Prompt Payment of Accounts Bill, 1997: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Minister for Enterprise and Employment (Mr. R. Bruton)

When this debate was adjourned I had been dealing with, in particular, section 1, the definitions section. The second key term defined in that section is "prescribed payment date", which is the date on which payment for the provision of goods and services will be due. In the case of a written contract, the due date will be the date specified in the contract. Where there is no written contract, or where the written contract does not provide for a date of payment, the payment date will be 45 days after receipt of the invoice or delivery of the goods, whichever is the later.

There is also provision in section 1, in conjunction with section 10 (2), for the 45-day payment period to be reduced by order, at a future date, if this should be considered desirable in the light of experience.

Section 2 specifies that the Bill will apply only to goods and services supplied on or after the date on which its provisions come into operation. Section 3 allows the Minister, by order, to amend the Schedule which lists the bodies covered by the legislation. This provision is necessary to allow the Act to be updated to include new public bodies which may be established in the future and to remove the names of those which cease to exist. For reasons of transparency, the section also specifies that, if the Minister deletes a body from the Schedule, the reason for its deletion must be specified in the order.

Section 4 is the key provision ensuring the prompt payment of accounts and requires purchasers, whom I described earlier, to pay for the supply of goods and services by the prescribed payment date. If payment is not made by the due date, the purchaser must pay an interest penalty on the amount outstanding. The interest must be paid in respect of the period beginning on the day after the due date of payment and ending on the date on which payment is made. Most importantly, the section specifically provides that the interest penalty cannot be waived by the supplier. Moreover, the interest penalty must be paid without any demand for its payment being made by the supplier.

The automatic entitlement to interest in respect of late payments provided for in this section is a fundamental prerequisite to the effective operation of the legislation. Very often suppliers regard themselves as being in a vulnerable position vis-à-vis purchasers. It is more than likely they would be reluctant to submit demands for payment of interest for fear of jeopardising their chances of securing future contracts. Section 4 is designed specifically to protect the supplier and ensure easy and automatic access for him or her to entitlements under the legislation.

Section 4 also stipulates when payment shall be taken to have been made by the purchaser. This shall be when the supplier has received the appropriate amount of cash, when the appropriate amount is credited to the supplier's account or when the purchaser enables the supplier to credit his or her account with the appropriate amount, for example, by means of a cheque which is subsequently honoured.

Section 5 is designed to address circumstances in which incorrect or inadequate invoices are furnished by suppliers. It is not uncommon for lengthy delays to occur while problems relating to invoices are resolved between the purchaser and supplier. Therefore, the objective of this section is to speed up this process or, at least, ensure that any undue delay on the part of the purchaser in querying an invoice will not result in the supplier having to wait indefinitely for payment. This section is intended to encourage the purchaser to raise any queries concerning the invoice with the supplier within ten days of receipt of the invoice. It provides that, where a purchaser returns an invoice to a supplier within ten days of receipt because of its inadequacy or inaccuracy and, at the same time, gives the supplier a written statement identifying the defects that prevent payment being made, the interest penalty shall not accrue until ten days after the purchaser receives a corrected invoice or until the due payment date, whichever is the later.

If the purchaser is late in returning the invoice to the supplier, the period of grace allowed for payment after receipt of the corrected invoice will be reduced by a corresponding number of days.

Section 6 specifies that, when any payment which includes an interest payment is made, it must be accompanied by a notice stating the amount of the interest penalty included, the rate by which and the period for which the interest penalty was computed. There is also provision to allow the Minister to prescribe that additional information must be provided if, in the light of experience, it transpires that further information would be useful to suppliers. The purpose of section 6 is to ensure clarity and transparency in relation to interest payments. It will enable the supplier to know exactly how much interest he or she is being paid, the rate used and the period involved. In the absence of such provision, it would be difficult for the supplier to ascertain whether or not he or she was receiving the correct entitlement.

Section 7 deals with the payment of invoices in the event of dispute. Suppliers often complain that it is common practice for purchasers to withhold payment of an entire invoice if any of the goods or services covered by the invoice are in dispute. They also contend that some disputes can be spurious and used as a delaying factor to postpone the date of payment. To rectify this problem in a fair manner I am providing for the partial payment of invoices in cases of dispute. The purchaser will not have to pay interest on amounts outstanding in respect of goods or services in dispute provided, first, the parties agree that the goods or services are genuinely in dispute or a court or arbitrator so decides and, second, the purchaser pays for the goods, if any, agreed or determined not to be in dispute.

