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Dáil Éireann debate -
Wednesday, 10 May 1989

Vol. 389 No. 8

Private Members' Business. - Finance Bill, 1989: Committee Stage (Resumed).

Section 48 agreed to.
SECTION 49.

I move amendment No. 44:

In page 51, line 34, to delete ", in relation to his business,".

The section provides that the services of a barrister or solicitor for VAT purposes are deemed to be supplied in certain circumstances to persons indemnified under policies of insurance. The section has effect from the date of the passing of the Act.

I have to declare an interest immediately in this amendment but it is not a very significant interest. One of the things that was worrying me was that it is restricted to people who, in relation to their business, are indemnified by a policy of insurance. Is there any significance in relation to that? I appreciate that somebody who was not indemnified in relation to a business——

Our Committee Stage amendment makes it available to policyholders.

Then my view in relation to that is that it is perfectly sensible and I have no objection to it.

Amendment agreed to.
Question proposed: "That section 49, as amended, stand part of the Bill."

(Limerick East): Are Irish insurance companies who provide insurance cover for UK clients, except in the case of VAT registered persons, likely to bear a double charge to VAT on solicitors fees?

(Limerick East): Will the fees be taxed in the UK on the basis that the services are supplied to the insured and not to the insurer? The insurance companies could be subject to a charge of Irish VAT on a reverse charge basis on the basis that the UK solicitors are supplied to the company. May I have clarification of that point?

The section makes a charge on the policyholder, not on the insurance company.

Suppose an English insurance company indemnifies an Irish policyholder and the trial occurs in Ireland and the solicitors' and barristers' costs are incurred in Ireland, it seems to me that in those circumstances a person is deemed to have received the services of a solicitor and barrister here for Irish purposes and is deemed to have received the services and he can make whatever use he wishes of the VAT in question, but what happens to the insurance company in England? If there was a foreign insurance company what would happen?

An insurance company in England in those circumstances is not charged the VAT. Where an insurer is established in the UK and not established here the VAT liability would not arise in this country. However, since UK VAT practice is to regard such services as supplied to the policyholder, no liability would arise in the UK.

So there is no double count?

There is no question of double count.

(Limerick East): In the case of Irish insurance companies providing cover to UK clients, will the fees then be taxed in the UK on the basis that the service is supplied to the insured and not the insurer? In the case of the insurance company——

An insurance company established here.

(Limerick East):——established here and providing a service to a UK client, would not the insurance company then be subject to a charge of Irish VAT on the reverse charge basis and would not the insured be subject to VAT in the UK?

(Limerick East): There would be a double charge in that situation.

No, the UK practice is different from ours.

(Limerick East): Perhaps the Minister would look at it between now and Report Stage to clarify it again.

The practice in the UK already is to make the charge on the policyholder. Between the section and the amendment here that changes our situation. It is now in line with the UK. There is no double count.

(Limerick East): What would be the position in relation to counsel's fees?

The very same.

(Limerick East): If the counsel was employed by the solicitor rather than employed by the company how would it workout?

The very same.

(Limerick East): It is also covered; you have covered the whole lot. Any kind of unfair competition between Irish and UK insurance companies has been eliminated by this section?

Precisely.

(Limerick East): Is it right that respective clients can claim back their VAT on an equal basis?

That is the position.

May I raise a point in aid of the barristers? This is very difinitely special pleading. As I understand the VAT Act from memory, a barrister is only deemed to have supplied a service when he is paid for the actual service. I think the Minister will find, through his advisers, that this is correct. There is a special arrangement for barristers they are only deemed to have supplied a service when, in fact, they are paid for the service.

That is the position.

Does this affect the last paragraph of the section which states:

Where a person, in relation to his business, is indemnified under a policy of insurance in respect of any amount payable in respect of services of a barrister or solicitor, those services shall be deemed, for the purposes of this Act to be supplied to, and received by, the said person.

In other words, the mere fact that you are indemnified will mean that the barrister is deemed to have supplied the service whereas at present the general rule for barristers is that they are only deemed to have supplied the service when they are paid for it. I think the draftsman may have damnified the poor barristers slightly because at present a barrister is not deemed to have supplied a service until such time as he is paid for it. This section says that his services have been deemed to have been supplied to and received by a person when he is indemnified under the policy of insurance. Before he pays the barrister, the barrister's services are deemed to have been supplied and received. I wonder whether that changes the barrister's position.

It does not change it.

I would like to know why it does not change it. It is fine to say it does not.

Listening to the Deputy it would seem to be a fair question.

At the moment the rule is in aid of barristers that, because they cannot sue for their fees, they are deemed only to supply the service when they receive the money. This says that, for the purposes of this Act, the services are deemed to have been supplied by the said person when they are indemnified.

When the barrister receives the money he is deemed to have supplied the service already.

So this does not affect barristers at all?

It is certainly not intended to I know but, on a strict reading of it, it may. As long as it is said now.

There is a retrospective element. When they are paid they are deemed to have supplied the service.

This says that when a person is indemnified under a policy of insurance in respect of any amount payable in respect of a service — that is before he is paid — of a barrister or solicitor, those services shall be deemed, for the purposes of this Act, to be supplied to and received by that person. Perhaps what is intended by the draftsman here is "deemed to be supplied to", but not "deemed to have been supplied to".

I will check that matter with the draftsman.

Will the Minister check it for Report Stage because if it does create a doubt or ambiguity it would be unfair to the barristers to deprive them of their little privilege.

We will check it again to make sure.

Is Deputy McDowell happy to remain happy?

Question put and agreed to.
NEW SECTION.

(Limerick East): I move amendment No. 45:

In page 52, before section 50, to insert the following new section:

"50.—That section 8 of the Principal Act (Value-Added Tax Act, 1972) is amended as follows:

(a) in subsection (3) (inserted by the Act of 1978)—

(i) in paragraph (b) (inserted by the Act of 1982, as amended by the Act of 1983) by the substitution of `£25,000' for `£12,000',

(ii) in paragraph (c) (inserted by the Act of 1981, as amended by the Act of 1983) by the substitution of `£50,000' for `£25,000', and

(iii) in paragraph (e) (inserted by the Act of 1981, as amended by the Act of 1983) by the substitution of `£25,000' for `£12,000',

(b) in subsection (3A) (inserted by the Act of 1982, as amended by the Act of 1983) by the substitution of `£25,000' for `£12,000'.".

I put down this amendment to explore the possibility that the Minister might be willing to raise the VAT thresholds on small businesses. I am suggesting, effectively, slightly more than a doubling of the thresholds. If a self-employed person engaged in something like hanging curtains at the moment has a turnover in excess of £1,000 a month he becomes subject to 25 per cent VAT. At that level of activity the temptation is not to be legitimate but to be in the black economy. Nobody can carry that kind of tax imposition if competing at the same time with people who are in the black economy and not in the VAT net.

There is a case to be made now on the grounds of competition between legitimate traders and traders in the black economy. We should raise the thresholds to see if, by doing so, we could get more activity going in the first instance. Secondly, we should have a clear cut-off point between the black economy and people who are registered for VAT. I would like to hear the Minister's views on that. I do not know the cost of the proposal but I am sure the Minister has that to hand.

