I move:
(1) THAT in this Resolution–
"Principal Act" means the Value-Added Tax Act, 1972 (No. 22 of 1972); "Act of 2000" means the Finance Act, 2000 (No. 3 of 2000).
(2) THAT–
(a) the rate of value-added tax on the supply of certain goods and services at present chargeable at the rate of 21 per cent be decreased to 20 per cent of the amount on which tax is chargeable in relation to the supply of such goods and services, and
(b) the rate of value-added tax on the supply of livestock and live greyhounds and the hire of horses be increased from 4.2 per cent to 4.3 per cent of the amount on which tax is chargeable in relation to the supply of such goods and services, and
that, accordingly, subsection (1) (inserted by the Finance Act, 1992 (No. 9 of 1992)) of section 11 of the Principal Act be amended–
(i)by the substitution in paragraph (a) of "20 per cent" for "21 per cent", and
(ii)by the substitution in paragraph (f) of "4.3 per cent" for "4.2 per cent" (inserted by the Act of 2000).
(3)THAT the rate of flat-rate addition to the consideration in respect of the supply of agricultural produce or an agricultural service by a flat-rate farmer be increased from 4.2 per cent to 4.3 per cent, and that, accordingly, section 12A (inserted by the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978)) of the Principal Act be amended by the substitution in subsection (1) of "4.3 per cent" for "4.2 per cent" (inserted by the Act of 2000).
(4)THAT this Resolution shall have effect as on and from 1 January 2001.
(5)IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
The resolution provides for a decrease to 20% on the supply of all 21%-rated goods and services such as cars, electrical goods, furniture and furnishes and telecommunications with effect from 1 January 2001. The standard rate was last changed in 1991 when it was reduced from 23% to 21%. The resolution also provides for an adjustment of 4.3% in the level of the flat rate farmer's refund together with a similar change in the VAT rate on the supply of livestock, live greyhounds or the hire of horses.
All goods and services which are currently standard-rated will benefit from this reduction with the exception of tobacco. As already discussed, the excise duty on a packet of 20 cigarettes will be increased by 2.6 pence with pro rata increases for other tobacco products from 1 January 2001. The reduction in the standard rate will cost £159 million in 2001 and £191 million in a full year. The difference in cost is due to the way in which VAT is collected as returns for the fixed VAT period, November to December, will not be received until January 2002.
It would be difficult to introduce a reduction in the standard rate on budget night because VAT is remitted by traders to the State on a two-monthly basis, January-February, March-April, etc., and the most suitable date on which to introduce it is 1 January 2001. The reduction is part of the Government's anti-inflationary strategy. The effect of a 1% reduction after allowing for the increase in tobacco excise is approximately 0.3%.
In addition to the 1% reduction in the standard rate from 1 January 2001 there are also reductions of 2 pence per litre, 2.4 pence VAT-inclusive, in the excise duty on petrol and 6 pence per litre, 7.26 pence VAT-inclusive, in the duty on diesel with effect from midnight. These measures will reduce the CPI by 0.5%.
With regard to the adjustment to 4.3% in the level of the flat rate farmer's refund, these changes will take effect from 1 January 2001 instead of the usual change on 1 March. This is intended to bring the changes in line with the reductions in the standard rate of VAT. The Revenue Commissioners have calculated, on the basis of macro-economic date for the past three years, that a flat rate of 4.3% is now needed to achieve full compensation. This change will cost £2.35 million in 2001.
The flat rate scheme is a simplified and practical method of applying VAT to farming. It compensates unregistered farmers on an overall basis for the VAT charged to them on the purchase of goods and services. This is achieved without applying the normal VAT rules on registration, record keeping and returns. Traditionally, the VAT rate on livestock has been maintained at the same level as the flat rate addition. This is administratively more convenient to farmers and their customers.