Before proceeding with the discussion generally, I wish to inform the House that I will be introducing an amendment on Report Stage to correct a very minor error in Part V of the Third Schedule.
Finance Bill, 1986: Committee Stage (Resumed).
Question again proposed: "That section 60 stand part of the Bill."
This is out of order.
It relates to the designation of an inner city area.
The Minister should do it in proper order.
It is done now.
Question put and declared carried.
Sections 61 to 67, inclusive, agreed to.
SECTION 68.
Question proposed: "That section 68 stand part of the Bill.
As announced in the budget, the duty on motor vehicle parts and accessories is being phased out. The sum of £0.5 was provided in the budget to cover the cost arising from this. The reduction is consistent with the Government's policy of reducing the cost of spare parts to provide more employment in the repair sector of the industry and prolong the life of motor vehicles by encouraging replacement of defective parts rather than replacing the vehicle itself with a new imported vehicle. This provision is reasonable. It is giving encouragement to the repair sector of the motor industry, which has the highest relative degree of Irish labour content.
Question put and agreed to.
SECTION 70.
Question proposed: "That section 70 stand part of the Bill."
Many of the sections we have been dealing with are interrelated. This section proposes to increase the excise duty on mechanically propelled vehicles. I would like to make some general points to the Minister. This is a very considerable increase. Perhaps the Minister could indicate what the comparable levels of excise duty on cars in 1982 were in respect of the horsepowers mentioned in this section. It is important that we should be able to compare the current level with the level that operated in 1982 before this Government took responsibility. I do not suppose that this question takes any one by surprise and I am quite sure those figures are available.
There is a need for a reduction in the excise duties on cars. From July next the repair and maintenance of all types of moveable goods will attract the low rate rather than the standard rate of VAT, and that applies to all types of moveable goods. Significantly, in respect of other goods, there is no requirement as seems to be applied to the motor trade to make self-financing arrangements, as was asked of the motor industry in 1983. In last year's budget the motor industry was given a concession of a reduction in the excise duty on spare parts of from 25 per cent to 10 per cent. The concessions cost the Minister approximately £3 million, but he gained about £10 million from the increase of 4½ per cent on the excise duty in 1983. The excise duty on spare parts was unique to Ireland, in any event; we are the only country in the EC that has excise duties on spare parts. This would be scheduled for removal in any event because the EC do not like it and they will be moving to get harmonisation in that area. Also, it adds to the issue we have been discussing, the Border difficulties and the discrimination in terms of trade as between traders on this side and those on the other side.
I would like to give some figures to back up the case I would make that the excise duty reductions which are now required to offset the 4.5 percentage increase in the excise duty of 1983 would be of the order of 1.8 per cent, as the duty is now calculated on the recommended retail price inclusive of duty and VAT, whereas in 1983 it was calculated on the wholesale price. For that reason a reduction of 1.8 per cent, which is not a major reduction and that is why we have carefully moderated the proposal we are making, would bring the excise duty to 19.9 per cent for cars up to two litres and 22.9 per cent for larger cars as distinct from the levels the Minister is now proposing, and an excise duty of that order is still very much higher than any that operates elsewhere.
There are other facts that underline the need for the Minister to adopt a much more sensible approach to the whole taxation of the motor industry. We dealt with hydrocarbons this morning.
Is the Deputy talking about section 69 or section 70?
I am talking about excise duty on mechanically propelled vehicles.
There is purchase tax and there is road tax.
I am not going to delay on this. I just want to make the argument, because they are all inter-linked. When the Minister replies we will see what progress we have made. New car registrations have dropped dramatically in the last number of years. I have the figures here. It is important that we record these and the impact they are having on unemployment in the trade generally. In 1981 about 106,000 new cars were registered here. In 1982 that figure dropped to 72,800. In 1983 it was 60,800. In 1984 it was 56,451 and, as far as I can ascertain, in 1985 there was a slight rise to approximately 60,000. But since 1981 new car registrations overall dropped from 106,000 to 60,000. That demonstrates the impact of taxation generally, whether we are talking about excise duty on cars or excise duty on hydrocarbons.
