million if all of our amendments were to be adopted. When I sat opposite the Minister's colleague in Government, Deputy Barry, had no compunction about proposing amendments to me that would have cost ten times the figure he is talking about today. That £56 million does not take account of the fact that the cross-Border trade and smuggling are guaranteeing that so much that would accrue to the Revenue if the Minister would meet our case in respect of electrical goods, clothing, kitchenware and such things, is now accruing to the revenue of a country where hurling is not a native game. It is accruing to the revenue of Britain. British industry is getting the benefit of the goods being manufactured in Britain and being smuggled across the Border. The black hole is damaging the Revenue. The Minister knows that the £56 million is very much a gross figure. The net cost, even on his bookkeeping terms, would be about £35 million. Finally, even then if he were to meet this case, that net cost would be greatly reduced in the very first year. What we have seen as the seepage across the Border and otherwise in illegal smuggling and trading of all kinds, the development of the black economy which pays nothing to the Revenue, would be corrected and we would begin to see, apart from a healthier revenue yield, trading conditions healthier than we have witnessed during the last three or four years. That is why I appeal to the Minister to review the whole situation. Our argument in this case is very much stronger than the Minister would present it. Unfortunately, his response has been predictable. For the Minister it is always a question that if you give on this side of the ledger you must take on that side of the ledger. He does not understand that there is something more important than the ledger in any enterprise, and that is management of an economy. If the Minister is concentrating on just the ledger entries he is guaranteeing that we will never get the kind of enterprise and activity in these trades that would promote even a greater yield.
I gave figures last night for the loss of employment in the electrical trade of about 3,500 who if employed could be contributing to the revenue. That can be verified by even the most casual inquiry to any electrical trade in this city. Ask them how many men they have let go in the last 12 months to two years.
How many people are out of jobs now because we are paying back what you have spent?
(Interruptions.)
In the last few years 8,000 jobs have been shed in the clothing industry and the Minister is prepared to ignore that also.
The Deputy's Government are the only Government who ever tried to spend their way through a boom and we are paying the price for it now.
(Interruptions.)
I take it the Minister is not accepting these amendments.
We are dealing with amendments Nos. 42, 43 and 44. Are you pressing amendment No. 42?
The amendment that Deputy Flynn will speak about is No. 52.
I am dealing with the amendments as I meet them on the Order Paper, Nos. 42, 43 and 44.
Let us conclude on those now. We will vote on them if necessary.
We must deal with amendment No. 42 before we conclude the debate on amendments Nos. 43 and 44.
On a point of order——
You spoke on amendment No. 44.
I did.
I have concluded. I moved them.
If the Deputy has concluded we should decide the fate of the amendments.
Are you withdrawing amendment No. 42?
No.
Are you pressing amendment No. 42?
I am pressing all of them.
We must deal with amendment No. 42 first. The first vote will be taken on amendment No. 42.
Amendment No. 42 is being withdrawn.
Amendment, by leave, withdrawn.
I move amendment No. 43:
In page 82, to delete lines 45 to 47, and substitute the following:—
"(b) by the substitution for paragraph (xviii) of the following paragraphs:
‘(xviii) sanitary towels and sanitary tampons;
(xviiia) footwear;rsquo;.".
We agree to this one.
Amendment agreed to.
We come to amendment No. 44. Amendment No. 43 is accepted so amendment No. 44 cannot be moved.
How can anyone suggest that by accepting the Minister's amendment in respect of these sanitary facilities I cannot move the same in respect of hurleys?
I am not suggesting that.
The Minister is not. A Leas-Cheann Comhairle, could you put the amendment to us?
The House has already deleted the words to which your amendment refers.
It has not.
It has done so.
If that is the case it does not appear to be so from the Order, and the Minister acknowledges that that is not the intention. Procedures are important but we will not let them rule us to the extent of technicalities suggesting that by accepting an amendment from the Minister we automatically delete something which is not connected in any way. I insist that our amendment No. 44 be put to the House.
