asked the Minister for Finance if he will give details of the amount of VAT collected from the 10 per cent VAT rate on the construction industry for the 12 month period after the introduction of the 10 per cent rate; and if he will make a comparison with the amount collected for the previous 12 months.
Ceisteanna—Questions. Oral Answers. - Construction Industry VAT.
7.
The information requested can be furnished only in the form of estimates derived from non-Revenue statistical data. The 10 per cent VAT rate was introduced generally on 1 March 1985. In the case of new private housing the introduction was deferred until 1 May 1985. On the basis of the latest data, the information sought is as follows:
|
Estimated VAT yield for period |
|
|
£m. |
|
|
1 March 1985 — 28 February 1986: |
103. |
|
1 March 1984 — 28 February 1985: |
56. |
Do the figures referred to by the Minister refer purely and simply to the construction industry, that is tax paid on actual construction, or do they also include any purchase of materials?
They would apply only to the area to which the new 10 per cent rate was applied against the previously existing rate.
I take it then that they include a significant amount of purchase of material. In that light may I put it to the Minister that the extra revenue which has been generated from the increase in tax is insignificant when compared with the revenue loss the Exchequer has had to bear and which is being caused by the downturn in the construction industry, a downturn that has been based directly on the increase in this taxation, and that therefore the increase was a retrograde step?
I am afraid I cannot agree with the Deputy. The decline in the level of construction is due primarily to a decline in the level of demand, a decline in the ability of people to buy new housing. Of a 7 per cent decline it has been estimated that only 2 per cent is attributable to the VAT increase and that the rest is due to demand factors which would have applied regardless of whether the VAT change had been made. I am sure the Deputy will agree that the level of yield as a result of the increase in rate has been quite substantial. If that yield had not been obtained the Government would have been forced to look at other sources for taxation. I am sure the Deputy will agree that there are not many such sources available.
An ceád ceist eile.
Let me put it to the Minister that the yield from construction, not materials, is about £30 million and, from the best estimates available to us, the loss to the Exchequer as a result of that increase is about £100 million. My final question is: is the Minister not accepting that what I am saying is correct by handing back some of that money in the new grant announced recently? Is it not correct that the Minister has increased, by £2,100, the cost of a £30,000 house by increasing VAT from 3 per cent to 10 per cent since he came into office? He has increased the cost by £2,000 with one hand and he is now handing back £2,250 with the other.
I have allowed the Deputy a long question but that is a speech.
That is an admission of the folly of this tax. It is red tape and bureaucracy to hand out money with one hand and take it back with the other.
It is not only a speech but specious arithmetic. If the money is being handed back as the Deputy said, then it is not lost to the construction industry. The Deputy cannot have it both ways.
It was lost for three years.
Deputy Fahey is attempting to mislead people.
Where is the point in putting on a tax and then giving it back and involving people in red tape, bureaucracy and more expenditure?
Furthermore I wish to point out that in regard to the Government assistance towards the reconstruction of houses, the Government are generating a very substantial proportion of private investment, perhaps two and three times as much as the Government are spending, which makes this house improvement scheme a very cost effective form of support by the Government to the construction industry who are getting much more value for money than they would have got from the type of projects which were advocated by the Deputy's party.
It is no wonder the country is the way it is with that kind of reply.