I listened with interest to what Deputy Noonan said in this regard. For his information, our thresholds, together with those in the United Kingdom, are far higher than those in any of the member states of the EC. The level of our thresholds is not viewed with favour by our fellow member states. Back in 1983, the Coalition Government reduced the thresholds. Obviously, they must have taken the view at that time that the thresholds were out of line. Has the Deputy reason to believe that the situation has reversed, that we should think in terms of increasing them again?

(Limerick East): That is what I would like to explore. What is the cost?

What would it cost?

(Limerick East): The Minister talks about using £1,000 to collect £1.

The figure is £289,000, or £2 million in a full year.

(Limerick East): It would increase activity. It would encourage people to be self-employed. People who are now in the black economy would be legitimised. By taking them out of the VAT net completely, at least they might be subject to PRSI on the one hand if self-employed and on the other hand to returning their income tax properly. It is not all one way traffic. There is the problem, especially in certain areas where services are provided, that it is impossible for somebody with a small turnover to be legitimate because if he is legitimate he cannot compete.

Increasingly people at low levels of activity are being driven into the black economy. Once they are in the black economy, everything is hidden. They just disappear off all books. The imposition of VAT at low thresholds makes them uncompetitive vis-à-vis their colleagues in the black economy. There is an advantage in raising the threshold, legitimising the activity, removing the VAT imposition and then allowing people to make proper tax returns as self-employed people would do on the basis of self-assessment and make proper returns of PRSI at the ultimate rate of 5 per cent which was introduced last year.

Would the Minister indicate what the number of taxpayers in this band between £12,000 and £25,000 actually would be? If it is £3 million and we were talking about spending £1,000 to collect £1, it must require a great deal of supervision if there are many people in the area.

The figure is somewhere between 7,000 and 10,000, but not necessarily everybody would take advantage of it no matter what was done. It is something in that region.

If there are 7,000 to 10,000 people in that area and they are producing £3 million, it follows that their total yield is about £500 each per annum or thereabouts, on average. This is very small beer from the point of view of the administration involved on their side and on the Revenue side in chasing that kind of money. That is in favour of Deputy Noonan's point.

Against it, I would be worried that he may, in fact, be increasing the pressure on the black economy. I am not going to single out any area of the economy. If the Government say that the threshold is to be £25,000 for a house painter or a barrister, you can actually live on an income which is below the threshold. Once people are in the position that they can say effectively to their inspector of taxes that they earn £23,000, or whatever, as their gross turnover in the year, that their profit is half that and that they can live on that, it is very hard to detect evasion. Some people will say they are under the limit. They compete on unequal terms, I find, with people who are respecting the limit and being honest about it. By raising the threshold you give people grounds for contending that they do not have a turnover subject to VAT. The net result is that there is more evasion. From my own experience of VAT, I would be against the proposal because it would lead to more evasion rather than to less.

If it is £500 a head, it may cost the Revenue more to collect this money than it is worth. I imagine that VAT compliance for anybody in terms of their time at around £12,000 to £25,000 would cost about £500 per annum. You would have to have somebody doing your books or spend much of your own time at that level. There would be people in the Revenue Commissioners' office opening files on you, sending out forms, chasing you up. For £500, is it really worth it? Deputy Noonan's point, on a practical level in terms of money received, has a good deal of merit about it but I am afraid that it might actually increase evasion if the thresholds were raised.

(Limerick East): I am talking effectivley about one man or one woman operation in the service industry where most of the activity in the black economy is at the moment. For example, if somebody in the upholstery business reaches a point where his turnover is £1,000 a month, that would not be a lot if you were re-upholstering furniture——

Is he in the black economy?

(Limerick East):——because he would not be registered for VAT he saves £1,000 a month. If he has to register and has to pay 25 per cent, he is going to sell the same service now at £15,000 a year to his customers where previously he was selling at £12,000. That makes him uncompetitive. Because he would not be trading in the material anyway, he is going out purchasing the material, he would not have a claim back. I am talking in particular about small service industries where there is a very small input of purchased materials but where the major cost is the labour of the serviceman. In those circumstances there is a case to be made for lifting the thresholds along the lines of the Minister's argument yesterday that it does not make much sense to spend £100 to go after £1. There could be other advantages on the employment side by raising the thresholds. At the moment people in the kind of case I have described are being forced into the black economy and forced to be in it because so many others are in it that they are uncompetitive if they are registered for VAT. At least you take a burden off the Revenue Commissioners once more. The tax foregone seems quite small. I am not categoric about doubling the allowances if you go up to £5,000 or £6,000. I would like the Minister to explore the merits of this suggestion.

Would the Deputy not be afraid that the higher you push it the more advantageous it is for the people in the black economy?

(Limerick East): Yes.

Except on the other basis of the argument in relation to management time and so on.

(Limerick East): There might also be a number of self-employed people who effectively are in a one-man operation. What we are suggesting would put them in a position of being less likely to become a burden on the State. It would also increase employment.

We are levelling the playing pitches in the black economy.

It is a finely balanced argument. It is a question of judgment at the end of the day as to where you go. I am not aware of any great push for it from traders, but if we do what the Deputy suggests maybe they come to the top of the threshold and off they go and forget about it. Of course the boys really in the black economy are those in those small businesses who just pay nobody. The real tax advantage to them is if they are not caught. The other move in relation to annual accounting is a move towards better management. I will consider the approach the Deputy is taking with increases less than he mentioned.

(Limerick East): To be blunt about it, I do not think the threshold is appropriate. If you put in a more realistic threshold you might get a better chance for your collection.

If you look at 1983 now you would be talking about £3,000 or £4,000 increase. If you are talking about a CPI index since 1983 you are probably talking about £15,000 or £16,000. It will be along those lines.

Is Deputy Noonan happy to withdraw his amendment and perhaps come back to this on Report Stage?

You will lose a great deal of income tax if you do it.

If you raise the threshold, beause a great deal of income will be undocumented and many small traders will cease to have any records and then the Revenue Commissioners will have no yardstick by which to judge what they have or have not earned. I think the Minister will find it is not simply VAT he is losing, he is losing a great deal of income tax.

We will have a look at it to see the implications both ways. I am not so sure about the documentation. We are into self assessment.

(Limerick East): And PRSI.

If you are a small trader carrying on a business as a furniture restorer, upholsterer or something like that, with very little materials and very little input one way or another and all your turnover is profit or income at any rate, and if the Minister scrapped VAT for people under £25,000 income——

I would not go that far.

——and whose turnovers approximate to their income, such as contractors working with other peoples' materials — for instance a cleaning contractor who is self employed and pushes a brush around the place has very few expenses and his total gross turnover approximates to his income — he will lose those people's income tax and VAT but will allow many people exist and have a living income in circumstances where at the moment they have not.

There is self assessment.

The Minister has an endearing faith in self assessment but if you are going to assess yourself out of the white economy and into the black economy, self assessment is not going to be any worry.

(Limerick East): You might go off the register; you might go off the welfare list.

Is Deputy Noonan happy to withdraw his amendment? No doubt the Minister will bear in mind what Deputy McDowell has said.

Amendment, by leave, withdrawn.
NEW SECTION.

I move amendment No. 45a:

In page 52, before section 50, to insert the following new section:

"50.—Section 11 of the Principal Act is hereby amended in subsection (1) (inserted by the Act of 1985)—

(a) by the substitution of the following paragraph for paragraph (bb) (inserted by the Act of 1988):

`(bb) 5 per cent of the amount on which tax is chargeable in relation to the supply of electricity:

Provided that this paragraph shall not apply to the distribution of any electricity where such distribution is wholly or mainly in connection with the distribution of communications signals,',

and

(b) by the substitution in paragraph (d) of `2 per cent.' for `1.4 per cent.' (inserted by the Act of 1988).".

