Dáil Éireann debate -
Tuesday, 8 Apr 2003

Vol. 564 No. 5

Written Answers - Tax Code.

Trevor Sargent

Question:

136 Mr. Sargent asked the Minister for Finance if, in the interests of promoting more prudent use of resources, he will consider ensuring second-hand goods are registered for VAT at a zero rate or at least at a lower rate than the current 21%. [9920/03]

Minister for Finance (Mr. McCreevy)

In general terms, there is no distinction made between new and second-hand goods for VAT purposes. The rate of VAT that applies to sales of goods is the same whether those goods are sold new or second hand.

It is not clear that the proposal being made by the Deputy would be in line with EU VAT law with which Irish VAT law must comply. It is not possible to introduce new zero rates, as we can only retain the zero rating that was in existence on 1 January 1991. This applies for the most part to food, oral medicines, books, children's clothes and shoes. Likewise, it is only possible to introduce reduced rates where they are specifically provided for in existing VAT law.

There is a scheme for sales of movable second-hand goods which are sold by an auctioneer-dealer. Under this scheme, the auctioneer may charge VAT on the profit margin only. Generally the rate applicable to that sale is the rate which applies when the goods are sold as new. However, there are some exceptions, the main ones being works of art, antiques and collectors items. These goods are normally liable at the rate of 13.5%, but they become liable at the 21% rate when sold under the auction-margin scheme.

Trevor Sargent

Question:

137 Mr. Sargent asked the Minister for Finance if he has plans to make tax credits refundable in order that people whose incomes are so low that they do not pay tax on their earnings will gain something in the next budget. [9921/03]

Minister for Finance (Mr. McCreevy)

I have no plans at this time to make tax credits refundable. The essential purpose of the tax system is to raise revenue to provide funding for the services of the State. Changes to the income tax system determine how that contribution is collected from those paying tax. I would not accept that persons should necessarily have to gain from such budgetary changes if they are not paying income tax. They may, of course, benefit where their incomes are increasing and budget changes in relation to income tax keep them out of the tax net. In addition, they may benefit from changes in relation to social welfare, for example, as a result of increases in pensions, child benefit and family income supplement.

The general issue of refundable tax credits was examined by a working group established under the Programme for Prosperity and Fairness and comprising representatives of the social partners and relevant government Departments. I understand that the report of the working group is being finalised at present and is expected to be available shortly. I await the report with interest.

I understand from the Revenue Commissioners that, depending on the assumptions made, to make the basic personal and PAYE credits refundable would cost in the region of €41.3 billion in a full year.

Finally, I would draw the Deputy's attention to the fact that over my last six budgets, more than 380,000 income earners have been removed from the tax net altogether and the estimated total number of those who are exempt from taxation now stands at over 680,000 representing over 36% of all income earners. This compares with a figure of 380,000 – representing 25% of income earners – before the 1998 budget.