Section 8 provides for the resolution of disputes. It gives suppliers the option of submitting disputes relating to the payment of an interest penalty to arbitration. Suppliers are sometimes reluctant to pursue cases in the civil courts for a variety of reasons, and I considered that some other form of resolution mechanism should be open to them under the Bill. Given the subject matter of this Bill, access to arbitration is particularly suitable. It is important to note, however, that the decision on whether to refer a dispute to arbitration rests with the supplier. It is still open to the supplier to bring a case to the civil courts if he or she would prefer that course of action.

The section also provides for the appointment of an arbitrator who may be chosen by agreement between the parties or, failing such agreement, may be appointed by the President of the Law Society or by any other person prescribed by the Minister. The provision of the Arbitration Acts will apply to arbitration under this Bill but, if necessary in the light of experience, the Minister may modify the provisions of those Acts for the purposes of arbitration on prompt payments or set additional conditions in relation to the arbitration.

Section 9 is designed to ensure that main contractors on public sector contracts pass on the benefits of being paid promptly to their subcontractors. The section applies where there is a written contract between a public sector body and a main contractor and where the main contractor then contracts, in writing, with other suppliers for the acquisition or supply of goods or services to be provided under the first contract with the public body. The main contractor must agree a payment period with his suppliers which is at least as short as the payment period he has secured from the public body.

There is one aspect of section 9, as published, with which, on closer examination, I am less than satisfied. The clause to which I refer is the provision which would allow the main contractor and his supplier to agree, in writing, to a longer payment period than would otherwise be permitted under the section. It appears this would have left a loophole and I have, therefore, decided to introduce an amendment on Committee Stage to close this off.

While section 9 refers only to circumstances relating to written contracts, suppliers to main contractors also have the protection of the legislation where there are no written contracts. By virtue of the definitions of "purchaser" and "prescribed payment date" in section 1, a main contractor would be obliged, under section 4, to pay his suppliers within 45 days in the absence of a written contract. The amendment I propose to introduce on Committee Stage will make this position clearer.

Section 10(1) requires the Minister, by order, following consultation with the Minister for Finance, to fix the rate of interest penalty which will apply to late payments. It also allows the Minister to amend such an order. This provision will allow for flexibility so that fluctuations in interest rates in the market can be taken into account, as necessary, in setting the rate of interest penalty on late payments.

Section 10(2) allows the Minister, after consultation with the Minister for Finance, to shorten the 45 day payment period specified in the definition of "prescribed payment date". It is my intention to monitor the operation of this legislation on an ongoing basis and this section will give me the power, if it is deemed necessary or desirable in the light of experience, to reduce the 45 day payment period at any stage.

Section 11 provides for a major safeguard against public sector bodies seeking unreasonably long payment periods in written contracts. It gives the Minister the power to police the payment practices of public bodies. Where the Minister considers any public body is availing itself of credit terms that are unreasonable in the circumstances, the public body can be compelled, by order, to pay for all or some of its goods and services within 45 days. For reasons of natural justice, the Minister will have to advise the public body of the grounds for believing that the credit terms are unreasonable and afford them an opportunity to respond.

Section 12 is intended to ensure transparency in regard to payment practices by public bodies. It will require all bodies listed in the Schedule to disclose details of their payment practices. Where the body is required, by statute, to publish an annual report, the report must include details of the payment practices in the period covered by the report. Where a public body is not required to publish an annual report, it will have to submit an annual review of its payment practices to the Minister and the review shall be laid before the Houses of the Oireachtas. The Minister also has the power to specify the type of details which should be included in the annual reports and reviews.

Section 13 provides a further mechanism for ensuring compliance with the legislation. It specifies that every auditor auditing the affairs of a body listed in the Schedule must report on whether that body has complied with the provisions of the Act. This is in line with the recommendations of the Task Force on Small Business which suggested that the Comptroller and Auditor General should be given a function in monitoring the payment performance of public bodies.