On amendment No. 43 we have already decided to delete a section and we cannot go back on it.
I could not put a case about the deletion of amendment No. 43, so put amendment No. 43 to the House again if that is the case.
It is already put and agreed.
It is already put and agreed.
The Minister and we accept that those two things are totally unconnected. I insist that you put amendment No. 44 to the House.
A Deputy
Hear, hear.
It is making a nonsense of the Rules of Order. I do not care what advice you have. If someone says that because I accept an amendment that sanitary towels and sanitary tampons and footwear be derated, that means that we cannot put an amendment to the Minister that hurleys and other things be derated also, that is nonsense.
The way you drafted your amendment caused this problem.
I insist that this amendment be put; otherwise we in our party will include it in our vote at the end as being composite.
That is the position I am in.
Amendment No. 44 not moved.
Amendment No. 45 in the name of Deputy O'Kennedy. Amendments Nos. 46, 47, 48 and 49 are related.
Amendments Nos. 45 to 49, inclusive, not moved.
I move amendment No. 50:
In page 84, line 2, to delete "paragraph (xvii)" and to substitute "paragraphs (xvii) and (xviii)".
Amendment agreed to.
Amendment No. 51 not moved.
I move amendment No. 52:
In page 84, between lines 19 and 20, to insert the following:—
"97.—Section 89 (2) of the Finance Act, 1983 shall be amended by the substitution of ‘10 per cent.' for ‘18 per cent.'.".
Ba mhaith liom ar an leasú seo cúpla focal a chur leis an méid atá ráite ag an urlabhraí, agus ba mhaith liom cur i gcoinne an méid a dúirt an tAire i dtaobh an "cúpla focal". Sin an rud atá romhainn go léir, na daoine a mhealladh chun an cúpla focal atá acu a úsáid chomh minic agus is féidir.
However, I would ask the Minister to consider this amendment favourably. I ask him to implement the change that we are putting to him that there will be a reduction on hotel room sales or, as they are referred to in the other Act immovable lettings, from 18 per cent to 10 per cent. In asking him to do it I will use his own yardstick. There need not be any loss of revenue to the Exchequer if it is applied in a certain way. The Minister on a previous occasion agreed that tourism is a growth industry and by the end of the century will probably be the world's biggest growth industry. We should be getting ourselves geared up to benefit from the improvement that will take place in that industry. We are out of competition at the moment, particularly because of our hotel costs. I am putting forward a practical proposition which would not only generate revenue here from sales of goods but would also provide a considerable amount of foreign revenue. It would ease the balance of payments considerably and create employment. It has all the trappings of a successful export market and should be treated in a similar fashion to all other export industries.
To regain competitiveness I would ask the Minister to consider changing the VAT rate as it applies to immoveable lettings in the hotel industry. Hotel profits have declined dramatically in recent years. In 1969 it was estimated that profits as a percentage of turnover were about 9 per cent but the figures for 1982, the most recent figures published by Bord Fáilte supported by Stokes Kennedy Crowley in their audit, show profits to be 0.6 per cent of turnover. We read in the same report that in 1982 41 per cent of all hotels made a profit but in the same year 21 per cent broke even and 38 per cent made a loss. If the position is as outlined in that report we will see a serious loss of employment and a loss in the long term of revenue to the State. Bed occupancy during the same period had also reduced considerably. In 1969 it was 44 per cent and in 1982 it was 36 per cent.
During the same period the VAT rate played a very important part in bringing about that dramatic change in fortunes for the hotel industry. In 1969 we had a 2.5 per cent VAT rate but it has now reached 18 per cent. Without those increases hotel prices in real terms would be more competitive than in 1979 and at least as competitive as in 1969.
