Value-Added Tax Consolidation Bill 2010: Second Stage

I move: "That the Bill be now read a Second Time."

I am delighted to introduce Second Stage of the Value-Added Tax Consolidation Bill 2010, not least as a former member of the tax strategy group between 1997 and 2002. The Bill consolidates the law relating to VAT which is contained in the Value-Added Tax Act 1972, as amended. The VAT Act has been amended in almost every Finance Act since then and was significantly amended by the Value-Added Tax (Amendment) Act 1978. Furthermore, changes to the Act have also been made by numerous ministerial regulations made under the European Communities Act 1972.

The new VAT consolidation Bill continues the successful process of the ongoing consolidation and modernisation of the tax code. In 1997, the Taxes Consolidation Act consolidated direct taxes legislation dealing with income tax, corporation tax and capital gains tax. Following on from this, further tax consolidation took effect with the Stamp Duties Consolidation Act 1999 and the Capital Acquisitions Tax Consolidation Act 2003. It is the Government's intention to modernise and consolidate law relating to customs over the coming year.

VAT is a general, broadly based consumption tax assessed on the value added to the supply of goods and services. VAT is levied at each stage in the chain of production and distribution. However, VAT-registered persons can generally reclaim the VAT they have paid. Therefore, VAT principally affects consumers. VAT is governed by EU law, was introduced in Ireland in preparation for our joining the EEC and took effect from 1 November 1972. Prior to this, Ireland had a turnover tax, introduced in 1963, and a wholesale tax. These taxes were replaced by the new VAT regime, which operated a system of five separate VAT rates. The number and level of VAT rates applying in Ireland varied substantially throughout the 1970s and 1980s. In addition, the range of goods and services to which those rates applied were changed.

The attempt to extend VAT to children's shoes and clothing in the January 1982 budget has entered the political annals. The amended March 1982 budget introduced by Mr. Ray MacSharry, which applied VAT at point of entry, also took the step of exempting books from VAT, which gave a significant and lasting boost to the Irish publishing industry. Very high VAT rates, such as the 35% standard rate introduced in the 1983 budget which lasted a couple of years or the opening up of more recent gaps between the Irish and British rates, since closed, have, along with often more important exchange rate differences — I shall put it diplomatically — stimulated cross-Border trade to an extent that was not intended and probably contributed to Newry acquiring city status. VAT is first and foremost a vitally important source of revenue, but also where margin for discretion exists an instrument of policy. Arising from agreement at EU level, by 1993 the current system of two VAT rates along with the zero rate came into effect.

As Deputies will be aware, changes to VAT law at domestic level may only be made within the confines of EU VAT law, which is continually subject to reform. The most recent extensive revision to the EU VAT code was the recasting of VAT law in the 2006 EU VAT directive, which is the current text that governs VAT within the EU. In this context, there has been little change in Ireland's VAT rates since 1993 and major VAT changes have generally related to administration, countering fraud and implementing EU provisions.

In Ireland, as indeed in other EU member states, VAT is a major source of Exchequer revenue. In Ireland, VAT accounts for around one third of the overall tax yield to the Exchequer, some €10 billion in recent years. The VAT Act is now substantially different from and more complex than the original 1972 text. The need for consolidation has been recognised by the Revenue Commissioners and stakeholders for some time. Earlier plans for consolidation were put on hold, because of significant changes that were ongoing to the VAT code at domestic and EU level, with the 2006 VAT directive recast and the extensive new VAT on property regime introduced in the 2008 Finance Act. More recently, the VAT code was amended by the ministerial regulations in late 2009, which implemented the EU VAT package that involved significant changes to the rules governing the place of taxation of supplies of services and cross-border refunds within the EU. However, the time is now opportune to consolidate the VAT code.

The preparatory process for consolidating VAT followed the same rigorous process that was adopted for the Taxes Consolidation Act 1997, the Stamp Duties Consolidation Act 1999 and the Capital Acquisitions Tax Act 2003. The aim at all times was to ensure the most accurate consolidation of the existing law with nothing left out and nothing added. This is what has been achieved in this Bill. The Bill was considered by the Office of the Parliamentary Counsel to the Government, and has been duly certified by the Attorney General as a consolidation of existing VAT law. The Attorney General's certificate was included in the Dáil First Stage motion introducing the Bill on 20 October.