Section 14 deals with tax clearance certificates and withholding tax. It makes it clear that the Act does not require the payment of an amount due to a supplier who has failed to comply with a request to provide a tax clearance certificate and it extends the time limit for payment where there are delays in furnishing such certificates. The section also makes it clear that the legislation will not affect the power to deduct withholding tax from any payment to a supplier.

Section 15 is a standard section empowering the Minister to make necessary regulations under the Act. It also deals with the laying of orders and regulations before the Oireachtas. Section 16 is also a standard provision dealing with the short title and commencement of the Act.

This Bill represents further evidence of this Government's ongoing commitment to improve the operating environment for small business. The legislative requirement on public sector bodies to pay their suppliers promptly, with the automatic entitlement of suppliers to interest on outstanding payments, are positive steps to improving cash flow for small business and to freeing management time to concentrate on the essential elements of their business. In conjunction with the wide range of other improvements introduced by the Government, this Bill will ensure that small businesses will have the environment they need to grow and develop and to expand their very significant employment creation potential. Accordingly, I commend the Bill to the House. I welcome the support for the legislation, particularly from the Fianna Fáil benches. They were keen to see this Bill and I am glad we had the opportunity to introduce it in this session.

Mrs. O'Rourke

I thank the Minister for his scant understanding of what we put forward. Almost seven months ago I presented during Private Members' time the Prompt Payments Bill, which included everything that is in this legislation. Two hundred days later the Minister has presented a straightforward cog of that Bill. While imitation is the sincerest form of flattery, the Minister's failure to take on board my Bill or immediately introduce alternative legislation has cost small businesses more than £10 million in credit costs since November. I am indebted to the Minister for giving me that figure, which I had estimated based on surveys carried out by the SFA and ISME. The document, Payment Practices in the Public Sector, by Goodbody Economic Consultants, issued today by the Minister, states that suppliers of goods and services will benefit from an improved cashflow. It also states that the maximum total benefit is estimated at £19.7 million per year.

I accept it takes time to prepare legislation, but the Minister could have accepted the Fianna Fáil Bill. I said at the time I was prepared to take amendments on board. In latter times the Government has taken on board Bills on justice and other matters and accepted them in a spirit of co-operation. That could have been done with the Bill I introduced, but the Minister adopted a small-minded approach to a practical proposition offered in a spirit of co-operation and flatly turned it down on the basis that he would introduce a Bill shortly after Christmas. He then said it would be introduced before Easter and now, in the dying days of this Government, it is introduced so that the Minister can say he fulfilled his promise. That lack of generosity of spirit and inaction cost £10 million.

Were I in the Minister's position and he in mine and he produced a prompt payments Bill which was acceptable, I would take it on board in a spirit of generosity. We do not need expensive new surveys to tell us that getting paid by the State sector is a never ending problem for businesses. ISME and SFA have produced their own surveys. I am amused it has taken an eminent firm to prepare the document, about which I will be asking the cost, and it has taken seven months to produce the Bill which will benefit suppliers by £20 million. It is amazing except that this Government has a strong liking for surveys, expensive publications and photographs of itself.

Slow up of payments causes serious cashflow problems and requires firms to extend overdraft facilities or engage in additional borrowing, estimated at up to £20 million per year in credit costs for small businesses. The final paragraph from Goodbody Economic Consultants reinforces what I said seven months ago. It is an amazing feat that it has taken that expensive survey to make that statement. The seven months lost because of the Minister's small-mindedness about an Opposition Bill resulted in a further unnecessary cost of £10 million for businesses in the half year.

It is apparent the reasons given by the Minister for rejecting the Fianna Fáil Prompt Payments Bill in November were spurious. His decision to reject our Bill was petty politics and he displayed an ungenerous spirit just because we had produced it. As an Opposition party we have limited resources but our Bill fulfilled all the Oireachtas criteria and met the standards laid down by the Dáil for Private Members' Bills, otherwise it could not have been produced. I say this because the Minister rubbished the Fianna Fáil Bill.