Let us compare that with the position in the North. No one would claim that the North has a very healthy economy. For obvious reasons it is anything but a thriving economy. Nevertheless, new car registrations in the North increased from 44,427 in 1981 to 68,627 in 1984. By 1984 it was well in excess of the total numbers being registered here, from a time when car registrations were less than half what they were here. If that is not a dramatic indication of the impact of taxation on cars and hydrocarbon oils and on the motor industry generally, I cannot think of anything else that is. To put it another way, excise duty and VAT in the Republic for cars up to two litres represents a 72 per cent increase on the pre-tax price and on large cars an 81 per cent increase on the pre-tax price, whereas in the North it is a 25 per cent increase on all cars. What we are seeing here is another example of what we were arguing about before lunch, the decimation of that industry as evidenced by all the facts, reduced consumption, reduced revenue and, most important of all, the fall-off in the numbers employed in this very labour intensive activity, the motor trade itself. Since 1980, 9,000 jobs have been lost in the retail motor trade — the figure dropped from 24,000 to 15,000 — and up to 300 retail motor trade outlets have closed completely. Most of those remaining have had to trim employment levels to an average of two-thirds of their 1980 labour force, and in some cases to one-half.
There is another way of confirming what I am saying and that is to look at the number of total registered apprentices. I have given the figures for employment tax and consumption generally, but let us look at the impact this has had on total registered apprentices. In 1980, there were 4,339 registered apprentices in the motor trade; in 1981, there were 3,546; in 1982, 3,236; in 1983, 2,842; in 1984, 2,552; and in 1985, 2,450. I do not believe there is anything I can add to those figures. This is a classic example of the legal principle res ipsa loquitur, the facts speak for themselves. Even at this late stage, the Minister should acknowledge those facts and do something about them. It is not enough to say that taxes are high. The only man who can do anything about this is the man I am addressing now. I hope I have got through to him in some way and I await his response.
The Minister is only able to make reductions in taxes to the extent of the financial means available to him. To suggest, as is often the case in newspaper headlines and in superficial comment, that the Minister simply by an act of will or by getting a bright idea in the middle of the night has the ability to reduce taxation is to suggest powers which Ministers simply do not have. Ministers have to deal with realities and for Deputy O'Kennedy to personalise it and to look at me in a meaningful way and say all I have to do is say the word and taxes will be reduced, is to promote a naive view of politics which even Deputy O'Kennedy does not believe. The reality is that I can only reduce taxation in one of three ways — reducing expenditure, increasing taxes or increasing borrowings, and none of those options is open to me for reasons which the Deputy understands.
I do not share his sense of upset at the fact that the sales are down of new imported motor cars, to whose manufacture Irish people have contributed little or nothing and which have created few or no jobs in the manufacturing process in Ireland. The sale of new motor cars is the only imported product which has succeeded in being politically promoted by the Opposition in this House. People do not come in here looking for tax reductions on most imported goods——
That is not true.
Bemoaning the reduction in the sales of new cars or looking for tax reductions to increase the sales of new cars shows that Deputy O'Kennedy is engaged in an import promotion campaign. I do not believe there is any merit in promoting increased sales of new imported Japanese, American, British or German cars. We should try to prolong the life of existing cars, and try to adjust the existing car fleet by whatever means possible to ensure that we use less imported fuel. Remember the motor car is a service, but it does not contribute to our national wealth. We do not produce the fuel for the motor car; nor do we produce the motor car.
What does the Minister want us to do? Does he want us to return to the ass and cart?
I do not see any purpose in changing our tax system artifically to promote the sale of an imported product.
This is outrageous. The Minister has a car, if not two cars.
Even accepting for the sake of argument Deputy O'Kennedy's thesis——
How many cars are there in the Bruton family?
My preference would always be to buy a second hand car because I do not believe in buying a new car and giving employment overseas. I believe second hand cars are better value. If the Deputy wants to know something about my personal preferences, which are irrelevant——
This has nothing to do with the section.
That is my view, for what it is worth. There is a tendency to want a new car when a second hand car would be just as good and when keeping and repairing the old car would be even better, because then one would be giving employment to mechanics rather than employing machines in Japan——
Even if they are dangerous? The EC said that after three years cars should be disposed of.