In preparing the VAT Consolidation Bill, an initial draft of the Bill was placed on Revenue's website for consultation with interested parties and was separately made available to the Law Society of Ireland, the Irish Taxation Institute and the Consultative Committee of Accountancy Bodies Ireland. These bodies were afforded an opportunity to submit comments on a draft of the Bill.

In regard to the layout of the VAT Consolidation Bill, as stated earlier, Irish VAT law is governed by the EU VAT directive, and, in this context, the provisions of the new VAT Consolidation Bill have been remodeled as far as possible on the VAT directive in order to facilitate better alignment and thereby easier reference to the directive. To this end, and in preparation for the consolidation exercise, changes were made in recent Finance Acts. In particular, the Finance Act 2010 reordered the Schedules to the VAT Act, so as to reflect their origins in terms of where the appropriate exemption or reduced rate is permitted under the VAT directive. The most notable effect of this remodeling exercise is the fact that there are now a much greater number of sections in the Bill. The 1972 VAT Act as amended contained 44 sections with a number of additional sections inserted throughout the Act. The new VAT Consolidation Bill contains 125 sections. This is primarily due to expansive sections in the Act being replaced and clarified by a number of separate sections in the Bill. For example, the VAT provisions relating to accountable persons in section 8 of the Act have become Part 2 of the Bill, accounting for 15 sections, namely, sections 4 to 18 inclusive. Furthermore, the use of archaic language in general and of the old-fashioned device of using provisos to change the meaning of a section have also been eliminated in the Bill.

To facilitate readers of the Bill, the statutory derivations for the legislation provided for in the Bill are set out in the margin, in the side-note to each section. These entries show the source of each section in the Bill. In addition, the memorandum published with the Bill, often referred to as the destination table, sets out the provisions of the 1972 VAT Act in chronological order, and indicates where the provision is located in the new Bill. If a provision of the VAT Act has not been enacted in the Bill, the memorandum explains why. The most common reasons for not including a provision in the Bill are that the provision in question has already been repealed, or is unnecessary, where, for example, it might be superfluous.

The Bill before the House is the culmination of considerable work. The greatest benefit which will result from this consolidation will be the restructuring of the VAT code in a more clear, coherent and logical way. This will make it more accessible and user-friendly for all users, including members of the Oireachtas, businesses, tax practitioners and students of taxation, who have to cope with annual changes to VAT legislation.

I do not intend to go through every section of the Bill. The explanatory memorandum, which has been published with the Bill, sets out in summary form the purpose of each section of the Bill. However, I would like to give Deputies some flavour of the overall structure of the Bill.

The Bill contains 125 sections, which are divided into 14 parts. It also contains eight Schedules. Part 1 contains the Short Title, defines certain terms, and sets out rules for the construction of certain references used in the Bill. It also provides for the charge to VAT. Part 2 contains the provisions relating to persons who are accountable for VAT. Accountability is a key concept in VAT, as persons who are accountable must register for VAT, submit tax returns and payments, keep records and comply with the provisions of VAT legislation. The part defines persons who are accountable for VAT by default or election, and persons deemed not to be accountable. Provision is made for VAT accountability in the case of intra-Community acquisitions of goods; certain services received from abroad; certain services of the State and public bodies and the activities of VAT groups. This part also provides for reverse charge mechanism in certain circumstances.

Part 3 sets out the rules relating to taxable transactions for VAT purposes. A transaction has to be taxable in order for VAT to apply. Taxable transactions include the supply of goods, services and intra-Community acquisitions, all of which are defined in Part 3, along with self-supplies, transfers not considered to be supplies, and supplies where there is no consideration.

Part 4 contains the provisions relating to the place of supply rules for goods, services and intra-Community acquisitions, which are central to the operation of VAT. Provision is made for the supply of goods to unregistered persons, special rules for the place of supply of gas and electricity supplies, and general exceptions to the rules relating to services.