We said if the Minister wished to table amendments we would look at them in a spirit of co-operation. Given the onset of an election, it is amazing what can be done. Had I produced this Bill a month ago I can safely say it would have been accepted. However, the Minister and the Government parties persist in taking their own route. One can only conclude the short-sightedness resulted from the dilatory approach to the problem of late payments exposed by our Bill. There were endless promises to introduce a Bill and the never ending delay prompted us to produce it.

Some days before our Bill was produced, the Minister took the unusual step of having a press conference to announce he would have proposals for a Bill. I suspect it was an effort to pre-empt what we would do. I welcome the fact that the Minister has produced the Bill, even if it is two and a half years after the rainbow Government's promise in its programme for government to introduce such a Bill. In many State organisations and Government Departments there was acute resistance to the Bill. The Bill will be introduced and, with co-operation, passed but the Minister will not be around to see its implementation.

Last November when he rejected the Fianna Fáil Bill, the Minister, Deputy Bruton, said "no time would be lost" in bringing his Bill to the House. He promised to have it in the New Year, later he promised he would have it before Easter but it is now May and we have the Bill. May is a good month for elections.

If the Bill proceeds to Committee Stage next week, Fianna Fáil will propose a number of amendments, the first of which will that Telecom Éireann, Bus Éireann and Aer Lingus come immediately within the ambit of the Bill. I do not understand why they are being left out. I am flabbergasted. Telecom, by its own admission and its financial reports, even though it faces difficult times ahead, has made profits and is well able to pay its bills on time. Likewise Bus Éireann and Aer Lingus have published flourishing financial reports. I do not understand the reason they are to be treated differently. The Minister has proposed they should not come within the scope of the Bill for one year after the coming into force of the legislation.

This afternoon the Minister said the date of implementation of the legislation would be 1 January 1998. It is worth noting Telecom Éireann, Bus Éireann and Aer Lingus will not come within the scope of the Prompt Payment of Accounts Bill until 1 January 1999. That is extraordinary. Does the Minister mean one year after the coming into force of the legislation or one year after the passing of the Bill? Perhaps we will get some guidance on that matter. One way or the other those companies should not be treated differently from any other State or semi-State body which owes people money. It makes no sense whatsoever and indicates the Minister is bowing to pressure. The same rule should apply to all State bodies and there should be no two tier system. Aer Lingus and Telecom, both major businesses, are reported to be in strong financial circumstances. I will be proposing that amendment and giving due notice of it and I hope it will be accepted. If it is not accepted, and the Bill goes through unamended because of the weight of numbers, when in Government we will propose an amendment immediately.

Another amendment we will propose next week is a special court system that would allow for quick inexpensive and effective legal remedies for non-payment of commercial debts. A prompt and simple system, similar to the small claims type court, would serve a useful purpose in relation to registering judgments for commercial debts up to £5,000. This would include a programme similar to the consumers small claims procedure which operated before the small claims courts were established.

Under the procedure, if respondents did not dispute a claim of non-payment within 30 days of receipt of a notice from the District or Circuit Court registrars, they would be held to have admitted to it. The claimant could then proceed to obtain a judgment against the respondent.

We will also propose an amendment to designate small businesses as consumers. This would bring small businesses within the remit of many ombudspeople and would give them new avenues to overcome difficulties. The Fianna Fáil legislation required all Government Departments and State agencies, more than 200 in total, to pay their bills on time. Our Bill took up directly the recommendations of the task force on small businesses and required all public sector bodies to settle their bills by the last business day of the month following on the date of invoice. This gave an average credit period of 45 days to public sector bodies.

Under the Fianna Fáil legislation if the State body was late in paying its bills it would have to pay an additional 1.25 per cent per month interest on the late payments business. The interest rate was identical to the Revenue Commissioners' penalty for late payment of corporation tax. All these proposals are copied directly into the Minister's Bill. However, one proposal the Minister has not taken up is our proposal to involve the Ombudsman. We believe he or some other officer of such standing can add a moral weight and authority to the process and ensure State bodies do not try to abuse their position in relation to payments.

