asked the Minister for Finance whether his Department has established any special unit or group to consider the revenue implications for Ireland of the Single European Act; and if he will make a statement on the matter.
10.
Ceisteanna—Questions. Oral Answers. - Single European Act.
3.
asked the Minister for Finance whether it is his proposal to publish a Green Paper or White Paper on the implications for excise revenue of the coming into effect of the Single European Act; and if he will make a statement on the matter.
11.
asked the Minister for Finance the steps, if any, which have been taken or are being taken to harmonise VAT and indirect taxes in line with EC requirements; and the likely effects on costs and wages within this country.
28.
asked the Minister for Finance whether his Department propose to publish and circulate a Green Paper or White Paper on the approximation of VAT rates in the context of the Single European Act; and if he will make a statement on the matter.
I propose to take Questions Nos. 3, 10, 11 and 28 together.
The European Commission's proposals for indirect tax harmonisation will be the subject of detailed discussion and negotiations among the member states. This process is at an early stage and it is not possible at this point to predict the final form the proposals will take. Appropriate steps will be taken as matters advance to inform the public generally and trade and other interest groups which may be affected by the developments. The possibility of a Green or White Paper on the subject is not ruled out but is not planned in the immediate future.
As I have indicated in response to an earlier question in the House, it is clear that the proposals as they stand would create very significant budgetary problems for us due to the loss of Exchequer revenue which would be involved in their full implementation. A working group of officials from my Department and the Office of the Revenue Commissioners was established to work out preliminary revenue implications of the proposals. They put the revenue loss at approximatly £470 million in the first year and £350 million annually thereafter. Some means of mitigating such a serious revenue loss will have to be found in the Community discussions.
The implications for costs and prices in this country will depend on the final shape of the package as settled by the Council of Ministers.
(Limerick East): Will the Minister inform us what single rate of VAT would apply if the Government were forced by circumstances in the EC to move to a single rate?
VAT rates will be approximated within a two-tier system. Standard VAT rates of each member state will be in the range of 14 per cent to 20 per cent. There will be a reduced rate in the range of from 4 per cent to 9 per cent but, probably more important from my point of view, the zero rate at present operated by Ireland and the UK will then disappear. They are the proposals for consideration and we are at an early stage in our negotiations. We must negotiate our way through to the end.
(Limerick East): On the basis of the Minister's research, is he able to say if there would be a revenue loss if we had a standard rate of 18 per cent in Ireland, together with a lower rate of 8 per cent to 9 per cent, on all items which are exempt at present?
Is the Deputy including VAT on food?
(Limerick East): The Minister has said there will be no exempt items in Ireland or the UK.
That is what the Commission have proposed.
(Limerick East): I am asking the Minister to tell us the calculations of the Department of Finance on a two-tier rate of VAT as it would apply here to maintain the present revenue flow. Has the Minister a figure?
I do not have such a figure. I was giving the Deputy the revenue losses on the basis of what is proposed, taking the upper figures of 20 per cent and 9 per cent.
(Limerick East): Is it the policy of the Government to seek a fiveyear derogation which would put this decision back from 1992 to 1997?
We will be looking for favourable changes in the Commission's proposal and for special consideration to be given to Ireland because of the difficulties we would face. There is no way, now or in the foreseeable future, that the Exchequer could do without £470 million in one year and £350 million on an annual basis thereafter. Something will have to give in between. A number of methods could be considered such as broadening the tax base elsewhere, further reductions in public expenditure, a direct contribution from the EC budget to the Exchequer or favourable changes in the Commission's proposals plus, as the Deputy has suggested, derogation. However, I do not think derogations will work in the future. When difficult discussions are taking place during the night at EC level member states often decide, for the sake of getting an agreement, to give a derogation to another member state for one year. However, it is very difficult to have derogations renewed for a second year. We should during the negotiations finalise the regime we are going to live under for years from 1992 onwards.
I apologise for being late, a Cheann Comhairle. Would the Minister agree that to publish a very substantial discussion document on the implications of VAT and on its rates would inform public discussion? At the moment, for instance, the idea of putting VAT on food is so frightening a prospect to many politicians that it cannot even be discussed, whereas at least if there were a document in which its implications were set out there would be more rational debate. Has the Minister any proposal to produce either a White Paper or a discussion document so that the public debate will not be conducted on the basis of prejudice alone?
As I said in reply, the publication either of a White or a Green Paper has not been ruled out. We shall ensure that the public, the trade and all concerned will be fully informed. Whether it will be through that mechanism or not remains to be seen. At the moment there are no immediate plans for that. However, if the need arises the issue has not been ruled out.
Could the Minister at this stage give the House the Finance estimate of the application of the 4 per cent VAT rate to those items currently on zero rating?
I do not have that information, but I can get it for the Deputy. I shall have the information later on concerning questions relating to basic food items, not at 4 per cent but at other percentages.
That is at the 25 per cent rate.
I think it is 10 per cent, 15 per cent and 25 per cent that are mentioned in a question. I do not have the details, but I shall get them for the Deputy and send them to him.