Part 5 contains provisions relating to the amount on which tax is chargeable. In general, VAT is payable on the full consideration including any ancillary charges made, such as additions for packing, transport, etc, although in some cases open market value may apply.

Part 6 contains the provisions relating to rates of VAT. It sets out the rates of VAT that apply in the State, providing rules for composite supplies, and for special rating rules for works of art and contract work. It also provides that VAT will not be charged on exempted activities, which are set out in Schedule 1.

Part 7 contains the VAT provisions relating to imported and exported goods. For VAT purposes, imports are goods brought into Ireland from outside the EU and VAT is normally paid at import. Exports are goods supplied, subject to a condition that they are to be transported to a place outside the EU and zero-rated for VAT purposes. In addition, Part 7 provides for temporary importation, the special scheme where exporters can have their inputs zero-rated, and the retail export scheme.

Part 8 provides for VAT deductibility. An accountable person may deduct the VAT charged on most goods and services that are used for the purpose of their business, where they have appropriate documentation, such as a VAT invoice. This part also outlines where deductions may not be made as well as situations where deductibility is apportioned. Provision is also made for the capital goods scheme for property. A capital good is defined in terms of property that has been developed and related only to persons carrying on a business activity and not to private individuals.

Part 9 provides the rules relating to registration, invoicing, returns and payments of VAT. It also contains rules on statements required by traders in respect of supplies of goods and services to other member states and provisions in regard to records that must be kept for VAT purposes.

Part 10 sets out the provisions relating to a number of special schemes that are provided for in the VAT Act. These include the scheme for flat-rate farmers, investment gold, as well as the margin schemes for taxable dealers, travel agents and auctioneers. Under the margin schemes, suppliers pay VAT on their profit margin in certain circumstances.

Part 11 covers VAT rules on property. Under the new VAT on property system, the first supply of newly developed property is taxable for five years from completion. The second and subsequent supply is taxable for two years following occupation. Transitional rules apply for properties that have been developed under the old VAT on property system.

Part 12 deals with refunds and repayments provisions, including ministerial refund orders and refunds to foreign traders. This includes an electronic refund procedure for businesses operating from other EU member states, and provides for regulations to allow repayment of deductible Irish VAT suffered by non-EU based businesses.

Part 13 sets out the provisions relating to the administration of VAT, including placing VAT under the care and management of Revenue. Provision is made for estimates, assessments, electronic returns and time limits. Interest, penalties and appeal provisions are also covered in this part.

Part 14 covers the repeals, transitional and other housekeeping measures needed to bring the VAT Consolidation Act into effect.

Finally, there are eight Schedules to the VAT Consolidation Bill. Schedules 1 to 3 list the activities that are exempt from VAT, zero-rated and charged at the reduced-rate, respectively. Schedule 4 lists agricultural activities, and Schedule 5 lists items of art and antiquities, as specified in section 46 of the Bill. Schedule 6 lists the activities that are within the scope of VAT as required by the EU VAT directive when undertaken by State or public bodies unless the activity is otherwise exempt from VAT. Schedule 7 makes necessary consequential amendments to references to VAT in other legislation and Schedule 8 lists legislation that is being repealed or revoked as a result of the new Bill.

The Revenue Commissioners are in the process of preparing guidance notes on the VAT Consolidation Act which they will publish as soon as possible after the Bill is enacted. I understand that these notes will also be made available on their website. For the information of Deputies, the guidance notes will follow the format and style of the guidance notes published in regard to the previous consolidated tax enactments. I understand that these notes will also be made available on their website. For the information of Deputies, the guidance notes will follow the format and style of the guidance notes published in relation to the previous consolidated tax enactments.

With regard to the timetable for passage of the Bill, it is important that the VAT Consolidation Bill is afforded priority, to ensure that it is enacted into law by end November 2010, as any VAT changes made by regulation to implement VAT directive changes, or by financial resolution on budget night, or in the Finance Bill 2011 would invalidate its status as a consolidation Bill. This would necessitate a recommencement of the consolidation process, create additional work, and delay its implementation unnecessarily until later next year. For this reason, it is proposed that the Bill be referred to the standing Joint Committee on Consolidation Bills for consideration next week.