I am advised that acceptance of this amendment involves the deletion of section 50 of the Bill.

This amendment relates to the rate of VAT on electricity. It has the effect that electricity distributed in certain circumstances attracts the 25 per cent VAT rate and not the 5 per cent rate which applies to electricity generally.

The amendment is necessary because of a recent Circuit Court decision that the activities of a particular company who relay television and radio signals to their subscribers constitute the supply of electricity.

Electricity was charged to VAT at 5 per cent with effect from 1 March 1988. Prior to that, from 1975, it was zero-rated. In adopting the zero rate, and in introducing a 5 per cent rate on electricity in 1988, the intention was that those rates should apply to supplies of the kind made by the Electricity Supply Board, that is at a level and strength which would provide power for normal industrial, commercial and domestic use. Accordingly, there was never the intention that activities, such as the relay of television and radio signals, in connection with which a minuscule amount of electricity is distributed, should benefit from the application to electricity of the zero rate up to March 1988.

The amendment confirms that intention by excluding from the application of the 5 per cent the distribution of electricity in connection with the distribution of communications signals, as mentioned, television and radio signals and also computer networks.

(Limerick East): The Leas-Cheann Comhairle has just said that acceptance of this amendment involves the deletion of section 50. Section 50 is about the rate of VAT on livestock. I just cannot make the connection.

The amendment puts it back.

Amendment agreed to.
Section 50 deleted.
SECTION 51.

(Limerick East): I move amendment No. 46:

In page 52, line 5, to delete "2" and substitute "2.6".

Amendment No. 46 is to increase the level of rebate of VAT to unregistered farmers. The compensatory rate of credit allowed to taxable persons purchasing agricultural products or agricultural services from unregistered farmers is proposed to be increased in the section from 1.4 per cent to 2 per cent with effect from 1 March 1989, which merely confirms Financial Resolution No. 7 of the budget. Last year the credit was reduced from 1.7 per cent to 1.4 per cent to penalise farmers for the non-payment of arrears of tax and tax related levies. Since then self assessment has been introduced and become operable.

The amnesty has got the tax affairs of most of the agricultural community up to date. The amnesty also applied to the levies and the backlog was substantially cleared. When the Minister's predecessor, former Deputy MacSharry, reduced the rebate from 1.7 per cent to 1.4 per cent he tied it to the issue of non-payment of arrears of tax-related levies. The levy position has improved significantly and has been eliminated as a serious problem in so far as it relates to the farming community. The rate should therefore be brought back to 2.6 per cent, as independent assessors have indicated, rather than 2 per cent.

Farmers who are unregistered are still being penalised and are not getting the full rebate to which they are entitled because of the penalty approach adopted by the former Minister. The situation has righted itself and it should be restored. People are being affected by this provision whose levy payments have always been up to date, but they are being penalised for the faults of their neighbours. It is peculiar that a person whose affairs are in order should be penalised on account of his neighbour down the road or in another county. I strongly advocate that the Minister should accept this amendment. The rate of 2.6 per cent is within the spirit of the commitment made by his predecessor. It would be justified and widely welcomed.

I wholeheartedly support this amendment in the name of Deputy Noonan and reiterate some of the points he has made. We have to underline the fact that the Minister's predecessor gave an unequivocal commitment to this House when he stated that he would restore the VAT refunds to the level at which they should be, provided he collected from the farmers what he considered to be the outstanding 1 per cent levies. The amnesty brought in virtually all the levies which are collectable. No sector of the community has a 100 per cent record in terms of collection of any form of tax. This House can no longer accept that farmers should be penalised when the vast majority have paid their just desserts in respect of these 1 per cent levies. I repeat that there is no tax which has a 100 per cent collection rate. There are always problems and always taxes where the amount outstanding is not collectable. There were 12 Apostles and one of those was a wrong one. If we could get 11 out of 12 in every community to pay their dues and to be on the right side of these issues, we would be doing very well. There is no point in discussing the principle of penalising all farmers for the sins of the few. We have had that argument before. What happened was not justified. We need full restoration to 2.6 per cent.

One of the main reasons we sold our entry to the European Community and Fine Gael canvassed so vigourously during the referendum on the Single European Act was the benefit to our farmers and the agri-food business from the single market, a market without frontiers. We have only to look at what the farmers in Europe contend with in relation to VAT rebates to realise how uncompetitive our farmers are on this issue. Pigmeat imports, for example, have increased from zero to 17 per cent in the past two years. The VAT rebate is 13 per cent to the unregistered farmer in the countries concerned. We think we are being generous in suggesting 2 per cent here. We are calling for 2.6 per cent. We cannot consider that there is fair competition when our continental competitors have that advantage.

The same applies to beef producers on the Continent. The bull beef producers of Germany and France have VAT rebates of 11 per cent to 13 per cent, while our beef producers will have to contend with 2 per cent if the Minister has his way or 2.6 per cent if he accepts our amendment. A new beef régime was cobbled together by the Council of Agriculture Ministers last January and the cap was put on it at the price negotiations more recently. The first lot of European beef to go into intervention under the new tender system, amounting to 3,000 tonnes, all came from German beef producers. Using the tender system they could undercut beef producers from countries such as Ireland due to their more favourable VAT refund régime.

We could go through all the different enterprises in agriculture and point out where our farmers are at a serious disadvantage. The rate of 2.6 per cent would be only a slight improvement on what the Minister is offering, but we must return to our farmers everything possible in terms of the VAT refund so that we may reach the position where like is treated with like. We talk about harmonisation of indirect taxes and what will happen post-1922. I suggest that it would be a gesture towards reaching that level of harmonisation, at least in relation to VAT refunds to farmers, if the Minister would give them all he could on this occasion. We request 2.6 per cent. It is but a small improvement on what the Minister has to offer. We will have a lot to do during the next few years before we go into the position of harmonisation. I would urge the Minister to accept this amendment.

The VAT rebate is related to rates of VAT on farm inputs. Abroad more of the inputs are taxable, so flat rates are higher. Most of our farm inputs are zero rated — feed, fertilizer, seed and oral medicines. Actually our flat rate is comparatively low.

The rate of 2 per cent does not represent a true rebate. There is no logic in that.

There is not much logic in asking me for money I have not got.

That is a different argument. Let us have a logical response.

Let the interruptions cease. Let us hear the Minister without interruption.

I refer to the commitment by my predecessor, Mr. MacSharry, I invite Deputies to read the Official Report of the debate on last year's budget which I read very carefully before I met the farmers' representatives in advance of the budget this year. I pointed out to them that Mr. MacSharry's only commitment was to go back from 1.4 per cent to 1.7 per cent, provided there was a reasonable increase in levies being paid. When I examined the best calculations we had in relation to the receipt of outstanding levies, the Government in their generosity decided to go to 2 per cent. This is the first time I have ever heard the figure of 2.6 per cent mentioned. I do not agreed with that figure.

