Vol. 384 No. 3
asked the Minister for Tourism and Transport if his attention has been drawn to the fact that under the current proposals of the Single European Market the removal of zero-rated VAT status for air and sea transport has been proposed; and the plans, if any, he has to counter the increases in fare prices.
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asked the Minister for Tourism and Transport the action which is planned by his Department and the Department of Finance to avert the serious threat to Irish tourism arising from the proposals by the EC to impose VAT on air tickets and other transport fares.
Under the Commission's proposals to harmonise tax rates, a uniform structure for VAT in all member states is envisaged. There would be two rates — a standard rate in the range 14 per cent to 20 per cent for general application to goods and services, and a reduced rate in the range 4 per cent to 9 per cent for a limited number of items.
At present international passenger transport by sea and air within the Community is zero-rated for VAT purposes. Domestic passenger transport is exempt from VAT. Under the Commission's proposals the reduced rate — that is 4 per cent to 9 per cent — would apply to both forms of passenger transport.
International freight transport by sea and air is also zero-rated for VAT purposes at present and it would be subject to the new standard rate, that is 14 per cent to 20 per cent. In the case of domestic freight, the current VAT rate of 25 per cent would be reduced to the new standard rate "A".
Decisions have not yet been taken on the Commission proposals because in relation to the package of proposals for harmonisation of indirect taxes generally, it will be necessary to proceed in a planned, pragmatic and realistic manner. Only when member states have assessed the financial, budgetary, economic and social implications of the measures for them, and the practical consequences for their economies and national budgets will decisions be taken. Detailed negotiations on the package are taking place in the EC Council of Finance Ministers.
Several participants in my recent European Conference on Tourism and Transport referred to the adverse effect which the Commission proposals for imposing VAT on access transport fares would have on their enterprises and on the tourism industry generally. I am, therefore, very much aware of the views of the transport and tourism sectors and he Deputy can rest assured that these views will be taken fully into account. The Minister for Finance will be pressing strongly in the Council of Ministers to ensure that the maximum consideration is given to the particular difficulties faced by Ireland as a peripheral member state and that appropriate Community solutions are developed to offset the particular problems which the package as a whole poses for Ireland. I will be monitoring developments very closely with a view to ensuring that access transport costs to Ireland are maintained at the most attractive levels possible.
I thank the Minister for his comprehensive reply. In view of the island status of this country, will the Minister take into consideration the fact that half of our tourists come to this country by air? In Europe only 3 per cent of tourists travel to different countries by air. I understand that a crucial meeting on this topic will be held in December. In view of the crisis effect that this would have in the undoing of access cost reductions to Ireland, will the Government and the Minister in particular consider asking for a derogation from this new VAT rate?
I am aware of the importance of the meeting in December. There are two meetings, one on transport and the other on tourism. We are not the only country affected and not the only peripheral country affected. At the moment we are in consultation with the Portugese and the Greeks with a view to ameliorating this problem.
May I ask the indulgence of the House in dealing with the remaining priority question in the name of Deputy Hussey?