A number of motions will be included on the Order Papers of both Houses to comply with the various rules and procedures, as set out in the 2007 Standing Orders for Public Business of Dáil Éireann, to facilitate the timely passage of the Bill. These motions will facilitate the taking of Committee, Report and Final Stages, and will shorten the minimum periods of time provided for in the Standing Orders.

As this is a consolidation Bill, and is so certified by the Attorney General, the effect of the law governing VAT in Ireland will remain unchanged. No substantive charges are made in the Bill which would change the regulation of VAT. During its passage through the Houses of the Oireachtas, the only amendments which can be taken on a consolidation Bill such as this are those intended to remove ambiguities and inconsistencies, substitute obsolete or inconvenient language, or achieve uniformity of expression. Indeed, substantive changes to existing law are not permitted under the consolidation process.

I would like to place on the record the Minister for Finance's, my own and the Government's appreciation of the amount of work which went into preparation of the Bill. In particular, the staff of the Revenue Commissioners and the Parliamentary Counsel's office are to be congratulated on an excellent undertaking. I commend the Bill to the House, and I look forward to the co-operation of Members in its rapid enactment.

I thank the Minister of State for his introductory remarks and I compliment everybody involved in producing this fine piece of work, in particular the Office of the Revenue Commissioners, the Parliamentary Counsel and officials of the Department of Finance. It is a really fine piece of work and follows the excellent work done previously on the Taxes Consolidation Act 1997, the Stamp Duties Consolidation Act 1999 and the Capital Acquisitions Tax Act 2003, which were consolidated and introduced here. It is really a work for stakeholders, professional tax advisers and, indeed, for Members of the Houses of the Oireachtas. It puts the VAT code within a single set of covers and makes it very easily accessible to all of us whose work requires us to have an interest in these matters.

I should like to compliment everybody who has been involved in a fine piece of work. I was going through it earlier and I found it is very accessible. The explanatory memorandum, which accompanies the Bill, makes it even more accessible because it is in the simplest of English and does not use some of the more arcane expressions one sometimes finds in legislation. Its accessibility is its principal virtue and I am sure that all those who labour in tax law and in accountancy offices will be very pleased that they can take it from the shelves or look at it on their computer screens, and deal with the information it contains in a ready manner.

There is not much more to be said in Parliament about this particular legislation. As a consolidation Bill it has been certified by the Attorney General as adding nothing to the law and taking nothing away from it as it exists. Of course we accept that. It will now proceed, as consolidation Bills do to the select committee on consolidation, of which my colleague, Deputy Jim O'Keeffe, is a member. Even under the thorough scrutiny of that committee, the amendments will be confined to matters of drafting, in effect, and no amendments of substance will be appropriate.

I do not need to delay the House. I thank the Minister of State for his explanatory remarks, and again I thank all those who have been involved in bringing forward this consolidation Bill.

I should like to share time with Deputy Arthur Morgan, with the permission of the House.

I, too, on behalf of the Labour Party, welcome this legislation. As with any consolidation Bill, it is for the purposes of simplifying procedures and that is to be welcomed. It will potentially reduce the compliance burden on small and family businesses and family farms, and this is to be welcomed.

I noted the Minister of State's remarks on the January 1982 budget. My late father played no small part in that particular decision as regards VAT on children's shoes, so that is a decision which has worked its way into the annals of our family, and we are proud of it. There is not much to be said, apart from acknowledging it as being a fine body of work. The Taxes Consolidation Act 1997, instigated by Deputy Ruairí Quinn, had a similar type of effect. However, the 1997 Act has been amended in every Finance Bill since, and arguably has led to an unwieldy tax system. One hopes that this legislation will remain as codified and in that sense, retain its purity.

There is not much more to be said. We have some amendments in respect of certain parts of the Bill, but nothing substantive. We shall deal with those on Committee Stage. We congratulate the Minister, officials of the Department and everyone who had a part in drafting the legislation. It was no easy task and they are to be commended.