Deputy O'Kennedy referred to Northern Ireland. I will read a quotation which he will enjoy, and perhaps even Deputy Mac Giolla will enjoy it from the point of view of its irony. This statement was made by a Conservative Member of the present British Government, who was the holder of the Northern Ireland Office. Speaking of the United Kingdom he said Northern Ireland was the part of the United Kingdom which had the largest number of BMWs on the road and the largest number of unemployed people in any part of the United Kingdom. I do not believe there is any great case to be made for comparing this part of Ireland with Northern Ireland. They do not produce cars either and yet they seem to spend more of their money importing motor cars than we do. We have a more sensitive situation in that we try to prolong the use of our existing fleet of motor cars rather than importing new ones.
I am glad to say that in this budget, and on the last occasion I had the opportunity to introduce a budget in January 1982, we took steps to reduce the rate of excise and tax duties. That was such a good budget that it was carried on by my successor, Deputy MacSharry. While many people look back on that budget from one viewpoint, another important aspect is that 90 per cent of its contents won not only the support of this side of the House, but was subsequently adopted by Fianna Fáil when they came into office. No budget ever achieved such a degree of unanimity of support in practice, if not in oratory, than that budget.
Ask Mr. Kemmy.
He did not get back to the Dáil after voting against it.
We are on section 70, not the 1982 budget.
The point I am illustrating is that in that budget, as in this Finance Bill, I and my colleagues reduced the level of duty on motor vehicle spare parts and we continued to reduce the level of taxation on motor repair services deliberately encouraging people not to buy new cars but to prolong the life of their old cars. Rather than having a new car as a status symbol, I would like to see the ability to conserve one's car in good, safe, working order for as long as possible, as a new status symbol. I realise from the Japanese or German point of view that would not be a particularly good recommendation, but from the point of view of the Irish economy with its productive capacity, rather than boasting about the number of new cars we are selling we should be boasting about the extent to which we have been able to extend the life of our existing car fleet on a safe basis. I make no apology for the taxation on the sale of new cars. I would far prefer to see any tax concessions that can be given, given in such a fashion as to prolong the life and promote the energy efficiency of the motor vehicle fleet we have for the sake of the balance of payments and employment.
I regret that the Minister has responded not with the facts he quoted but in the tone that he used. I refrained from making any personal allegations of any nature——
I made no personal allegations.
——and I refrain from going into the general arguments that he brings up every single time on every proposal, debt, public expenditure or taxation. Take the lecture that was delivered. We have heard on it every proposal we have made. I simply drew the Minister's attention to facts. I do not want the Minister to get away with the suggestion he made that I was part of a politically motivated campaign——
I did not say that.
He said it was a politically motivated campaign.
Let me interrupt to say that I intended to make no personal references to the Deputy. All I said was that there is a tendency in this House to make the case for new car sales which, unfortunately, Deputy O'Kennedy seems to share, but I make no personal reflection on him.
I must acknowledge that in the past 12 months and in particular the past six months I have had representations from every industrial service and sectoral interest in this country. I will give the Minister the point that I have had numerous representations from the motor trade, the drinks industry and every sector of activity trying to convey to me as spokesman on Finance the serious state of their industry. Many of the facts I have brought forward in the course of this debate were presented to me by the various interest groups. That they feel it so necessary to disclose all of this to a spokesman for the Opposition is evidence that they feel they are in a desperate state. It is evidence of the impact which we see in unemployment, in reduced revenue and in the decimated state of the motor industry. I am amazed to hear the Minister suggest that what I am proposing in this is that the Irish people go into an insane whirl of purchasing cars, that they will all go out buying new cars at a rate they and the country cannot afford. I made no such suggestion. I think the Minister will take it that it is accepted that a car is a necessary element for most people at this stage.
Not necessarily a new car.
Particularly in rural Ireland cars are needed to get people to their work and so on. I do not suppose the Minister is suggesting that we go back to the ass and cart. We are living in a modern environment.
No, but we do not always need new cars.