I would ask the Minister to consider our situation vis-à-vis other industries in other jurisdictions. The average VAT rate on the hotel industry is 9 per cent and in some countries it is considerably lower. For that reason I am proposing 10 per cent for the Irish hotel industry. One instance will indicate how seriously other jurisdictions take this matter. In Belgium they reduced the VAT rate on hotels from 16 per cent to 6 per cent on accommodation only for the purpose of keeping alive their existing hotel structure and generating new business. I am asking that we should do something similar by reducing VAT to about 10 per cent.
VAT rates do not apply to all registered bedrooms but only to hotels and registered guesthouses with a turnover of more than £12,000 per annum. Farmhouse accommodation and other bed and breakfast accommodation is not registered for VAT. The big VAT take comes from hotel accommodation. I am not asking the Minister to consider putting VAT on bed and breakfast operations because it would not be administratively possible but hotels should be protected and given at least as good a chance to operate.
In 1982 about 7.3 million bed nights were registered. Of that total only about 2.1 million were bed nights in hotels and registered guest houses. In 1982 total room sales in the hotel industry were worth about £55 million.
If we had a reduction from 18 to 10 per cent VAT I estimate there would be a loss to the Exchequer of about £4.3 million. It would not be a loss in so far as there are ways and means whereby this VAT reduction would generate extra growth to bring about a positive result for revenue collection. It is suggested in some recent European studies that the price elasticity of demand for tourism services lies somewhere between 1 and 1.6 and I am putting it in between at about 1.3. There would be an increase in revenue of about £5.6 million, giving a VAT return of about £0.5 million at 10 per cent. It is reckoned that there is a direct ratio between accommodation, food and drink sales and that is spelled out quite forcefully in the Stokes Kennedy Crowley report. It works out as follows: 20.3 per cent accommodation, 39.8 per cent food and 34.8 per cent drink. If we had an increase in sales of £5.6 million there should be a food turnover of about £10.9 million and VAT at 23 per cent would bring in about £2.52 million. Of the turnover of £10.9 million about 23 per cent would go in direct wages. With the marginal rate, even at 25 per cent, there would be a considerable revenue from income tax. That kind of money would cater for about 400 new jobs in the hotel industry. Taking into consideration the average cost of paying social welfare benefit to those 400 people, together with their possible contribution by way of tax to the Exchequer, one definitely comes up with a figure in excess of the £4.3 million estimated loss by the reduction of VAT from 18 per cent to 10 per cent. That is leaving drink sales out of the arithmetic.
The Minister said yesterday that he wanted people on this side of the House to indicate how it was proposed to generate this increased activity and how the cost could be met from increased sales. I am satisfied that if he applies the criteria outlined in the Stokes Kennedy Crowley report as to the various ratios and the elasticity in demand for services because of reduction in taxation he will end up in a net profit situation. It would also attract people back from the untaxed accommodation sector which caters for about 5.2 million bed nights as against the 2.1 million bed nights in hotels. There would also be a roll-on effect in other sales as well. This would regain our competitiveness. There is a great price sensitivity in the tourist trade.
If we are to gain the kind of benefit from the industry that is promised to us and being actively promoted by Government spokesmen in the light of new American trade during the next few years, now is the time to make these adjustments. For quite a number of years we have not given proper recognition to the potential of tourism. There is less importation involved in catering for the trade than in any other industry that generates foreign revenue. Money spent yields a better return to the Exchequer than in any other industry. There is a good case to be made for doing something positive to improve conditions for the tourist industry. The means I have isolated would not cost the Exchequer anything over a two-year period. It would move some of the overnight business from the non-tax sector back to the tax sector and generate activity in food and drink sales. It would have a large bearing on the employment situation. The case can positively be established that there would be no loss of revenue to the State.
I commend Deputy Flynn for the way he has presented this case. He has taken me at my word last night. I appreciate that. Last year we reduced the rate of VAT on hotel accomodation from 23 to 18 per cent. This year I have provided for a similar reduction in the rate of VAT on short-term hire of cars, caravans and boats. I am now trying to get a picture of the result for hotel accommodation of the change in the VAT rate last year, to the extent that it can be identified. Deputy Flynn and other Members can conclude that at least my mind is open in relation to the effect of changes in VAT rates in these sectors.