It is a change for the Minister of State and I not to be locked in combat on matters, whether across the floor of this Chamber, or in venues outside. The Vincent Browne show comes to mind. Rather, we are dealing with the modernising and consolidation of legislation as regards value added tax, and I very much welcome that. I accept the Attorney General's verdict completely to the effect that it does what it says on the tin, and neither adds nor takes away from the tax system.

I find that almost unfortunate in a way, as someone who represents a Border constituency. Clearly, the whole differential in the VAT rate on the island is an issue, and I hope that following the consolidation some moves will be made to align or merge the taxation systems. That would be good for business, generally, and good for all.

The Bill has eliminated the use of arcane language. That is wonderful because the Dickensian-type phrasing still being used in some legislation can be somewhat frightening in a modern Parliament. Hopefully this will set a positive tone for any legislation coming through the Oireachtas. On a broader note, the whole issue of VAT as a tax tool is very regressive because clearly low and middle income families pay proportionately more as a percentage of their earnings than those on higher incomes. In that regard I clearly have a problem with VAT as a taxation tool. It will not happen under this Government, but sooner or later I hope the whole taxation system will be overhauled and modernised. I am sure the Minister of State would concur with that given the number of levies that have been introduced. We all know the reason the levies were introduced mid-tax year in the emergency budget in 2009. A whole series of rates of PRSI were also introduced and these need to be streamlined and modernised and, more important, made fairer. We need a fairer taxation system in which people can have confidence.

I have strayed a little in terms of this being a consolidation Bill. However, neither I nor my party have a problem with this Bill and wish it a fair wind through the House.

I join colleagues on both sides of the House in complimenting the Revenue Commissioners, Parliamentary Counsel and the Department of Finance on the preparation of the Value-Added Tax Consolidation Bill 2010.

The history of consolidation of taxation measures dates back to the Taxes Consolidation Act 1997, the Stamp Duties Consolidation Act 1999 and Capital Acquisitions Tax Consolidation Act 2003. Anyone who deals with VAT knows the intricacies involved. Having to reference back to previous years and so on is an onerous task. I know that practitioners will be delighted when this Value-Added Tax Consolidation Bill 2010 comes into force. The Minister of State can be assured that the Select Committee on Finance and the Public Service will expedite its work on the Bill as there are no contentious issues involved and it is not a Bill to which substantive changes can be made.

I note from briefing that this legislation must be enacted prior to introduction of this year's Finance Bill. It is important that we consolidate taxation measures. In this regard, the Minister of State might consider having the Taxes Consolidation Act 1997 further consolidated given the complications arising in terms of the changes in income tax, corporation tax and, in particular, VAT which is extremely complicated because of our ties to the European scene. Many of the changes made during recent years have been as a result of directives from Europe.

I thank everybody involved in bringing this legislation to this Stage. The type of language used is more understandable to the ordinary person and those educated in tax matters. It is time the archaic language previously used was updated and this has been successfully done in this legislation. I congratulate everybody involved in that.

I join the Minister of State in commending the Bill to the House.

When in a moment of weakness the Chief Whip contacted me and asked if I would accept an appointment as a member of the Select Committee on Finance and the Public Service, which is to consider this Bill in detail, I agreed not realising the committee would deal with a Bill consisting of 125 sections and eight Schedules, all of which would have to be teased out and carefully analysed before the committee put its imprimatur on it. This will not be the first time I have dealt with a consolidation Bill. I recall, following my election to this House being appointed a member of the committee which dealt with consolidation of social welfare Bills. It may, therefore, be appropriate for me to deal with this Bill at this stage.

Much work done on this Bill to date has been worthwhile. The work to be done by the committee will be also worthwhile in that it is important that there is complete clarity and certainty in regard to taxation provisions. There is nowadays a huge obligation on taxpayers to self assess and to make their own returns. This also applies in respect of VAT, in respect of which penalties apply where people get it wrong. It is important for those making self assessments that there is clarity in regard to their obligations. From that point of view, this consolidation Bill will be worthwhile in terms of it being the one central reference point for any such queries. Currently, there is in place a hotch potch of legislation with the original Act having been amended every year, in some instances twice yearly, since its introduction. I am happy to work with members of the committee, including Deputies Michael Ahern and Michael McGrath, on this task. The only consolation is that work on this Bill must be completed by the end of this month. It will not be an easy task to get through our work on the Bill in time. It will be three weeks' hard labour.

