asked the Minister for Defence if he will outline the amount of VAT paid by his Department annually since VAT was initiated.
Ceisteanna—Questions. Oral Answers. - Department VAT Payment.
7.
As separate records are not maintained in my Department of the amounts of value-added tax related to payments to contractors for the supply of goods and services the information sought by the Deputy cannot be made available.
I am very disappointed that we have not got the information available. I know that is not the fault of the Minister but of the system. Would the Minister agree that we are the only state in western Europe, and maybe further afield, whose Army has to pay VAT on its purchases?
That is another question.
This is the Minister for Defence who has responsibility for defence matters and the fact that VAT is imposed on purchases within the Department of Defence deprives the Minister of resources and facilities that would be available if VAT was not imposed. Would the Minister agree that that is a major impediment to providing proper equipment and assistance for our Army. Will he appeal to his Cabinet colleagues to see if this VAT could be removed from Army purchases?
I am not prepared to comment on whether we are the only country in western Europe who apply VAT to military goods.
There are two factors involved. The first is that since the inception of the VAT system, VAT has been applied to a variety of goods including military goods and other goods and services in areas in which a case as strong as a case for military services could be made. However, I should like to see the VAT element removed. We have been talking to the Revenue Commissioners on this issue and the advice we have got is that because of EC restrictions we would not be allowed introduce a zero VAT rate on any particular type of commodity, including military goods. Let me also point out that it does not necessarily follow that if there is a zero VAT rating for any purchase of goods, such as military goods, that there would be more money available to buy more goods. One must remember that the State would have that much less in revenue. So it is a Catch-22 situation. I know it is a circular transfer but that is the system and it applies in other areas also. Apart from all that there is the definitive EC restriction which prohibits the introduction of zero VAT rating.
Would the Minister agree that VAT is eating into a lot of the financial resources available to his Department? I submit that VAT on purchases within his Department is basically a transfer of resources. Since we are a neutral country, could the Minister, through his Cabinet colleagues, make a special application for special exemption for Ireland, on the basis that we are a neutral country and not involved in any alliances, to de-rate the VAT charges on military purchases here?
We have been in touch with the Revenue Commissioners and the Department of Finance on this issue and we have backed up our case by mention of our neutrality. So far we have failed to break down their defences, if the Deputy will excuse the pun, but I have no qualms about making a further effort to see what can be done.