The Taoiseach indicated in the debate on the Financial Resolution on the night of the budget that the reason for not improving the refund to 2.4 per cent was the considerable amount of arrears outstanding from farmers in health contributions and levies. He also said that the arrears had not been exactly calculated at that stage and that this was in the context of the incomplete analysis of the amnesty receipts. The analysis has now been completed for the period to 31 March 1989 and shows that farmers paid £28.8 million in health contributions and levies, made up of £11.2 million in health contributions, £5.3 million in income levies and £12.3 million in employment and training levies. While this represents a considerable improvement, the Revenue estimate that a further £4.9 million is still outstanding from farmers. This is made up of £2 million in health contributions, £2 million in employment and training levy and £0.9 million in income levy. These figures concern the arrears owed to the Revenue who have been responsible for collecting them from full time farmers only since 5 April 1984. Prior to this the Revenue were concerned with part-time farmers while the health boards were responsible for the collection from full time farmers for all years up to 5 April 1984. The latest estimate by the Department of Health for the arrears owed to the health boards in health contributions is £4.29 million at the end of 1988. No figures are yet available for the levy arrears due to the health boards. Therefore, despite the amnesty payments, at least £9 million is estimated as still owing by farmers to revenue and health boards. While I would concede that there are a certain amount of bad debts in every situation we are certainly a long way from being at the ideal situation.

Furthermore the best I can say to the Deputy at this stage is that I cannot accept that amendment. What I gave the farmers this year cost in the region of £12 million. I met the situation fairly and squarely. I can assure the House that I will certainly be looking at it again in the context of the budget of 1990.

The Minister surprises me. The lack of Fianna Fáil commitment to the farmers is obvious from Minister O'Kennedy's actions. I thought this Minister would understand.

Let us make progress in an orderly fashion.

It would cost £12 million. The Deputy must think it is hanging around on the trees.

You are penalising the farmers who have paid all their taxes and levies.

Let us not get excited about it. If the Deputy knows where we can find £12 million, I will consider it.

I am opposing Deputy Noonan's amendment. I will also be opposing the Minister's section. I have dealt with this issue on a number of previous Finance Bills. Deputy Doyle is crying about the crucifixion of the farmers in this matter and advocating that not alone should they be getting 2.6 per cent but should be harmonised with the EC and getting 13 per cent. The Minister's response to that is that there are lower rates of VAT on agricultural products here and if one pays less one gets less by way of refund.

Deputy Noonan said that farmers are not getting the full rebate to which they are entitled. I would like to know how we assess that. How do we know that they are entitled to anything when they are unregistered? There is no question of entitlement to anything. This is just a further subsidy to farmers, an addition to the price subsidy. If there is a problem about not getting the full rebate to which they are entitled surely they should register and then we would know what their entitlement is, just like small traders who know exactly what their entitlement is. What rebate or refund they should get is very clear and mathematically correct. In this case there are no such mathematics; there is no relation whatever to VAT. The system is wide open to fraud.

The Minister for Social Welfare made great play during the course of the year with the great efforts he made to uncover fraud in social welfare to the extent of something like £5 million. The huge escalation, year by year, in the amount of VAT refunds paid to unregistered farmers indicates that there is something wrong. They have jumped in the five years from 1981 to £22 million. Five years later in 1986 the amount of such refunds had risen to £79.4 million, almost £80 million. That is a four fold increase. Was there a four fold increase in VAT payments? The system is obviously wide open to fraud and I would like to know if the Minister or the Department of Agriculture have ever attempted to uncover the fraud in this area.

Last year the Minister reduced the level from 2.4 per cent to 1.4 per cent because the farmers had not paid their levies, but this raised surprisingly little protest among farmers. It was the equivalent of the corporation refusing to give grants until the water rates are paid. The farmers knew that. They were not able to say that they were entitled to this refund and claim it irrespective of what levies or income tax they had not paid because there is no such legal entitlement.

For that reason I am certainly opposing the Fine Gael amendment to increase the VAT refund to 2.6 per cent. There is no basis for it whatsoever, certainly not in this Finance Bill, having passed section 50. I will even be opposing the Minister's section, section 51, until there is a clear explanation of why farmers cannot register, the basis for deciding the amount of refund and whether the taxable persons who are purchasing the agricultural produce are making more of a good thing out of it than the unregistered farmers who are supposed to be getting the refund as a subsidy to their prices for agricultural produce.

The whole area requires major investigation to see how it operates, who gets the money, where the rip-off is and whether all farmers should be made to register for the purposes of VAT.

Could the Minister indicate the previous history of the figure which was reduced from 1.7 per cent to 1.4 per cent? What is the history of this level of VAT refund over a period? I take it from some remarks the Minister made there that this would cost an extra £12 million. Could the Minister indicate, in relation to last year, the total yield of income tax from agriculture so the House can know whether this year we can expect a significant increase in income tax yields from agriculture. I would be interested to know what his prognosis is about the yield from agriculture.

Income tax from farmers in 1988 was £82 million. That is the year of the amnesty. This year it is estimated at roughly £44 million. In 1987 it was £34 million. I could go back to 1975 but I have given an idea of what happened in more recent years.

What is the total value of the refund?

There can be a lot of distortion in figures, no matter which way one looks at them. If farmers had their farms incorporated in a company they could well be in the PAYE sector just as people in small businesses are.

That is scraping the bottom of the barrel.

With all due respect to Deputy Mac Giolla, his knowledge of farming was so far off the wall here tonight that I would not waste my time trying to educate him. I would ask him not to laugh about it and to stop making such silly stupid accusations of fraud. Does the Deputy know who he is accusing of fraud? He is accusing the co-ops and the marts.

(Interruptions.)

If the Deputy does not want to listen and be educated I will not bother my head trying to explain. There is no sense in coming into this House and trying to raise scares about frauds that do not exist. The Deputy does not even understand the system of the flat rate. If he keeps quiet for one minute I will tell him the position. The co-ops and the marts operate the system. They give the flat rate to the farmers who, in turn, sell their goods to the marts and co-ops. The Deputy can oppose all the sections he likes but he should not raise scares about frauds that do not exist. Account is taken of the special position of farmers in all other member states except the UK and Denmark. It is embodied in EC law. It is the best way to operate the system and that is the way we will continue to operate it. I hope the Deputy knows a little more about the position now and will not come into the House in future looking for headlines about frauds that do not exist. He should not let anybody cod him that the Revenue are a soft touch because they are not and everyone in the country knows that.

(Limerick East): You can put that to music.

In 1972 the VAT rate was 1 per cent; in 1979, 1 per cent; on 1 September 1981, 1.5 per cent; 1 May 1982, 1.8 per cent; 1 March 1983, 2.3 per cent; 1 July 1983, 2 per cent; 2 per cent; 1 March 1985, 2.2 per cent; and on 1 March 1986 it was increased to 2.4 per cent, the highest ever. On 1 May 1987 it was reduced by my predecessor to 1.7 per cent and there was a further reduction to 1.4 per cent. I am now increasing it to 2 per cent. There was never any mention of 2.6 per cent as is proposed in the amendment. The adjustment which was made this year to 2 per cent will cost £12 million in 1989 or £17 million in a full year. If Deputy Avril Doyle would like to tell me where I could get another £12 million to increase the figure further I would be glad to hear it.

The figure of 2.6 per cent came from independent agricultural economists who have no interest in this matter either politically or agriculturally.

If this proposal is not accepted the farmers will lose about £15 million. Our proposal of 2.6 per cent is fair and reasonable. Farmers have paid almost all, if not all, the levies that were due. The additional £15 million which is due to them and which is being withheld on this occasion should be paid to them. The position is most unsatisfactory because quite a number of farmers will lose a considerable amount of money. The VAT refund at present is not sufficient. I put it to Deputy Mac Giolla that the decline in the numbers employed in agriculture and the fall-off in farming families should be sufficient proof that there are still a lot of problems in agriculture. If the farmers were paid the additional £15 million it would make an enormous difference to them and the Minister should meet our request in this instance.