We had proposed to give the Ombudsman powers to enforce prompt payments by State bodies. He would also have the power to name State bodies in his annual report for non-compliance with the legislation. We also required senior executives in each State body to certify compliance with the Bill in their annual report and accounts. That will be necessary because executives and various other people will try to dodge this Bill and keep people waiting. Often people who are awaiting payment fear they will be discriminated against for further contracts if they complain about late payments. Legislation can mean well but those giving the contracts can make their displeasure plainly felt by not giving further contracts to small firms who are already disadvantaged because they are waiting for payments. There will be undertones of disapproval because they have been bold enough to pursue their rights under this legislation, and they may find that orders will go elsewhere. This matter must be addressed.

The Minister rejected the idea of an annual report from the chief executive on an organisation's pace of payments. If the Minister felt there was a problem with the Ombudsman he could have given the power to somebody else. Fianna Fáil provided that its Private Members' Bill would come into effect on 1 July 1997 for every State body. That date was based on the assumption that the Bill would not be passed for some time as it was a Private Member's Bill and we wished to be reasonable. We did not want the Minister to reject it. Whatever time gap there might have been between the passing of the Bill and that date could have been used by State bodies to prepare for its introduction. Had the Minister wanted the provisions to come into effect sooner he could have proposed an amendment to our Bill which we would have accepted gladly. However, in effect he wants it to come into effect much later.

The Minister should have worked with us immediately to tackle the late payments problem. Our Bill was prepared following consultation with the business community and our legal advisers. I am interested to know why the Minister is to give a one year derogation to bodies such as Telecom Éireann. I fail to understand the need for this.

Late payment is a serious issue and should have been addressed long ago. The small business task force noted that late payment causes serious cash flow problems and requires firms to extend overdraft facilities or to engage in additional borrowing. The problem consumes vast amounts of scarce management time in chasing payments. The first task each day for many small firms is to list those whom they have to ring in attempting to extract payment and the firms tell me that in many cases it is like getting blood from a stone. When they could be seeking new business or dealing with research or personnel matters they must spend time seeking payment of bills. When they ring up large firms they suffer the indignity of being shunted from one person to another or are told the cheque is in the post.

Irish payment periods are among the worst in Europe and State bodies are among the worst offenders. Departments, local authorities, vocational education committees and health sector bodies have poor payment performances. The task force on small businesses came up with all the information which is in Goodbody survey. Fianna Fáil believes the public sector should have an exemplary record in paying its accounts on time. The State's firms should lead by example and this would have a significant knock-on effect. At present the State takes many actions to support enterprise but it is contradictory for the State to assist small businesses through industrial policy interventions while the payment practices of State bodies smother the development of small businesses.

The Fianna Fáil Bill followed a number of initiatives taken previously when Deputy Séamus Brennan chaired the task force on small businesses as Minister of State with responsibility for commerce and technology. That task force made a number of significant recommendations, some of which have been implemented, although the pace of implementation is very slow. The Private Members' Bill was not Fianna Fáil's first initiative in the area of prompt payments. In 1994, the Leader of Fianna Fáil, Deputy Bertie Ahern, who was then Minister for Finance, allocated £100 million to restructure the finances of the health sector bodies. At that time they were among the worst offenders in withholding payments from suppliers, small businesses in particular. Unfortunately, health bodies have slipped back into their bad ways in this regard. The Fianna Fáil Bill made no exceptions for any State bodies. It included every Department, health board, harbour authority, local authority, vocational education committee, Aer Lingus, Aer Rianta, the ACC, BIM, Bord Gáis, Bord na Móna, CIE, ESB, RTÉ and the VHI.

We undertook to continue to review this matter as it applies in the private sector and I note the Minister today echoed that commitment. A code of practice was introduced, but I do not know how well that is operating and seven months after the Fianna Fáil Bill this Bill has been introduced. Once this Bill has been in operation for some time we should examine the practices in the private sector. I understand there are provisions in this regard in Germany for the private sector.

We intend to propose amendments to provide for a special court system to allow for quick, inexpensive and effective legal remedies for non-payment of commercial debts. A prompt and simple system, similar to the Small Claims Court, would serve a useful purpose in registering judgments for commercial debts up to £5,000. The Minister has proposed arbitration. We also propose a procedure similar to the pilot consumer small claims procedure in operation before the Small Claims Court was established. If respondents did not dispute a claim within 30 days they would be held to have admitted it.

All Government contracts should contain a clause requiring main contractors to pay their subcontractors in accordance with the payment terms of the Bill. Ireland's Presidency of the EU should have been used to have small businesses designated as consumers. That did not happen and we will table amendments on that point.

