We have two other major draft reports to consider yet.
Taxes other than Turnover Taxes which affect the Consumption of Manufactured Tobacco.
Is one of them on company law?
Yes. Senator Lenihan is very interested in that and he is also interested in the draft report on excise duty on cigarettes.
My objection is to doing this at the tail of the meeting. They are very important.
I am prepared to take the tobacco one because, even though it is technical, it is very straightforward. We are all fairly agreed on what is needed. What is involved here is a proposal to harmonise the excise duty on cigarettes and, of course, there are two different systems for doing this. One is the specific duty system and the other is the ad valorem system and what is concerned here is the relationship they bear to each other. The substance of our report is on page five. What it really all boils down to is that we want the specific element to be at least 50 per cent of the total duty because the industry here would regard that as the absolute limit at which it could operate. That is the essence of the report. I admit it is fairly technical but these are the main facets of it: (1) it deals with cigarettes only; (2) it has to do with the relationship between the specific element of duty and the ad valorem element of duty. Our trade here feels that the specific element of duty should be equivalent to at least 50 per cent.
Paragraphs 1 to 6 inclusive agreed to.
Senator Alexis FitzGerald has submitted two amendments to the draft report which I think are valuable and express more clearly the industry's views, as submitted to us. I recommend them to you for adoption and I will ask Deputy Esmonde to move them.
I move :
" On page 5 at the beginning of the second subparagraph to insert the following:
‘ While the Irish cigarette industry is seeking an early decision on the final tax structure it has made it clear to the Joint Committee that it does not welcome the proposed changes though it accepts that some changes are inevitable. The proposed tax structure will entail heavy and exceptional capital and marketing investment which could affect employment. However, the industry is confident that it can remain viable and can compete provided that the proportional element of taxation does not dominate '."
Amendment agreed to.
I move : " That the following new subparagraph be inserted after the second subparagraph on page 5:
‘ ITMAC believes that failure to negotiate an acceptable tax structure could have serious consequences for the Irish industry. To attempt to counteract an unfavourable system of taxation by developing low cost products for which the industry has no established skill and no market reputation would involve heavy additional investment in retraining and re-equipment. In a small market cost penalties which arise from a change in the tax system and are not material to competitiveness would deter investment and favour importation from longer run producers. The Irish industry could find itself unable to compete with Continental producers who enjoy cost advantages from a protected position in a large domestic market. Moreover a high proportion of the proportional element of taxation could induce increasing import penetration of the United Kingdom market thus creating spare United Kingdom capacity for the production of cigarettes which is now being undertaken on contract in Ireland thereby reducing Irish exports '."
I want to say at this point that I have the most serious doubts about the value of this particular piece of harmonisation. It is certainly going to cause a lot of problems for the Revenue Commissioners and for the industry. We would all be prepared to accept difficulties of that sort if we could see some overall benefits to the Community as a result but I cannot see any ultimate benefits from this particular provision.
One of the more serious aspects of this is that it is one step further towards the encouragement of the cartel situation referred to.
The report, with these amendments, will put our views strongly. I think we should leave it at that.
The two amendments are an extension of the submission made by ITMAC.
They just spell out the views of the industry much more clearly than the Report does at its present stage.
The Revenue Commissioners should make a submission, too, because it is going to interfere with their whole tax structure.
Amendment agreed to.
Paragraph 7, as amended, agreed to.
Paragraph 8 agreed to.
Draft Report, as amended, agreed to.
Ordered : To report accordingly.