I agree absolutely with what Deputy Enright has said. About 20,000 farmers have got out of farming in the past ten years and it is expected that 40,000 will leave the land in the next decade. There is a saying that the rising tide lifts all boats but that is not true as regards farming. A large number of farmers have experienced increased profitability but the majority of smaller farmers are not benefiting from the EC or from anything else. They are getting out of farming and the bigger farmers are buying the land.

(Limerick East): The big farmers are registered for VAT but the smaller farmers are not.

Why are they not registered? As Michael Dillon said, in 50 years time 10,000 farmers will control all the land and production in this State. He is an expert in this area. I do not agree with his taxation policies but that is what he said. Deputy Enright is absolutely right in that farmers are leaving the land and will continue to do so. People on both sides of this House have been crying about the family farm down through the years and have been in favour of the farmers. I am supposed to be anti-farmer and they are supposed to be pro-farmer. When the State was founded there were 380,000 farm holdings and now there are only 120,000. Successive Governments were in favour of the farmers but they drove them off the land. I am saying that the farmers who have the money should pay their taxes.

I would like the Minister to explain whether it was a huge increase in productivity in agriculture or an increase in the number of farmers that resulted in the VAT refunds increasing from £22 million in 1981 to £55 million in 1983. I am an ignorant person in these matters. In 1983 the VAT rate was 2.3 per cent and there were VAT refunds of £55.4 million to unregistered farmers. In 1986 the rate was 2.4 per cent, an increase of 1 per cent, and there were VAT refunds of £79 million, an increase of £24 million. Why was there such an enormous increase in Exchequer refunds? Was it due to an increase in agricultural produce, in purchases and sales and so on? If the Minister would explain that to me it would be a great help for next year's Finance Bill, for instance.

There is a simple answer to that. The increase in VAT refunds reflects the increase in VAT rates over the period. In 1980 the rates were 10 per cent and 20 per cent and by 1983 they had increased to 23 per cent and 35 per cent. As those rates increase, so too do the VAT refunds. It is as simple as that. There is nothing mysterious about it and there have been no frauds.

There has been almost a four-fold increase in five years.

How does the amendment in Deputy Noonan's name stand?

(Limerick East): I am pressing it.

Question put: "That the figure proposed to be deleted stand."
The Committee divided: Tá, 69; Níl, 39.

  • Abbott, Henry.
  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Andrews, David.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Matthew.
  • Brennan, Séamus.
  • Burke, Ray.
  • Byrne, Hugh.
  • Calleary, Seán.
  • Conaghan, Hugh.
  • Connolly, Ger.
  • Coughlan, Mary T.
  • Cowen, Brian.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fitzgerald, Liam.
  • Fitzpatrick, Dermott.
  • Flood, Chris.
  • Flynn, Pádraig.
  • Foley, Denis.
  • Gallagher, Pat the Cope.
  • Hilliard, Colm Michael.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kemmy, Jim.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • McCarthy, Seán.
  • McCreevy, Charlie.
  • Mac Giolla, Tomás.
  • Mooney, Mary.
  • Morley, P.J.
  • Moynihan, Donal.
  • Nolan, M.J.
  • Noonan, Michael J.
  • (Limerick West).
  • O'Dea, William Gerard.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Rourke, Mary.
  • Power, Paddy.
  • Reynolds, Albert.
  • Roche, Dick.
  • Stafford, John.
  • Swift, Brian.
  • Treacy, Noel.
  • Wallace, Dan.
  • Walsh, Seán.
  • Wilson, John P.
  • Woods, Michael.
  • Wright, G.V.

Níl

  • Barnes, Monica.
  • Barrett, Seán.
  • Begley, Michael.
  • Birmingham, George.
  • Boylan, Andrew.
  • Bruton, John.
  • Bruton, Richard.
  • Carey, Donal.
  • Clohessy, Peadar.
  • Colley, Anne.
  • Connaughton, Paul.
  • Cosgrave, Michael Joe.
  • Creed, Donal.
  • Cullen, Martin.
  • Deasy, Austin.
  • Deenihan, Jimmy.
  • Doyle, Avril.
  • Durkan, Bernard.
  • Enright, Thomas.
  • FitzGerald, Garret.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Gibbons, Martin Patrick.
  • Griffin, Brendan.
  • Hegarty, Paddy.
  • Higgins, Jim.
  • Kenny, Enda.
  • McDowell, Michael.
  • McGinley, Dinny.
  • Mitchell, Gay.
  • Nealon, Ted.
  • Noonan, Michael.
  • (Limerick East.)
  • O'Brien, Fergus.
  • O'Keeffe, Jim.
  • O'Malley, Desmond J.
  • Shatter, Alan.
  • Sheehan, P. J.
  • Wyse, Pearse.
  • Yates, Ivanf.
Tellers: Tá, Deputies V. Brady and D. Ahern; Níl, Deputies J. Higgins and Boylan.
Question declared carried.
Amendment declared lost.
Amendment No. 47 not moved.
Section 51 agreed to.
SECTION 52.
Question proposed: "That section 52 stand part of the Bill."

(Limerick East): We discussed the principle of this at an earlier stage on the Bill so I can agree to the section without discussion.

As Deputy Noonan said, we discussed the basic principles relating to PAYE deductions.

An féidir níos mó ciúnais led' thoil?

We discussed the basic principle of PAYE deductions, which in certain cases may not be returned to the Exchequer for a maximum period of one year. I objected to that under the relevant section, and I am objecting to this section as well because the principle is the same. VAT payment is a tax, which people know is going to the Exchequer. Under this section of the Finance Bill those who deduct that tax at the point of purchase, or at the point of sale, may retain it for themselves instead of forwarding it to the Exchequer. I made the same points in relation to PAYE. I think it is totally wrong — possibly illegal and unconstitutional — that tax payments made by individuals who accept that they must pay for the normal running of the State and the social services, education, health or whatever are not forwarded to the Exchequer. The only reason they do not object to paying taxes is that they know these taxes help to provide these services for the general public — health, education, local authority services, social welfare benefits and so on.

If these services were not being provided people would object to paying taxes. They object to paying double taxes — paying for the health services and then having to pay extra charges. In this case they find their taxes are not being forwarded to the Exchequer, but rather are being held by employers and business people for a period of 12 months.

(Limerick East): On a point of order. The Ceann Comhairle before leaving the Chair called section 52. I said that since we had discussed the principle of the section at an earlier stage I was prepared to proceed without discussion. Deputy Mac Giolla then intervened. I thought he was to speak to section 52, which is his right, but he is now speaking to section 51 which has already been agreed.

I have made no reference to unregistered farmers or VAT refunds since rising to speak. Section 52 relates to the retention of VAT for a period of 12 months. Having deducted VAT one would not have to pay it over to the Exchequer within a month or two months but one can hold on to it for 12 months. I understand that is what is implied in section 52.

(Limerick East): The Deputy is on section 52 now.

Am I right? May I proceed, a Leas-Cheann Comhairle?

The Chair is happy that Deputy Mac Giolla is in order.

Thank you very much.

When the Deputy is not in order I will advise him accordingly.