If in 1981, 106,000 new cars were registered and that number had reduced to 60,000 in 1985: (1) there is an unduly dramatic decline in the number of new cars; and (2) in the Minister's former role as Minister for Industry, Trade, Commerce and Tourism he would have faced up to what the Road Safety Association pointed out, that one of the major causes of the heavy rate of serious accidents on our roads is the fact that our vehicle stock is defective and much older than that in other countries. Cars are in a bad state of repair. How often do we hear that from the Road Safety Association? The figures I have presented here demonstrate the extent of the decline in the industry, the drop in the number of new cars, the drop in employment and the drop in revenue as a consequence of the level of duty imposed. Let me add the increase in the accident rate which is recognised by the Garda and everybody. If the Minister is not disposed to accept my proposal I must live with that, but we do not need to go into general argument.
Of course we must try to ensure that our cars are in good and safe working order, but in many cases our existing stock of cars is not properly maintained by the owners. Vehicles are allowed to fall into a poor state of repair frequently with neglect of the servicing of the cars and hence the neglect of an opportunity to create employment here. My fiscal policy regarding motor cars is to do everything possible to encourage people to maintain existing cars in good working order and prolong their life rather than take the superficially easy but ultimately more damaging option of buying new cars. There is a tendency to see a new car as some sort of status symbol. It should not be seen in that light. The aim should be rather to encourage the prolongation of the life of our existing car stock.
Question put and declared carried.
Sections 71 and 72 agreed to.
SECTION 73.
I move amendment No. 59:
In page 69, before section 73, to insert the following new section:
"73. —Section 1 of the Principal Act is hereby amended by the insertion in subsection (1) after the definition of `footwear' of the following definition:
"`free port" means the land declared to be a free port for the purposes of the Free Ports Act, 1986 (No. 6 of 1986), by order made under section 2 of that Act;'.".
This amendment is consequential on the enactment of the Free Ports Act, 1986, and the inclusion by amendment No. 64, which we will reach soon in section 82, of provisions for applying zero rate to certain free port transactions.
The amendment proposes an insertion after the definition of "footwear" in section 1 of the Principal Act. Let me recall the difficulty the Minister had in the definition of "footwear" four or five years ago which led to you, Sir, having to tramp the roads of North Tipperary in circumstances and at a time that you did not think you would have to.
I like to recall the fact that, were it not for that event probably the Deputy and Deputy O'Kennedy would be on this side of the House and I on that side. As a result of that event and the consciousness it brought to people's minds of the problems facing the country and the difficulty it was in, the present Government were returned resoundingly in November 1982, are here still and will be here for many years to come.
Amendment No. 72 is consequential on amendment No. 60 and she may be discussed together by agreement.
I move amendment No. 60:
In page 69, to delete line 20.
Amendment agreed to.
NEW SECTION.
I move amendment No. 61:
In page 69, to delete lines 37 to 43, and in page 70 to delete lines 1 to 30, and substitute the following:
"(c) in subsection (6)—
(i) by the insertion after paragraph (c) of the following paragraph:
`(d) in confirmation of the provisions contained in the Value-Added Tax (Place of Supply of Certain Services) Regulations, 1985 (S. I. No. 343 of 1985), which regulations are hereby revoked, the place of supply of services consisting of the hiring out of movable goods by a person established outside the Community shall be deemed to be the place where the movable goods are, or are to be, effectively used.',
and
(ii) by the substitution of the following paragraph for paragraph (e):
`(e) The place of supply of services of any of the descriptions specified in the Fourth Schedule, with the exception of services of the description specified in paragraph (ia) of the said Schedule supplied by a person who has his establishment outside the Community, shall be deemed, for the purposes of this Act, to be—
(i) in case they are received, otherwise than for a business purpose, by a person whose usual place of residence is situated outside the Community, the place where he usually resides,
(ii) in case they are received, for the purposes of any business carried on by him, by a person—
(I) who has his establishment outside the Community and has not also an establishment in the Community, or
(II) who has his establishment in the Community but does not have this establishment or, if he has more than one establishment, his principal establishment in the country in which, but for this subparagraph, the services would be deemed to be supplied,
the place where he has his establishment or, if he has more than one establishment, the establishment of his at which or for the purposes of which the services are most directly used or to be used, as the case may be,
(iii) in case they are received, for the purposes of any business carried on by him, by a person resident in the Community who has no establishment anywhere, the place where he usually resides,
(iv) in case they are received by a department of State, by a local authority or by a body established by statute, and are supplied—
(I) by a person who has his establishment outside the Community and has not also an establishment in the Community, or
(II) by person who has his establishment in another Member State of the Community, in circumstances in which value-added tax referred to in Community Council Directive No. 77/388/EEC is not payable in that Member State in respect of the supply,
the State,
(v) in any other case, the place specified in subsection (5) that is appropriate to the circumstances.'.".
