Frances Fitzgerald
Question:13 Ms F. Fitzgerald asked the Minister for Finance the plans, if any, he has in relation to the removal of VAT on Irish newspapers.
Ceisteanna—Questions. Oral Answers. - VAT on Newspapers.
I have no plans to remove VAT from Irish newspapers. This is because the agreement reached at EC level under the VAT Rates Directive precludes member states from introducing new zero rates. I should point out that the reduced VAT rate of 12.5 per cent applies to all newspapers sold here regardless of where they are published.
Would the Minister agree that the average rate of VAT on newspapers sold within the European Union is 3.5 per cent, those in the UK are zero rated and ours carry a rate of 12.5 per cent? Does this account for the 25 per cent decrease in sales of Irish newspapers over the past 11 years? Given our close proximity to the United Kingdom does that not make it very difficult for Irish newspapers to compete with their foreign counterparts? Would the Minister agree that he should be helping the newspaper industry to compete on equal terms with foreign newspapers?
I helped the newspaper industry in a big way this year in the Finance Act when, as Opposition spokespersons will recall, we extended the 10 per cent corporation tax rate to all newspaper revenue for accounting periods ending on or after 1 April 1992. Deputy Fitzgerald is correct in saying that historically VAT rates have been very low in a number of EC countries but I should point out that, under the Sixth VAT Directive 1 January 1991 was taken as the operative date. We could not revert to a zero rate; we would have to strike a rate higher than 5 per cent. Frankly, we are not in a position to do so; indeed, we have to use such funds for many other purposes of which Deputy Yates reminded me earlier.
In an effort to clarify the issue of imported newspapers I should say that newspapers imported from the United Kingdom constitute a major problem for ours. Even though such newspapers are zero rated in the United Kingdom once sold on the streets of the Republic they are subjected to a VAT rate of 12.5 per cent. When introducing the 10 per cent corporation tax rate change I went into this issue in great detail with the newspaper industry here who face a continuing and growing threat from imported newspapers. The reason is the economy of scale, bearing in mind these printing manufacturing units who merely run off another 20,000 or 30,000 additional copies for the Republic of Ireland. One must bear in mind the economy of scale when selling to a population of 50 million people which allows that to be done. My initiative on the revised tax on manufacturing will help. Other suggestions have been made to me recently by newspaper people which I will examine.
Will the Minister accept that much of the traditional newspaper industry here is caught in a pincer movement between advertising revenues through the medium of television, on RTE and ITV, and, on the other hand, very cheap, imported tabloid newspapers which means they are losing revenue on both sides? I wish to remind the Minister that one of his predecessors, former Deputy MacSharry introduced a special concession, vis-à-vis another form of VAT on knowledge, for books, periodicals and so on. Would the Minister consider some restructuring of the VAT code, examining all indirect taxes, with a view to giving some support to employment in the newspaper industry, particularly the provincial press?
The Deputy made the same point I made earlier, that the problem for advertising is clearly evident with more and more advertising being carried on local radio at cheaper rates. But, in any endeavour to reduce the rate, one would have to strike a rate somewhere in excess of 5 per cent which would also have to be extended to other categories subjected to the 12.5 per cent. It would be better to target any reduction at manufacturing reliefs. We have taken a step in that direction and next year we will ascertain how that assisted them, although I think it does help them enormously. The only disadvantage is that if you are losing money the relief on profits is not of benefit. We will have to wait and see how this works out. It is certainly beneficial to newspapers in profit.
I take the Minister's point that the changes in the budget were helpful. However, as sales of Irish newspapers have declined, sales of British newspapers have increased, from 499,000 in 1985 to 560,000 in 1992. In Ireland 90 per cent of the population read daily and Sunday newspapers. One in four daily newspapers is English and one in three Sunday newspapers is now published in Britain. The industry strongly believes that the VAT rate — because it led to price rises — is one of the main reasons for the Irish newspaper industry not being able to compete with the British daily newspapers. I note from an earlier response to the Minister that VAT on newspapers in 1992 amounted to £17 million. I put it to the Minister that the damage to the newspaper sector and the losses in terms of circulation and sales are major problems for the industry and skills are being lost.
Is the Deputy arguing that the VAT rate on Irish newspapers is the reason for the problem? There is no difference in the VAT rate on Irish and British newspapers.
The price rise has been influenced by the VAT rates. They increased to 18 per cent at one stage.
All we can do now is try to assist the provincial newspapers and those not making money. The other 10 per cent probably deals with newspapers making money but the rates are lower. I know, from speaking to newspaper people, that the number of newspapers coming into this country, both daily and Sunday, is frightening. I do not know who reads them — I do not.
My constituents — and those of the Minister — read them.
I only read the Irish newspapers.
I want to move on to other questions and to be fair to other Deputies. I will take two final supplementaries on this question.
Can the Minister put a figure and value on imported newspapers and magazines and the job equivalent it represents here?
To a huge extent the periodicals are non-Irish. The figures quoted by Deputy Fitzgerald are correct. In excess of 500,000 UK newspapers are coming in here.
Can the Minister expand on a remark he made in the course of his first response about the 10 per cent tax being extended this year. He said he was actively considering other measures. What measures?
I said that that scheme helps. When we introduced it we thought the scheme would help everybody. Some newspapers pointed out since that it helps those in profit or those with accumulated profits but that is not the full picture. Individual newspapers have put forward ideas which they asked me to examine in the context of their own position. I had better not say any more.