(Limerick East): On a point of order, the Deputy is now in order but he was not in order five minutes ago.

Was I not in order before?

(Limerick East): The Deputy was speaking to section 51.

Excuse me, the Deputy must have been dreaming.

(Limerick East): I was listening to the Deputy.

I made my contribution on section 51 and Deputy Noonan heard every single word of it. I have made no reference to that section since I started my contribution on section 52. What I said on section 51 obviously annoyed him so much that that is all he can hear now.

It just sounds the same.

I have spoken solely about the retention of VAT by traders for a period of 12 months, when people who have paid their VAT would expect this money to be with the Exchequer and being used to finance the health services, the education services, etc. That is the point I made. It is wrong that this Finance Bill should contain a provision which would allow individuals to retain what belongs to the Exchequer for a period of 12 months without paying any interest on that money. It would amount to an interest free loan for 12 months from the public, the consumers. In the other case it amounted to a loan from workers, deducted from their wages. In this case, it is money paid over by consumers to the Exchequer, but it is being held by traders. I do not know how the Minister will decide who will retain the money and who will not, but it can be held for a period of 12 months. I am registering my objection to this, as I registered my objection on the PAYE section because I think it is illegal, unconstitutional and totally wrong.

To respond to the criticism made by Deputy Mac Giolla, if small traders opt for an annual return, right through the year they would have no vehicle to obtain a VAT refund in respect of the goods they have purchased. We are talking about the net VAT figure. The traders have paid VAT on the goods they purchased but they would not have to make a return to the Revenue, if they so opt, for 12 months. We are talking about a minute figure, not a large amount of money as Deputy Mac Giolla seems to believe.

We do not know the amount of money that would be involved. The Minister did not tell us the figure, and he will not be able to tell us the figure until the end of the year. I ask for figures——

Surely, the Deputy can use his imagination.

Deputy Mac Giolla appreciates that he will get another opportunity to speak and he should not interrupt the Minister when he is possession. Indeed, nobody is to be interrupted.

I would like some figures.

I hope the Deputy takes my point: we are talking about VAT on the margin. A trader has to pay VAT on any goods he purchases, but, if he opts for making annual returns, he will not get that VAT back.

The goods are sold.

Of course, but all we are talking about is the VAT on the margin, no more than that. We have already discussed this matter at length. The scheme is aimed at helping small traders to ease their compliance burden. The amount of tax at risk is a minute fraction of the VAT yield. The scheme is optional. By the same token the Revenue Commissioners do not have to extend this facility to somebody with a bad record. At any given stage the Revenue Commissioners can ask for payments and the section has been so framed that if the worst should happen, the Revenue would still have preference.

The Collector General is the final arbiter and it is he who will decide whether a trader should be allowed opt for the scheme, and he would make his decision on the basis of the past record of the trader concerned. As I said in the other section, there are substantial administrative benefits to be gained, and the Exchequer will gain, not lose, at the end of the day. In other words, I would not be spending £1,000 to follow £1.

I understand the point the Minister is making. That measure can be justified. Am I correct in thinking that VAT returns are normally paid every two months?

That is correct.

I think the returns have to be paid within three weeks of the end of the two month period.

On the 19th day.

Let me highlight one administrative problem about which the Minister might not be able to do something. In the normal course of events a person pays over their VAT returns to the Collector General. That person is entitled to claim a VAT refund and he deducts that refund from the figure he is paying and sends the net amount to the Collector General. A problem arises if the accounts are not sent in to him in time. If someone wishes to keep their accounts in order they pay out what is owed on the nineteenth day to the Collector General. At the end of the nineteenth day, they try to balance the account of a particular person, but it may transpire later that some further moneys have been paid out with the result that that person will have to make a futher deduction, This leads to confusion and many difficulties for business people. I suggest, Deputy Mac Giolla may disagree with this, that even though the amount of money involved in some cases is sizeable many administrative problems arise from this money having to be paid over within 19 days. I think that period should be extended to at least 28 days.

They have 12 months.

That concession applies to small traders but I am referring to those who would not be regarded as small traders in the strict sense. I hope I have got my point across to the Minister. Many people have expressed the view to me that they are in breach of the law by not paying on time and are liable to pay surcharges or interest penalties. Those people do not wish to break the law.

I do not know the type of trader the Deputy is referring to.

The trader with a medium sized business.

There are two ways traders can opt to pay their VAT. They can opt to pay on a cash/receipts basis. If they opt for that system the problem the Deputy is concerned about does not arise. However, if they are on an invoice/sales basis, they must pay before they have taken in the money. I suggest to the Deputy that the person he has in mind should consider opting for the cash/receipts system. People are entitled to opt for that system and that would get over the problem if they are not getting in their money fast enough. Under that system they pay when the cash is received. If they opt for the invoice/sales system they are caught for the money even if they do not get paid. Any type of trader is entitled to opt for the cash/receipts system if he or she wishes. That system may suit the businesses referred to by Deputy Enright.

I should like to put a question to the Minister in regard to paragraph (viii). I understand that that authorisation allows value-added tax to be collected from small traders over a period of 12 months rather than over a two month period as at present. I note that the authorisation in accordance with this paragraph will automatically cease, and, presumably, all VAT will automatically become due, on the death of the taxpayer which is not a predictable event, as the Minister will appreciate in all cases. That could be the cause of some hardship. For instance, if an authorisation had been given to a person that he or she did not have to pay VAT for 11 months, and that person died, the person succeeding in the administration of that business would be obliged, it appears from the provisions of paragraph (viii), to bring the VAT affairs up to date. Will the Minister indicate if that is the position? It appears to me that that is so because paragraph (viii)(c) refers to a person either ceasing to be a taxable person, dying or becoming bankrupt. I am concerned about the death of such person. I am sure the Minister will agree that the financial and other consequences of a death are sufficiently severe in themselves without adding this provision.

What the Deputy has said is correct. The provision is no worse than the consequences that would apply in regard to normal VAT procedures. I accept that one could argue that there may be more arrears involved if such an event occurred.

We are introducing a new system which allows people financial latitude to account for their VAT and to provide for their VAT over a period of 12 months, where previously we had asked them to provide for it over a period of two months. We are saying to them that, notwithstanding the fact that they have been authorised to account for VAT on that basis, if they die suddenly everything is cancelled. We are saying that the person who succeeds must pay immediately as if no such authorisation had ever been granted. The Minister will be aware that at the time of the death of a small businessman there will be many other financial charges to be met, such as capital acquisitions tax, stamp duties of various kinds and other dislocative expenditures.

We are saying that simply because of a death an authorisation is automatically terminated, as appears to be quite categoric in the section. It states that an authorisation shall be deemed to be terminated and it does not state that the authorisation shall be open to be reconsidered and, if necessary, withdrawn. It states quite categorically that the authorisation shall cease on death. It will be more appropriate to insert some measure of discretion in that provision so as not to create hardship, not to turn what is designed, laudibly, as a sensible concession to small businesses into something which in the case of the death of a small business person could become a source of hardship to successors in the business.

I do not see how we can do anything else. We have to bring them all together and use that phraseology to take care of other likely events, apart from deaths. I am referring to liquidations and so on. I cannot see how we can differentiate in these cases. The death of a person is a tragic event and it can bring its own consequences and problems but we are dealing with small amounts of money. If we were dealing with large sums of money it could be said that the provisions might constitute a real hardship but the amounts involved will be very small. The provisions will operate only six weeks after the death of a taxpayer. We are not talking about large amounts of money that would put people out of business. I do not see how we could divorce a death from the other eventualities that must be covered by such a provision.