Fianna Fáil has proposed many measures in this area. In addition to the Private Members' Bill we have brought out a policy document on rewarding risk takers and we are planning radical reform of the agency structures which provide enterprise advice to small businesses. I accept that Fianna Fáil was responsible for introducing the country enterprise boards as a response to the EU bottom up approach to making funds available. However, the system has gone too far. For example, there are about 140 agencies to promote enterprise in Cork city and county alone. It is like a jigsaw puzzle without a solution. I am sure all the agencies do their best, but the consumers of their services must go to all the agencies for fear of missing out on funds or advice.

The IDA, Forbairt, county enterprise boards, area partnerships, Leader groups, county councils' development groups, self-help groups, advice groups or innovation centres are all admirable but confusing. The message I have received from around the country is that those planning a business or expanding their business must go to many agencies to establish the level of assistance available. Confusion is caused and time is wasted. Fianna Fáil proposes that in every county there should be one body for enterprise information. We also propose that there should be one body providing support to small businesses, rather than the current jigsaw of agencies.

I will support this Bill, which is copied from the Bill I introduced to the House last November and which the Minister refused in a niggardly, small minded and ungenerous way, to accept costing small businesses £10 million in the intervening period. That is not a wild summation on my part but is based on the figure given in the Goodbody survey commissioned by the Minister on payment practices in the public service — £19.7 million in a year and the intervening period is half of that which would have cost about £10 million. That shows the mean spirit in which this was approached. I know enough about the Minister's character to know that, either on his own initiative or on the advice of his Department, he will refuse to accept some of the important amendments I will table on Committee Stage in a cooperative spirit. I would be very surprised if he agrees to them, the most important of which will seek to ensure that large bodies such as Aer Rianta, Telecom Éireann and Bus Éireann will not be exempt when the Bill comes into force on 1 January next. I will be proposing that they should come within its remit. I am glad to support it in that spirit and look forward to the production and reception of the amendments to which I have referred next week.

Mr. M. McDowell

I support the general principle of the Bill which is a welcome one, that is, that the State will pay interest where it or any of its affiliate bodies or bodies performing public functions or substantially reliant on public funding fail in their duty to pay for goods and services by the prescribed date. There are, however, a number of features which could be improved.

I am unhappy with the provisions of section 2. I fail to see why the Bill shall apply only to and in relation to goods and services supplied on or after the commencement of the Bill, in other words, outstanding bills will not be covered. I fail to see why that should be so, especially since we have been given a timeframe for its introduction. It would be better to state that the Bill shall apply to and in relation to goods and services supplied on or after the passing of the Bill.

It is desirable that orders made under section 3 should be laid before the House and positively approved. The Minister should not have the power to remove the name of a person or body from the Schedule, temporarily or permanently, by means of a statutory instrument. It would be unfair on those who deal with public bodies, that by a stroke of the Minister's pen the bodies concerned can be exempted from the provisions of the Bill without any recourse. If, for whatever reason, the public company to which I am supplying goods can persuade the Minister to exempt it by removing its name from the Schedule, I am entitled to be heard or, at the very least, the Minister should explain in the House why its name is being removed. There should, therefore, be a positive mandate from the House for the inclusion or exclusion of bodies from the Schedule.

The provisions of section 4 which deal with the position of the Minister in determining the rate of interest payable where payment is not made by the prescribed date are unsatisfactory. The rate of interest payable should be laid down in statute and it must, for commercial reasons, be capable of being revised from time to time. Any revision should be subject to a positive mandate from this House, in other words, the House should be consulted where the Minister proposes to change the figure from 1.25 per cent per month to 0.75 per cent per month so that the implications are known. It should not be done as a cost saving measure.

I have some misgivings about the provisions of section 5. Will the exercise of the power of a purchaser to return an invoice for clarification be subject to the provisions of section 8 which deals with arbitration? I would be worried if it is not. It might become routine policy in certain Departments to fling back every invoice, with a standard nuisance "get up your nose" letter, in prevarication to the supplier. Where it is later found that sufficient or adequate information was supplied to the purchaser, it would be better if it was deemed that the clock was running all the time. I know the way Departments work and that the easiest thing for somebody who will be held accountable for the non-payment of an account to do is to send a Xerox letter stating the Minister or the secretary of the company cannot accept X, Y or Z and requires full details before payment can be made. Where the provisions of section 5 are improperly or unnecessarily invoked, it should be deemed that the clock was running all the time.