The report to which the Deputy referred deals with the possible reaction of activity to a change in VAT rates. The central point made in the report is the elasticity, the response to a change in prices. Without going into the subject at great length, I have to say that I am not convinced that the figure which the Deputy chooses in the middle of the range of 1.3 is necessarily the correct one, nor am I convinced that it applies all across the board. What I intend doing on foot of the examination which I am carrying out on the reaction to the result of the change last year and looking at what will happen during the course of this year, is to have a special look at the tourist sector within a wider reorganisation of VAT rates, to see whether a better result could not be obtained while protecting the Revenue. In concrete terms, while I cannot agree to do what the Deputy wants me to do now, my mind is open to the kind of analysis which he has put forward.
I appreciate that the Minister has given an indication that he is going to look favourably, if possible, on this measure. Some of the measures are having a beneficial effect, I can vouch for that from on the ground inspection of them, especially the reduction from 23 per cent to 18 per cent. The Minister increased that percentage but after a little pressure it was left at our percentage of 18 per cent. The Minister might consider representations which might be made to him or his colleague, the Minister for Industry, Trade, Commerce and Tourism, concerning VAT rebate on sales of goods through distributors. It would become an embarrassment to the Government if its implementation were attempted by the Revenue Commissioners. I ask the Minister to look carefully into the matter and not make nonsense of what was a very good idea. I say that in all honesty. The Minister has mentioned that he will consider favourably some of the comments, but would he take the initial step of this reduction to 10 per cent VAT?
In view of the time factor, I must indicate that we are prepared to agree to the Ministerial amendments which stand in the Minister's name at this point. I do not propose to move the other amendments. We can take all the amendments in terms of a composite vote, which I suggest that the House take now.
Amendment No. 52, by leave, withdrawn.
Amendments Nos. 53 to 55, inclusive, not moved.
I move amendment No. 56:
In page 97, line 17, to delete "the company" and substitute "a company".
Amendment agreed to.
I move amendment No. 57:
In page 97, line 22, to delete "or director" and substitute", director or employee".
Amendment agreed to.
I am putting the Question: "That the Finance Bill, 1984 do now pass".
The Dáil divided: Tá, 65; Níl, 54.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Carey, Donal.
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael
- (Limerick East).
- O'Brien, Fergus.
- O'Brien, Willie.
- Crowley, Frank.
- D'Arcy, Michael.
- Deasy, Martin Austin.
- Desmond, Barry.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Joe.
- Dukes, Alan.
- Durkan, Bernard J.
- Enright, Thomas W.
- Farrelly, John V.
- Fennell, Nuala.
- Flaherty, Mary.
- Glenn, Alice.
- Hegarty, Paddy.
- Hussey, Gemma.
- Kavanagh, Liam.
- Kenny, Enda.
- L'Estrange, Gerry.
- McCartin, Joe.
- McGahon, Brendan.
- O'Leary, Michael.
- O'Sullivan, Toddy.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Andrews, David.
- Barrett, Michael.
- Brady, Gerard.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Briscoe, Ben.
- Browne, John.
- Burke, Raphael P.
- Byrne, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- 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.
- Gregory-Independent, Tony.
- Harney, Mary.
- Haughey, Charles J.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leonard, Tom.
- McCarthy, Seán.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- MacSharry, Ray.
- Molloy, Robert.
- Moynihan, Donal.
- Nolan, M.J.
- Noonan, Michael J.
- (Limerick West).
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond J.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Tunney, Jim.
- 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.
This Bill is certified a Money Bill in accordance with Article 22 of the Constitution.
The Dáil adjourned at 5.10 p.m. until 2.30 p.m. on Tuesday, 15 May 1984.