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Dáil Éireann debate -
Tuesday, 24 Oct 1989

Vol. 392 No. 1

Ceisteanna—Questions. Oral Answers. - VAT and Excise Rates Harmonisation.

28.

asked the Minister for Finance the present position regarding EC proposals for harmonisation of VAT and excise rates; the steps the Government intend to take to ensure that the proposed harmonisation does not damage the Irish economy; in particular, the steps which are planned to protect those on low incomes; and if he will make a statement on the matter.

54.

(Limerick East) asked the Minister for Finance the Government's policy on the harmonisation of VAT, excise duty and deposit interest retention tax.

I propose to take Questions Nos. 28 and 54 together. In May 1989 the EC Commission tabled revised proposals for approximation of VAT. These provided for a minimum standard VAT rate of about 15 per cent, a reduced rate in the range 4-9 per cent, and the option of a zero rate in respect of a limited but unspecified range of goods. The Commission's excise proposals have not yet been tabled but I understand that these will be available shortly.

Discussions on the VAT proposals are proceeding. Agreement has been reached in the Council of Ministers on certain structural aspects, in particular, the continued application of zero-rating to exports and the charging of VAT in the country of consumption. However, the whole question of rates of both VAT and excises remains to be settled.

The Government's policy in this area is to participate fully in the realisation of the internal market while at the same time ensuring that this does not entail any unsustainable loss of revenue or serious damage to the economy as a result of tax approximation. We are continuing our efforts to find solutions to these problems with our Community partners.

Since matters have not yet progressed to the point where the shape of an agreed package is clear, it is not possible to say whether persons on low incomes will require protection from indirect tax harmonisation. Deputies can take it, however, that this aspect will be considered carefully by the Government.

There are no live proposals to harmonise deposit interest retention tax.

Proposals were put forward last February by the European Commission for the introduction of a minimum Community-wide withholding tax on interest income; member states would have been free to impose a higher rate on their own residents. The proposals, which Ireland broadly supported, were opposed by a number of member states and, although they have not been withdrawn by the Commission, they seem very unlikely to be agreed.

(Limerick East): I would like to thank the Minister for summarising the European Commission's policy on harmonisation. Perhaps he would turn now to the question I asked. What is the Government's policy on harmonisation? Has the Minister, on behalf of the Government, any proposals to put before the Council of Ministers in Europe?

I repeat what I have already said to the Deputy. The Government's policy in this area is to participate fully in the realisation of the internal market while, at the same time, ensuring that this does not entail any unsustainable loss of revenue or serious damage to the economy as a result of tax approximation. We are continuing our efforts to find solutions to these problems with our Community partners.

(Limerick East): Is the Minister aware that the recent NESC report states that one of the great problems in this country is that we have merely reacted to the proposals of other people, particularly the Commission, and that our salvation is in having a pro-active approach to Europe where we front-lead and advance our own policies in areas like tax harmonisation, convergence and other matters?

I would like to inform the Deputy that we are extremely active at Community level at ECOFIN meetings and in bilateral discussions in this regard. Our policy is quite clear.

As the Deputy will be aware there are proposals around on tax harmonisation that are known as the Cockfield proposals which were there for a period of years and in which we have made no progress, good, bad or indifferent. The main proposals are there for discussion. We made quite some progress at the last meeting of ECOFIN. We expect that the excise proposals which are not yet on the table will be made available to us shortly for a full discussion at the next meeting of the ECOFIN on 13 November.

(Limerick East): I have one more brief supplementary.

I am seeking to dispose of four more questions within the prescribed time which is less now than ten minutes. A number of the Deputy's own questions are involved and I seek his co-operation as much as that of the other Deputies in the matter. I will allow the Deputy a brief question.

(Limerick East): I will cooperate. I am aware of Lord Cockfield's proposals, as indeed I am aware of the alternative proposals put forward by the present Commissioner. I am also aware that the Government have no proposals of their own and are merely reacting. Let me ask the Minister something that he might be prepared to answer. What is the estimated cost of Madame Schrivener's proposals as regards VAT? What is the cost of full harmonisation of excise duty to the UK level and the loss to the Irish Exchequer of the elimination of DIRT?

The Deputy is raising specific matters worthy of a separate question. I am calling Question No. 55 which is Deputy Mervyn Taylor's question.

(Limerick East): You are protecting the Minister and he does not need protection. He has the information.

Deputy Noonan, do not make that allegation against me.

(Limerick East): That is not an allegation.

Deputy Noonan, desist.

(Interruptions.)

(Limerick East): Why is the Minister running away from the issue?

Why does the Deputy not let me answer the question?

If the Deputy dislikes the Minister's reply he has a remedy. He may not allege the Chair is partisan in the matter.

(Limerick East): On a point of order, it is not a question of not liking the reply. I got no reply because you would not allow the Minister to reply.

That is a most unfair remark. I am seeking to dispose of a number of questions within the prescribed limited time. I sought the Deputy's co-operation. It was not forthcoming.

(Limerick East): You took 20 minutes for the first two questions to the Taoiseach.

(Interruptions.)

Please, Deputies.

(Limerick East): When the debate on the NESC starts I hope I will get better answers.

I will be delighted to answer the Deputy.

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