I accept that the necessary information should accompany payment. The provisions of section 6 in this regard are reasonable.

As I understand it, there is considerable doubt as to whether interest payable under the provisions of the Bill will be taxable in the hands of the recipient. There is not much advantage in receiving interest payments if they are regarded as taxable income. I know from professional experience in the courts that there is considerable doubt as to whether interest paid by the Revenue Commissioners on repayment of tax is subject to tax. If it is, it clearly affects its value. If I supply my services to the Director of Public Prosecutions and he delays in making payment — in fairness to the Director of Public Prosecutions, he is prompt in paying barristers — it would be unfair if the 3 per cent, 5 per cent or 10 per cent payable in interest was regarded as income, taxable at 48 per cent. In effect, it amounts to compensation for a wrongful act on the part of the State.

I seek clarification as to whether the arbitration procedure provided for in section 8 is contemplated as being one which will apply in determining whether the provisions of section 5 were properly invoked. I agree fully with the provisions of section 9 which deal with the question of prompt payment to subcontractors.

Section 10 states that the Minister shall fix the rate of interest penalty payable. It should be borne in mind that it is a penalty. I query, therefore, whether the State should claw back half of it in tax.

Under section 11 the Minister and the Minister for Finance will play a supervisory role to prohibit or prevent a purchaser from setting out terms which, in the last analysis, are unfair or unreasonable. I agree with Deputy O'Rourke that it would be better for a neutral person such as the Ombudsman or Director of Consumer Affairs who is conversant with commercial practice but who is not worried about the Exchequer implications to decide whether the terms offered by a purchaser are reasonable. The Restrictive Practices Groceries Order which is still in operation requires payment in certain circumstances by suppliers. Non-payment in accordance with those terms can lead to court action and injunctions. It might be better if this issue was decided by a more objective body or person.

I have no problems with sections 12 and 13. On section 14, I do not mind the tax clearance certificate system but it is important to make some points in regard to it. It is a bit rich for this House to require a vast number of suppliers and companies to have tax clearance certificates but not to impose a tax clearance certification system on aspirant Members of the House. We are great at giving it but not good at taking it. We tell others they must comply with the tax law, that they cannot deal with certain companies and must be able to produce a tax clearance certificate, but none of us had to produce a tax clearance certificate before we entered Leinster House. I wonder how fair that is.

I hope this will not give rise to a situation where a letter asking for a tax clearance certificate is taken out of the bottom drawer by every semi-State and public body threatened with the interest penalty payment. It is not good enough for companies to allow the matter to drag on for a while before sending a letter in red ink which asks, "where is your tax clearance certificate, the clock is stopped". Section 14(2) provides that if the certificate is not produced within seven days the clock will be stopped until it is produced. The clock should not be stopped in respect of the period during which one fails to produce the certificate. If the supplier produces the certificate three weeks or one month later they should be entitled to their money. The idea that the clock stops and cannot be retrospectively deemed to have started again seems unfair.

A supplier of goods who finds it difficult to get a tax clearance certificate for whatever reason and convinces the inspector of taxes that everything is up to date should be entitled as of right to the money he would have been due if the request for the tax clearance certificate had not been furnished to him. One cannot have it both ways. A supplier who has dealt in good faith with a semi-State or public body who receives an annoying letter which says, "produce a tax clearance certificate" will have to ask his accountant to ring the Revenue Commissioners in, say, Limerick for the certificate. If it takes a month for him to receive the certificate then he is entitled retrospectively to be regarded as somebody who is entitled to receive his money on time.

We live in the real world and people must get on with their lives. If, say, the Patents Office sends a supplier a letter which states, "In regard to the envelopes you supplied to us last month and for which we have not paid you, will you provide a tax clearance certificate?" this can be a serious imposition for a busy businessman.

Debate adjourned.

Dáil Éireann debate - Thursday, 8 May 1997