I wish to share my time with my colleague, Deputy Ray Burke.
Adjournment Debate. - Golf Club Taxation.
I am sure that is satisfactory and agreed.
I am raising this issue on foot of many representations in connection with what I perceive to be an iniquitous tax. As I am not a golfer, I do not have a special interest in the sport, although I recognise it as an important element of our sporting ethos. Our golfers have done much for the country by bringing its good name to the attention of the international golfing world. They have distinguished themselves.
There are 350 private members' golf clubs and 15 to 20 commercial golf clubs in the country. I understand this tax of 12.5 per cent is to be introduced as and from 1 January next. While the commercial clubs are an important element in that they are democratic, if an adjustment has to be made the answer is to levy this tax on these clubs on the basis that there are only between 15 to 20 of them.
The inequity in this is that the young and the old, various golfing societies, and others, such as holiday makers, will suffer. The tourism trade will be damaged as a direct result of the introduction of this tax. The Minister for Finance should, prior to 1 January, consider the Spanish experience. When a serious additional element was imposed on the golfing fraternity in Spain visitors were no longer attracted to play golf. I urge the Minister to abolish this tax for private members' clubs and to impose it on the commercial clubs only.
I sincerely thank my colleague for sharing his time with me on this important issue which is of crucial importance in my constituency where there are over 20 clubs, four of which operate on the basis of "pay and play". I share my colleague's concern about the private members' clubs which are non-profit making and which plough membership and green fees back into the development of facilities.
This iniquitous tax on green fees is being imposed by those who do not understand the system. In the parish of Donabate where I was born there are six clubs the members of which will now have to pay VAT on green fees whenever they play at other clubs. The golf tourism trade is a vitally important source of income for the community. For example, 38 people are employed at Beaverstown Golf Club during the summer. They will be badly hit by the imposition of VAT on green fees.
One way around the problem might be to exempt from VAT the private members' clubs and not go ahead with the proposal to impose it on the commercial clubs. This proposal will affect many people who have taken early retirement and play society golf, whether in their local pub society, football society or golf society in clubs around north County Dublin and elsewhere throughout the country. They will be penalised by the imposition of this VAT.
I appeal to the Minister of State to maintain some sanity in this area, remembering that it will adversely affect employment, tourism, the membership and income of golf clubs and that the revenue yield will be minimal compared with the incalculable damage that will be done to all golf clubs. The Government should rethink this proposal and remove this iniquitous taxation.
I thank Members for raising this issue, affording me an opportunity to explain the rationale behind the proposal.
The Finance Act, 1995, provides that, as from 1 January 1996, the green-fee type turnover of member-owned golf clubs will be become liable to VAT at the reduced rate of 12.5 per cent provided the organisation's turnover from such sources exceeds, or is likely to exceed, £20,000 in any period of 12 months. The measure will also apply to local authority golf facilities.
Commercial golf courses have been liable to VAT since 1992. As they are clearly engaged in the course of furtherance of business, they are taxable in accordance with the provisions of EU and Irish VAT law. Member-owned golf clubs, on the other hand, are exempt from VAT because they are deemed to be providing services for the benefit of their members on a non-profit making basis. However, EU VAT law requires that this exemption from VAT shall not apply if the basic purpose of the service being supplied is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises which are liable to the tax. For some time, the representatives of the commercial clubs have complained that the present situation, where they had to charge VAT on their facilities but the traditional golf clubs did not, was putting them at a competitive disadvantage. In the circumstances there was no option but to bring the green-fee type income of the member-owned golf clubs into the tax net. The initiative was taken on grounds of equity rather than as a revenue-raising measure.
Would it not be more equitable to do away with VAT on the 350 member-owned clubs and impose it on the 15 or 20 commercial clubs?
We cannot because, under Irish and European Union law, the 20 are obliged to pay VAT.
We make the laws in this Parliament.
An Leas Cheann-Comhairle
Let us hear the Minister's response, please.
The commercial clubs are a commercial venture.
The Minister said it was Irish law.
Both Irish and European Union law.
We make the laws here.
We made the law but we cannot exempt one commercial activity. We cannot make laws and then make those kinds of exceptions. Great pains were taken to ensure that the Finance Act requirement was carefully targeted at the area of distortion, that is the green-fee-type turnover for which both categories of club are in direct competition. In the case of member-owned clubs, turnover from membership fees, bar receipts and so on is not taken into account in calculating the registration threshold. The £20,000 registration threshold is applied across the broad range of service industries as indicating a scale of activity which, if not taxed, would constitute a distortion of competition to the detriment of taxable providers of similar services. This threshold level is also appropriate in the case of golf facilities. The alternative turnover thresholds most frequently proposed in representations received from a number of member-owned clubs — £175,000 and £200,000 — only serve to illustrate the substantial scale of activity involved and confirm the obvious competition this represents for commercial operators who are, after all competing for the same visitor and tourist clientele as member-owned clubs.
I might also make the point that golf was not singled out. While there are special provisions in the 1995 Finance Act to deal with the particular circumstance arising in the golfing sector, the Act also contains measures enabling the Revenue Commissioners to designate any exempt sports facility liable to VAT where they are satisfied the facility in question is creating, or likely to create. a distortion of competition for a taxable person providing similar services.
This sounds as if it were written by a fellow engaged in deep sea diving who knows nothing about golf.
It is fully accepted that green fees constitute an important source of income for many clubs which is used for the development and expansion of their club facilities and, in some cases, to reduce membership fees. The leading role taken by many of our long established member-owned clubs in promoting Ireland abroad as a holiday destination for international golfing tourists is also well known, on which they are to be commended. However, it is simply not credible to argue that this type of overseas promotion falls within the context of providing a service for their members on a non profit-making basis. The Government also has a responsibility to the commercial sector to apply the tax in a fair and equitable manner. At present a tourist playing golf in a commercial facility pays VAT but does not do so when playing in a member-owned club. This position could not be allowed to continue.
Why reduce them rather than increase their number?
I have heard the Deputy say the same thing several times.
The Minister has but five minutes to respond and ought be allowed to continue.
The Minister continues to read out this tripe.
I cannot accept that the measure to be applied next year will have a detrimental effect on tourism. As regards the possible effect of the initiative on prices, in many instances the effective VAT rate should be less than 12.5 per cent because the organisations concerned will be able to recover the VAT borne on their inputs such as buildings, machinery, greens maintenance and so on in respect of the taxable part of their activities, a facility previously denied them because they were exempt from VAT. Second, member-owned clubs have had considerable time to prepare for the new circumstance. Third, unlike their competitors in the United Kingdom, France and Spain, where the standard rates of VAT applicable to green fees is 17.5 per cent, 20.6 per cent and 16 per cent respectively, Irish clubs will have the benefit of the reduced rate of 12.5 per cent——
That is some consolation.
They are being hit with a hammer but not so hard.
Deputy Ray Burke should have taken up this game during his recent sabbatical.
As Deputies will be aware, 12.5 per cent is the rate applicable here to most tourism-related areas such as sporting activities in general, short-term car hire, hotel and holiday accommodation and restaurant services. Deputies may be interested to know that the issue could not have been resolved by exempting commercial facilities from VAT. As they are clearly engaged in the course of or furtherance of business activity, European Union VAT law requires they be liable to tax.