asked the Minister for Finance (a) the total amount of VAT accruing to the Exchequer in respect of the last full year for which the information is available, from the baking and confectionery industry (b) the estimated cost of a reduction of 50 per cent in the coming year.
Ceisteanna—Questions. Oral Answers. - Confectionery Products VAT Yield.
9.
The VAT yield for 1988 from confectionery products, including sugar confectionery, chocolates and sweets, is estimated at £89 million. The estimated cost of reducing the rate on confectionery generally by 50 per cent would be about £46 million in a full year.
May I ask the Minister, in view of the general theme of harmonisation in anticipation of 1992, whether he can foresee any changes taking place in the level of VAT charged at present to the baking industry?
The question of harmonisation of taxes within the European Community in preparation for the single market in 1992, is one in which there is a wide divergence of opinion as to what each member state would like to see in place. I could not even contemplate to judge at this stage what rates might be eventually agreed. I would remind the House that a new word has come into this whole discussion and that is the approximation of taxes. I have attended only one meeting since becoming Minister for Finance and I will attend another in the next two weeks. It has been mooted there that priorities should be given to harmonisation of investment tax. It would be very early days for me to speculate as to what VAT rates there might be at the end of the day. Basically, that is the reason I took no steps in last week's budget to move along that road and do not intend to do so until the position is crystallised somewhat.
I wish to ask two supplementary questions. I understand Deputy Durkan's question to relate to the fact, if we are to believe the submissions received by Members of this House, that there is a very large thriving black market in VAT-free confectionery and baking. This is undermining the possibilities of the registered traders in this area. I notice that the Minister's Estimate takes no account of any buoyancy by means of taking on the black market. It seems to go in the opposite direction — the more that is given away in tax, the higher the proportion of VAT not recovered. The Minister seems to suggest — and I want to know if this is Government policy — that there is nothing to be said about VAT harmonisation because the matter is unclear and this country will not pursue its own private interests in the matter and make these known to Irish traders.
I want to make the position quite clear. Things will not happen overnight with regard to changes which might have to take place. This would be done on a phased-in basis. I would remind the Deputy that there are still three budgets to be put through this House before 31 December 1992. It is not tomorrow that this must be done and nobody in this House would seriously suggest that at the start of negotiations I should put all my cards on the table. That would be a very foolish tactic to adopt.
Notwithstanding what the Minister has said, surely some preparatory work at least should now be undertaken in regard to harmonisation, with particular reference to the kind of concern that has been expressed in the baking industry in relation to present VAT levels. Surely the Minister would accept, rather than having a decision at midnight on a particular night in 1992, that it would be far better to undertake planning and make proposals in the meantime which would have the effect of reassuring the industry concerned.
I can assure the Deputy that planning is taking place. If he refers back to the answer given, he will see that the cost of £46 million is a sizeable amount of money. It must be found somewhere. If it is given away in one place, it must be found somewhere else. If the Deputy would like to suggest where we could find that money it would be just another input into the planning that is in progress. I would also remind the House that VAT has no effect on the competitive position of Irish products as against foreign products because under the VAT system the VAT applicable is in accordance with the rate in the country of final sale.
It is over to the black economy.
If it is the black economy, it must be black at two ends, at the wholesale end and at the retail. Reducing VAT rates is not necessarily the way to get at this problem. There are other ways and means.
The motor industry did well out of the reduction in the VAT rates.
I know that. They are very happy with the way I am handling the situation.
A very brief question.
I am sorry, I call Question No. 10. I have given the Deputy a great deal of latitude. He must appreciate that.
The Minister has asked that I suggest an alternative.
If the Deputy can suggest where to get £46 million he is welcome, but he cannot just ask the Government to take £46 million without saying where it should come from.
Within the next couple of years——
Does the Minister want us to provide every solution to his problems?