Why not delete the word "dies" from line 21 and state that the authorisation shall be deemed to have been terminated on the date that an authorised person ceases to be a taxable person — an event that they will themselves — or becomes bankrupt which, from the point of view of financial prudence, suggests that not only should the authorisation terminate but it should never have been granted. Why is there any need to include the word "dies" among the terminating factors in regard to such an authorisation? It has not been demonstrated to me that there is any need for this.

The Deputy is presuming that the person dies at the end of the year but a person may die in the first quarter, the second quarter or the third quarter.

Some will die at the end of the year in the normal course of events.

We cannot take the worst example and say that that is the average. We must take the average across the board.

We do not make legislation for averages but for actual cases.

Precisely, and that is what I am legislating for here.

We have a cold, heartless Minister.

Deputy McDowell might wonder why I did not advise the House earlier that we have had agreement to deal with ten more sections before 10.30 p.m.

Is the Minister satisfied that this arrangement, with which I agree, safeguards the position of people who are liable to penalties? For instance, officers of a body corporate are liable for non-compliance with VAT. If I am a secretary or director of a company and I am liable to penalties for a six month period, and during that period I am excused under this provision from making my returns and so on, but after I cease to be a secretary or director of the company the company defaults, it will not be deemed to have complied with its obligations under paragraph (ii) because it will, subject to my officership, have failed to deliver the goods, so to speak. Therefore, as I understand it under this Bill as presently drafted I would be liable.

Once you had gone out of the company the new officer would have to accept liability.

Somebody over there is not reading the section.

I have not read it but I am using commonsense as to what should apply.

It is the same as the 1977 manifesto — you did not read that either.

(Interruptions.)

Perhaps if I put the question to the Minister——

With your permission, Deputy McDowell, I might say that it seems a new air of flippancy has been brought into the House by some recent arrivals. Maybe they would allow us return to the intellectual sobriety we had earlier on. Deputy McDowell, without interruption.

Now that I have the Minister's whole and undivided attention, if he looks at lines 43 to 45 of section 52 he will see that you shall be deemed to have complied with the provisions of paragraph (a) in relation to the taxable periods if you comply with this regime. However, if you do not comply you are not deemed to have complied with those provisions and, therefore, all the people behind you in the line are not deemed to have complied with their duties when their duties arose. If the Minister looks at it that is a clear and obvious reading of the section. In other words, you only get a retrospective validation and compliance with all the steps taken during the year if at the end of the year you comply with what you are supposed to comply with. If you fail at the end of the year you are deemed to have failed at each individual spot during the period. What I am saying is that an officer of a company who was there during part of that period and was liable to penalties for failing to comply will find himself in the position that he would be exposed to penalties for things which happened after he ceased to be an officer.

It is an annual return made at the end of the year. The Deputy is instancing a situation where an officer has left a company during the year. That return is made by——

It is not made at the end of the year.

We are talking about a situation where there would be one annual return at the end of the year.

It is not made at the end of the year.

Do you mean if it is not made at all at the end of the year?

Yes, and if that happens the people who have complied with their obligations during the year will be deemed not to have complied with their obligations and will be liable for failure to comply with them.

There is no retrospection involved.

No, there is not.

(Limerick East): I agree with the Minister.

We will leave it at that so. Deputy Noonan had better talk to Deputy McDowell after the session is over. They can sort it out between them.

If Deputy McDowell has reservations perhaps he will have an opportunity on Report Stage of coming back to them.

I have raised the issue and if there is anything in it the Minister can come back to me.

Question put and agreed to.
Section 53 agreed to.
SECTION 54.

Amendment No. 48 is out of order.

I accept the ruling of the House as a matter of order but I think that on this occasion the ruling of the House is wrong and that my amendment could not have imposed any liability on any member of the public and, therefore, should not have been ruled out of order. I am just saying that as a matter of record.

The Deputy will appreciate that already in respect of an amendment accepted by the House the Minister saw fit to introduce special regulations — it is the same point which is at issue — therefore, he must have assumed there was an additional charge. The Minister is entitled to do that but the Deputy is not so entitled.

For the time being.

Hope springs eternal.

Amendment No. 48 not moved.

I move amendment No. 49:

In page 55, to delete lines 3 to 13, and substitute the following:

"(a) by the insertion of the following subparagraph after subparagraph (g) of paragraph (i) (inserted by the Finance Act, 1987):

`(gg) the management of an undertaking which is a collective investment undertaking within the meaning of section 16 of the Finance Act, 1989, other than services specified in subparagraph (g);',

(b) by the substitution of the following paragraph for paragraph (iii):

`(iii) professional services of a medical nature, other than services specified in paragraph (iiib), but excluding such services supplied in the course of carrying on a business which consists in whole or in part of selling goods;',

(c) by the insertion after paragraph (iiia) (inserted by the Finance Act, 1986) of the following paragraph:

`(iiib) professional services of a dental or optical nature;', and

(d) by the substitution in paragraph (ix) of `subparagraph (g) or (gg) of paragraph (i)' for `paragraph (i) (g)'.".

Amendment agreed to.
Amendment No. 50 not moved.
Question proposed: "That section 54, as amended, stand part of the Bill."

As we appreciate, this section was brought in through a judgment of the European Court of Justice. It is understood that corrective spectacles and contact lenses are subject to VAT. I should like the Minister to consider on Report Stage that a section of the population — and I refer to the partially sighted — who are in need of a particular type of low vision aid could be exempted from the payment of VAT on these aids.

In Ireland there are some 5,000 registered blind people and perhaps a little fewer than 2,500 partially sighted people. The need for low vision aids for partially sighted people is very great. As the Minister will be aware, just before Christmas, the President opened an institute on the north side specialising in this area for people who are in need of low vision aids. There is not a great lot of money involved and I know that across the water in England these aids are exempt from VAT. We are not speaking in terms of spectacles as such: we are speaking of a particular type of sight correcting aid for people who have very low vision needs where the benefit to them would be very great as a result of that extra degree of sight.

I certainly do not intend to give the Minister figures of the number of persons so affected but it is very low. Perhaps the Minister could recommend to his officials that they take a look at this section of society to see if there is a way in which these aids can be exempted from VAT. In certain cases low vision aids can be quite expensive. They are not worn in the same way as spectacles. I am not referring to hand held magnifying glasses or anything of that kind: I am speaking about sophisticated aids which have been developed by modern technology and which can help people. I know it was not the Minister's intention to include these aids in this section of the Bill but as I read the section they are included and it would be a shame if the section was not amended in some way or brought into line. In developed countries sophisticated techniques for reading Braille, closed circuit television and so on are used to assist such people but if the Minister examines the area I am talking about he could, without any loss of revenue to the Exchequer, include this group of people in section 52 on Report Stage.

I have listened with interest to what the Deputy had to say. This question arose as a result of a decision of the European Court taken against Britain. We were queued up right behind them and this is why we gave an undertaking at that time to include this provision in VAT legislation here.

In response to the Deputy, the reason these aids were not included is that I am debarred, under the decision of the European Court of Justice under EC law, from zero rating them. I will certainly look at that segment of society. I have every compassion for them and I will see how they can be accommodated in some shape or form, perhaps by way of refund or whatever. We did not include them intentionally. We knew of their existence. We will examine the possibility of how it can be handled between now and Report Stage.