The committee had previously to work through more than 1,000 sections of the Income Tax 2007.

We will get through this Bill. While I am not looking forward to the three weeks' hard labour, I am glad to have an opportunity to contribute to ensuring the Bill, as requested by the Minister of State, is ready and in place before the end of the month thus enabling it to be enacted by Parliament.

I welcome the opportunity to speak on this Bill. This is one of only a few occasions when I have been in the House and there has been unanimity and good will towards a Bill. In that context, the Minister of State is one of the lucky ones. I do not intend to take away from that.

This is important legislation which seeks to clarify and ensure the structures in place are more easily understood. The Minister of State in his contribution stated:

The Bill before the House is the culmination of considerable work. The greatest benefit which will result from this consolidation will be the restructuring of the VAT code in a more clear, coherent and logical way.

This is important given the difficulties that can arise in regard to such matters. It is important this legislation is accessible and user-friendly, in particular by small businesses given the amount of red tape in that area.

I draw the attention of the Minister of State to the fact that a person in financial difficulty who sought to pay his taxes on a weekly basis was able to do so. Given current technology, it is hard to understand why a person wishing to pay employee taxes, such as PRSI and PAYE — I am not sure about VAT — on a weekly basis cannot be accommodated. As one who lives on the Border, I am aware that the VAT rates in the different areas of the country are extremely important and I want to highlight the grave difficulties we come across in the entire Border region. At the time the euro and sterling rates were very close. We increased our VAT rate by a small amount and, at the same time, the United Kingdom Government increased its rate by a significant amount. That increased the flow of VAT transactions and business in general across the Border and cost us jobs. It is difficult to put a figure on how much it cost us in unpaid VAT and other issues because much of the material came across the Border without any issues attaching. It is important that we try to ensure, even in a very difficult budgetary position, that we do not raise VAT to a level that will force people to go out of the country to shop.

The Minister likes to reflect on history and in his contribution he highlighted Mr. John Bruton's VAT on children's shoes and so on. That may be interesting but it is very light reading in light of the current economic position in which we find ourselves. As we come nearer to the time of the budget the Minister of State should be cognisant of the serious implications of VAT in the Border region and I ask him to try to keep it in line.

The second issue may not be directly to do with this Bill but we have a major opportunity to increase the income from tourism and in that regard the levels of VAT being charged in that sector should be examined.

We are trying to encourage alternative energy production yet if I, as a farmer, put up a solid building on my farm I am entitled to reclaim the VAT as a non-registered farmer. That is the way the system works. However, if I put up a windmill to provide power for that farm and green energy to go into the grid, I cannot reclaim the VAT in the same way. That is a major anomaly in the system and if we were serious about alternative energy and maximising our green energy, we must look at those areas.

I was talking to a pig farmer who has a pig unit in County Monaghan and one in Northern Ireland and the differences between the allowances they get North of the Border for producing electricity and the ones we get here are unreal. If we are serious about alternative energy and maximising green energy we must rectify that situation.

In general I have no problem with the Bill. It is the job of my party spokesman on finance to go through the issues with the Minister, and I know he will do that very carefully. I wish the Minister well with it and I thank the Acting Chairman for the opportunity to say a few words on it.

As there are no further speakers offering, I invite the Minister of State to reply.

Like all previous speakers I will not necessarily take up my full allocation.

I thank Members on all sides of the House for their welcome and constructive response to this legislation, understanding that the detail has to be teased out in committee. As Deputy Crawford would be aware, it is the time of year those of us who might have some income from self-employment, in farming for example, tend to pay calls on what we call practitioners in this debate. Accountancy practices particularly are very grateful for consolidated legislation, which makes reference to it easier.