This is merely a technical amendment and that is all I propose to say.
Amendment agreed to.
Question proposed: "That section 73, as amended, stand part of the Bill."
This section deals with major changes in VAT and I can only deal with two or three illustrations here. We have only nine more minutes in which to discuss this and therefore I propose to make general comments on the level of VAT charges and to listen to what the Minister has to say. I want to illustrate our case by giving two example. One is the building industry and the other refers to hurleys and the continuing imposition of VAT. Hurleys are an essential part of our native game and, as the Minister acknowledged in a reply to me some time ago that he does not know how much is yielded by VAT on hurleys, I ask him to accept the assertion of the Gaelic Athletic Association that it is a major burden on them, particularly in providing hurleys for young people. Hurling is a healthy outlet for young people and it is time that hurleys were exempted from VAT. When I was in the Ministers seat I increased the grant to the GAA by twice the estimated cost of VAT. If the Minister cannot remove VAT he should consider following my example in 1980 which would make him welcome in every village community throughout the country.
It would be welcomed at the Munster final.
Yes, and the Minister would see Tipperary coming back to greatness. It is essential to remove VAT on hurleys, not just for the sake of the GAA but for the sake of healthy community life.
As a consequence of the imposition of 5 per cent VAT on the building industry 40,000 people are unemployed. That is an enormous number of people in what is in every sense a domestic industry and the domestic characteristics of this industry far outweigh any other. All its employment is domestic and almost all of the input is also domestic. There has been a cutback of £18 million on the capital programme, with all the consequences we have seen for employment in this major, labour intensive industry. We know that money does not grow on trees, but it is much better to put it into productive use in regard to road maintenance, house construction, industrial and hotel construction, anything which will generate activity in the economy. The return from the building industry is perhaps the best we will get; and it is regrettable to note that cement sales to the end of April this year, compared to the same period last year, which was disastrous, were 17 per cent down on the previous four months. This is mainly attributable to the effect of VAT as the public cannot afford to pay it and many builders simply cannot absorb it. A gentleman from a major firm came to tell me — not to complain — the extent of the drop-off in investment by them in this country. This is one of the biggest companies and 80 per cent plus of their investment programme is outside the country to maintain, as he put it, the 20 per cent skeleton at home. I do not want to name firms in the construction industry but I have met all of them recently——
I know the firm to which the Deputy is referring.
I do not think that the Minister knows as I had never met this man before although I know the family. I am not referring to McInerney's——
I know.
I will mention all the big names and the Minister can take his choice, Cramptons, Sisks and John Paul. Their only basis of survival these days is by transferring their investment programmes outside the country. It is time we stopped that nonsense because we cannot afford to have their money reinvested outside the country or to have employment generated in another state while unemployment continues to grow here. Grants can only assist in a small way and the only thing that might help would be to lift the extra burden of VAT which the Minister's predecessor imposed. Perhaps we can discuss this further on Report Stage.
I join in this very sincere plea to the Minister to remove VAT from hurleys, since he is not even aware of the amount taken in. There are hurling clubs in every parish in Ireland and we are trying to keep young people involved in their national games so that they will not resort to vandalism. We should encourage them to play hurling and the Minister would perform an excellent service, particularly for rural areas, if he removed VAT on hurleys. The GAA are our greatest national organisation and, in recognition of what they have done for half a century for young people, the Minister should be courageous and remove the VAT. It is unfair and unjust and is preventing young people from purchasing hurleys to develop great skills which all parties should be encouraging. If he removed this imposition, the parents in rural areas would be grateful to him forever——
He would make a big name for himself? This is his big chance.