Question put and agreed to.
Section 55 agreed to.
SECTION 56.

(Limerick East): I move amendment No. 51:

In page 55, between lines 36 and 37, to insert the following:

"(d) period furniture, and works of craftsmanship in silver, glass or porcelain, 100 years old or more;".

When this section was originally drafted the proposal was to reduce the rate of VAT from 25 per cent to 10 per cent on works of art more than 100 years old. The Minister has modified the position since his announcement on budget day to what appears in the section and has removed the requirement that an allowable work of art should be in excess of 100 years old. He has tightened up the section quite considerably.

Effectively three new paragraphs will be added to the Sixth Schedule listing new items that would be 10 per cent VAT-rated. For example, there is reference to a painting, drawing, or pastel, or any combination thereof, executed entirely by hand, an original lithograph engraving and so on, or an original sculpture or statuary. I should like the Minister to consider extending the provisions of the section to include antiques and, for the purposes of such extension, to revert to the original intent on budget night, to talk, in terms of the extension I am proposing, of period furniture, works of craftsmanship in silver, glass or porcelain 100 years old or more. I am seeking the addition of a fourth paragraph to the Sixth Schedule to include antiques.

I believe that at present there is a huge loss of revenue to the Revenue Commissioners from the antique trade. What is happening is that, because of the 25 per cent VAT rate, the trade is being taken out of traders' rooms and being conducted at auctions in parish halls and public places. Second, the trade is being conducted by the submission of items to house auctions where furniture, other than the furniture and contents of the house, is being added and sold at public auction. There is a tax advantage in this exercise because, when something is sold at auction in a parish hall or at a house auction, VAT applies only to the auctioneer's commission, whether that be at 5 per cent or something less. This means the trade in antiques is being diverted into auctions where VAT is not charged on the market value of the item; rather is it being charged on the auctioneer's commission.

I can see the difficulties in framing a section which would allow for the inclusion of genuine antiques and exclude objects with little artistic merit or those whose age would be difficult to establish. I think the Minister will grasp my intent here. For example, any expert in antiques will be able to validate furniture which is 100 years old or more. I am also endeavouring to have included works of craftsmanship in silver, glass or porcelain. The extension to silver goods should be easily administered because silver is hallmarked. There should be absolutely no problem about establishing the age of any item of silver. Not only would the extension I propose be of benefit to people in the antique trade but it is my belief that the trade would move back from auction rooms into antique shops with a consequent increase in the VAT returned to the State.

I should like the Minister to take this amendment on board. If he cannot reply in detail this evening he might examine the matter between now and Tuesday next. I am seeking an extension to cover genuine antiques where such can be clearly established. There would be no loss of revenue to the Exchequer because of the circumstances I have described in which antiques are now being traded in auction rooms rather than in antique shops.

In response to Deputy Noonan I should say that, since budget day, we have received six representations only in relation to the point he made; that is not to say it is not valid. Certainly I will examine the matter. I will talk to the Deputy between now and Tuesday next in order to ascertain whether we can devise a sufficiently tight provision. The reason I removed the original provision on budget day was that it has excluded much of our own Irish artists' works and it seemed somewhat crazy to do so. That is the reason I followed that course and included manuscripts as well. We have had very few representations in relation to it. It is not easy to draw up a sufficiently tight section or provision vis-à-vis description and so on. I will talk to the Deputy between now and Tuesday next in order to ascertain whether we can reach some accommodation.

(Limerick East): I should like to point out that I accept the section, as drafted. The new formulation is quite justified for the reasons the Minister gave both now and on Second Stage. I am seeking an amendment of the section by way of addition which would use the 100-year formula suggested by the Minister in the budget and that this would apply to the antique trade exclusively without interference with the section, as now presented. It would then be possible to isolate the antique trade, certainly in respect of silverware, where the hallmark will give the year anyway. It would not be a matter of debate as to what was the age in that case. The same would apply to a large extent to furniture, porcelain and glass. If the Minister really wants to tighten it, if he places the onus of proof on the seller rather than on the Revenue Commissioners, the requirement will be to prove that an item is 100 years old and that VAT should be imposed at 10 per cent. If that proof is not available VAT should be imposed at 25 per cent.

I will certainly consider what the Deputy is saying. I was concerned about re-importation because the country had been losing quite an amount of artifacts and other articles. I was endeavouring to do something to prevent that loss. However, I will examine the matter and talk to the Deputy between now and Tuesday next.

Amendment, by leave, withdrawn.
Section 56 agreed to.
NEW SECTION.

Amendment No. 52 in the name of Deputy McDowell. I observe that amendment No. 55 is an alternative. Therefore, I suggest that we discuss amendments Nos. 52 and 55 together if that is satisfactory. Agreed.

I move amendment No. 52:

In page 56, before section 57, but in Part IV, to insert the following new section:

"57.—The First Schedule of Stamp Duties under the Stamp Act, 1891 as revised by the Finance Act, 1970 is hereby amended to exempt from stamp duty all leases and contracts of tenancy of 12 months duration or less in respect of any premises proposed to be used for a dwelling where the rent thereby received calculated on an annual basis does not exceed £6,000.".

This amendment arises, as does amendment No. 55, from a suggestion by the Threshold organisation in relation to rented accommodation. That organisation is of the view that the requirement that short term leases in respect of modest dwellings be stamped actually acts as a reason for not giving out written leases or written tenancy agreements at all, which tends to the prejudice of tenants in such accommodation. In view of the fact that the amount of money involved must be very small indeed from the point of view of the State on short term tenancies of flats and the like, there must be very little actual stamping of the vast majority of such leases, it would be better if it were completely abolished as an area of documentation requiring stamping, when landlords would be more inclined to give their tenants written contracts of tenancy which did not need to be stamped. Accordingly, social justice would be furthered at very little expense to the Exchequer.

Perhaps I could be enlightened in regard to this matter. The Deputy is talking about a short term lease given by a landlord. I should have thought that the reason a landlord would be interested in issuing a longer lease would be that he would be inclined to keep his options open and be able to have the premises vacated at an earlier stage. We are talking about a small amount of money involved in the stamping of a lease, of perhaps £5,000 or £6,000 which would be paid by the tenant. Why would that act as a deterrent to a landlord not to issue a lease? I am not clear on the reasons being advanced by the Deputy.

Most landlords prefer the minimum of documentation, records and complexity. They tend to conduct their business on the basis of a verbal tenancy or weekly lettings of a premises. However, such a weekly letting means that a tenant will be left high and dry in terms of minimum notice and obligation on the part of the landlord to the tenant. What the Threshold organisation want is the Exchequer to withdraw its requirement of stamp duty on such short term leases in order to encourage the general granting of written leases in respect of short term tenancies. That is it.

I am prepared to accept it. I just wanted to hear the logic behind it. I will do something with it between now and Tuesday.

(Limerick East): There is a similar amendment in my name.

Amendment, by leave, withdrawn.

As it is now 10.30 p.m., I am required to put the following question in accordance with the Order of An Dáil of yesterday: "That the amendments set down by the Minister for Finance to Parts III and IV of the Bill and not disposed of are hereby made to the Bill and in respect of each of the sections undisposed of, in the said parts, that the section or as appropriate the section as amended is hereby agreed to." Agreed.

Progress reported; Committee to sit again.
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