I reiterate congratulations on the Bill. The relative unanimity in the House, at least on the principle of the Bill, does not conceal the fact that an enormous amount of work was put in at an expert, legal and revenue level to putting together this legislation. We are very grateful for that.

To reply to one or two points that were raised in the course of the debate, Deputy Crawford should know that I always find that a little bit of history illuminates every subject. I try to introduce it in as noncontentious a manner as possible but it is interesting to recall debates over turnover tax. What happened seemed to have touched the pride of Deputy Sherlock and his family in regard to the 1982 budget but obviously that is not——

The Minister touched more than him.

——what we are primarily discussing. That has a relationship, and I made this point in my opening speech, to economic activity in different sectors. It is not just revenue raising, even if revenue raising is its principal purpose.

Deputy Morgan and Deputy Crawford referred to cross-Border shopping, and I referred to that in my contribution. The Central Statistics Office published the results of a survey of cross-Border shopping on 4 December 2009 as part of its quarterly national household survey of quarter two, 2009. It showed that 16% of households in the Republic made a shopping trip to Northern Ireland in the 12 months to the second quarter, with 41% in the Border area and 21% in Dublin so doing. Anecdotally I would say the percentage going from Tipperary or Cork would be in the low single figures.

The cause of the price differentials between goods in Northern Ireland and the Republic were operating costs, mark-up, taxes and, most importantly, a significant depreciation of sterling against the euro. That said, VAT rates have a certain headline psychological effect independent of their actual substance or weighting in the difference in prices.

There is not more recent data available but the CSO will estimate losses for 2009 and into 2010. However, the UK standard VAT rate, which had been lowered shortly after we put up the 0.5% in 2008, went from 15% to 17.5% in 2010 and will rise further to 20% on 4 January next. The gap, therefore, will be nearly closed; it will have been reduced from 6.5 percentage points to one percentage point. That, combined with a reduction of approximately 20% in alcohol excise duty rates since December 2009, should provide less incentive for people to shop outside the State.

If one goes North of the Border and looks at the prices on the petrol station forecourts they are nominally roughly the same level in sterling as they are in euro, which means, depending on the exchange rate on the particular day, there is probably a 12% or 13% difference between the two.

Deputy Morgan also made the point that VAT, like most forms of indirect taxation, bears more heavily on less well off households. However, it must be borne in mind that this is the reason that food, drink and children's clothes and shoes, for example, are exempt from VAT. It is precisely to counter the effect mentioned by the Deputy. As we know, food in particular constitutes a much larger proportion of spending in poorer households compared to richer ones.

Deputy Crawford raised the question of VAT refunds on wind turbines for farmers, if I am correct. Farmers who are registered for VAT are accountable persons for VAT in respect of all their taxable activities, whether those activities consist solely of farming or of farming and other activities such as the generation of electricity for provision to the national grid. As accountable persons for VAT they are entitled to claim input credit for VAT charged on the installation of alternative energy generators such as wind turbines for use in their taxable activities.

The real issue is that of farmers who are not registered for VAT. They are not in the normal course of things entitled to credit for or repayment of VAT incurred by them on their business inputs. As adverted to by Deputy Crawford, the Value Added Tax (Refund of Tax) (No. 25) Order 1993 provides for refunds to unregistered farmers for tax borne on the construction, extension, alteration or reconstruction of any building or structure that is designed for use solely or mainly for the purposes of a farming business. While the installation of an alternative energy generator may be the construction of a structure, however, such a structure is not necessarily designed for use solely or mainly for the purposes of a farming business but, rather, to generate electricity for wherever it is required. That is the reason the installation of alternative energy generators does not come within the scope of the VAT refund order. However, I appreciate Deputy Crawford's belief that this should be changed.

These are all the issues I noted as having been raised. I thank everyone again for their help in expediting this Stage of the Bill.

Question put and agreed to.

In accordance with Standing Order 141, the Bill, with the concurrence of both Houses, will be referred to the Standing Joint Committee on Consolidation Bills. I understand the motion of referral will be moved shortly.

Sitting suspended at 5.53 p.m. and resumed at 7 p.m.