I should like to join in the plea to the Minister to remove VAT on hurleys. Deputy Flanagan made a very good case in this regard and the Minister should heed our calls.
I will be considering this matter with a mind to the people of Kilmessan, Killine, Dunboyne and a number of other places in County Meath where hurling is very strong. Naturally, I will consider the case which has been made quite eloquently by Deputy O'Kennedy and Deputy Flanagan on this matter. I regret that it is a bit late to be considering it just now.
Will the Minister consider it between now and Report Stage?
Question, "That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill, the Bill, as amended, is hereby agreed to, and, as amended in Committee, is reported to the House", put.
The Dáil divided: Tá, 69; Níl, 63.
Tá
- Allen, Bernard.
- Barnes, Monica.
- Barrett, Seán.
- Barry, Myra.
- Begley, Michael.
- Bell, Michael.
- Bermingham, Joe.
- Birmingham, George Martin.
- Boland, John.
- Bruton, John.
- Bruton, Richard.
- Burke, Liam.
- Carey, Donal.
- Collins, Edward.
- Conlon, John F.
- Coogan, Fintan.
- Cooney, Patrick Mark.
- Cosgrave, Liam T.
- Cosgrave, Michael Joe.
- Coveney, Hugh.
- Creed, Donal.
- Crotty, Kieran.
- D'Arcy, Michael.
- Deasy, Martin Austin.
- Desmond, Eileen.
- Donnellan, John.
- Dowling, Dick.
- Doyle, Avril.
- O'Keeffe, Jim.
- O'Leary, Michael.
- O'Sullivan, Toddy.
- Pattison, Séamus.
- Prendergast, Frank.
- Quinn, Ruairí.
- Ryan, John.
- Dukes, Alan.
- Enright, Thomas W.
- Farrelly, John V.
- Fennell, Nuala.
- FitzGerald, Garret.
- Flaherty, Mary.
- Flanagan, Oliver J.
- Glenn, Alice.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Kelly, John.
- Kenny, Enda.
- L'Estrange, Gerry.
- McGahon, Brendan.
- McGinley, Dinny.
- McLoughlin, Frank.
- Manning, Maurice.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Naughten, Liam.
- Nealon, Ted.
- Noonan, Michael. (Limerick East)
- O'Brien, Fergus.
- O'Brien, Willie.
- Shatter, Alan.
- Sheehan, Patrick Joseph.
- Skelly, Liam.
- Taylor, Mervyn.
- Taylor-Quinn, Madeline.
- Timmins, Godfrey.
- Yates, Ivan.
Níl
- Ahern, Bertie.
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Mattie.
- Brennan, Paudge.
- Brennan, Séamus.
- Browne, John.
- Burke, Raphael P.
- Byrne, Seán.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Cathal Seán.
- Cowen, Brian.
- Daly, Brendan.
- De Rossa, Proinsias.
- Doherty, Seán.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Fitzgerald, Liam Joseph.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hilliard, Colm.
- Hyland, Liam.
- Keating, Michael.
- Kirk, Séamus.
- Kitt, Michael.
- Lenihan, Brian.
- Leonard, Tom.
- Leyden, Terry.
- Lyons, Denis.
- McCarthy, Seán.
- McEllistrim, Tom.
- Mac Giolla, Tomás.
- Morley, P. J.
- Moynihan, Donal.
- Nolan, M. J.
- Noonan, Michael J. (Limerick West)
- O'Connell, John.
- O'Hanlon, Rory.
- O'Keeffe, Edmond.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Malley, Desmond J.
- Ormonde, Donal.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Treacy, Noel.
- Walsh, Joe.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael.
- Wyse, Pearse.
Tellers: Tá, Deputies F. O'Brien and Taylor; Níl, Deputies V. Brady and Browne.
Question declared carried.
When is it proposed to take Report Stage?
Tuesday next.
Is that agreed?
Report Stage ordered for Tuesday, 13 May 1986.