Skip to main content
Normal View

Seanad Éireann debate -
Thursday, 7 Jul 1966

Vol. 61 No. 17

Finance (No. 2) Bill, 1966 (Certified Money Bill): Committee Stage.

Question proposed: "That section 1 stand part of the Bill."

Might I take this opportunity, before going on to deal with section 1, to offer an apology to the House for a misunderstanding on my part last night as a result of which I understand the House was waiting for me to return. It was a misunderstanding on my part and, in fact, I was moving the same motion in the Dáil while the House was waiting for my return. I want to apologise for the misunderstanding.

It is quite understood.

I am sure the Minister will be glad to know that the motion he moved was agreed in spite of his absence. I welcome him here this morning. He is now Minister for Industry and Commerce, and we are all anxious to wish him well in his new post.

Section 1 is the interpretation section and I am wondering if I am correct in understanding that in this Bill we are now imposing a tax on electricity, that we are increasing the cost of electricity to manufacturers and to ordinary consumers. It is my understanding of the first paragraph of section 1, that the cost of electricity will be increased by five per cent as a result of this measure.

No, this is the interpretation section. The purpose is to include the generation of electricity within the definition of manufacturer. The production of gas is regarded as an activity in goods. Coal gas is within the category of goods but electricity is not. The definition brings the generation of electricity into that category. That permits of the registration of the Electricity Supply Board as a wholesaler so that they can purchase the necessary equipment and raw materials for the generation of electricity without having to pay tax.

Without having to pay tax?

Yes, so that there will be no corresponding or consequential charge on the cost of electricity.

Does that mean that the people from whom the goods are purchased do not have to pay any tax either?

Yes, as between one registered wholesaler and another no tax will be paid.

Question put and agreed to.
Section 2 agreed to.
SECTION 3.
Question proposed: "That section 3 stand part of the Bill."

I should like to congratulate the Minister for Industry and Commerce but unfortunately——

On section 3.

Yes, I cast my eyes down for a moment and when I looked up I discovered a different Minister in charge. The change was effected so speedily——

I was engaged in moving a motion in the Dáil and I asked the Minister for Education to sit in for me while I was attending to that motion.

If everything is done as speedily as that in the Department as a result of his appearance it will be very satisfactory.

It is a well geared Department already.

On the section, it is my understanding that the Minister will have power to exempt any goods other than those listed at the very end of the section, or is it only those ones? In subsection (5) (b) (ii) there is reference to any activity which is declared by the Minister for Finance for the purpose of the section to be exempt and then there is a list of items following. Is the idea that the items under subsection (5) (b) (iii) are absolutely exempt subject to definitions but that under subparagraph (ii) the Minister may further exempt any other article? If that is the case, how wide a discretion are we giving to the Minister as regards definition? There seems to be a distinction here that for these particular articles there is to be exemption subject to definition, but the Minister has a further power in the other subparagraph to exempt any other goods which he wants to exclude. How is it supposed to work and how much discretion are we giving to the Minister in regard to exempting the articles?

It seems that under subparagraph (iii) a list of goods are exempted but the Minister has the discretion to get them in again by defining articles which are not food, drink and tobacco. Is it simply a method of defining precisely what is food? Secondly, how does the Minister propose to exercise his powers under subparagraph (ii) as regards exempting other goods? It seems to give him a very wide discretion. Is there an implicit idea that he may use it in a broad way?

The answer to the first question is yes: the Minister will have the function of defining but it will come within a very narrow range—it will be in a very marginal area that the Minister will have power of definition. The purpose of subparagraph (iii) is to define more precisely—and it will be done at a very early date—which goods are excluded. I may say generally that the purpose of these orders will be the exclusion rather than the inclusion of anything. The Minister cannot do any more than the Oireachtas gives him power to do but he can narrow the field by taking out of the range of tax, sales of goods which are regarded as marginal. In effect, the Minister's area of definition will be very limited.

Am I to understand that approximately 500 business firms will be required to keep two sets of records—under the 1963 turnover tax system and under this Bill? Apparently it will involve large and small firms. The Minister says he has discretion regarding the exclusion of a number of items subject to the provisions of this section. If the Minister has such discretion, can he give an undertaking now to use it for the purpose of preventing increases in the cost of houses as a result of the effects of this Bill? The Minister's own estimate is an approximate two per cent increase on the cost of houses which, on a house of £5,000, works out at £100. Other people estimate that the effect of the Bill will be a four per cent increase in the cost of houses, which will mean £200.

It appears the effect of this Bill will be to increase the cost of houses by between £100 and £200 each. The Minister says he has discretion to eliminate items which are subject to this Bill. The housing situation is so drastic and the need is so urgent to have houses erected as quickly as possible that he should take steps to use this discretion.

It is certain that this Bill will cause another round of wage demands because of increased costs in the end product. It may seem a small imposition at its origin but when it gets to the consumer through the retailer this tax will be much more than the base amount. The turnover tax of 2½ per cent ultimately became an 8 per cent cost when it got to the consumer. If the 5 per cent on these goods will have the same effect and chain reaction down along the line we can take it that eventually the consumer will be saddled with a charge of approximately 16 per cent, assuming that this is double the amount of the turnover tax. It certainly looks as if we will have a situation in which this tax will be a gross 10 per cent on the original figure with the chain reaction down along the line. It will certainly increase the cost of living and push prices higher than they are at present. No steps have been taken in this Bill to ensure that this chain reaction will not take place. In so far as it will affect housing loans or grants as a result of the increased prices in addition to the payment of loans it is a very serious matter. There is another point here, too. I do not know whether it is under this section or not—the date.

Another section. It is rather a pity that Senator Rooney was not here yesterday when Senator Garret FitzGerald was speaking when he gave a fair enough appraisal as to how the impact of this tax could not be permitted to escalate.

When he gave what?

The Senator indicated that with the present powers of the Minister for Industry and Commerce he was going to suggest that the turnover tax could now be eliminated and placed on the shoulders of the wholesalers in connection with this wholesale tax, and that there might be no danger of prices increasing because of the powers now vested in the Minister for Industry and Commerce in that field.

If the powers are exercised.

Otherwise I can only describe Senator Rooney's remarks as either deliberately malicious in connection with this tax or deliberately designed, as I suspect, to gain political Party advantage out of an ill-considered observation of the Bill. The suggestion that turnover tax accounted for 8 per cent in the increase in prices since it was introduced is not only inaccurate but completely ridiculous. Since the turnover tax was introduced there has been roughly a 12½ per cent increase, of which turnover tax accounted for 3 per cent and an increase in wages and incomes accounted mainly for the balance.

An increase in prices.

It contributed to some of the price increases but also to incomes. There were price increases amounting to about 12½ per cent of which the turnover tax accounted for no more than 3 per cent. I indicated last night what the effect of this tax is likely to be. Assuming a range of consumption expenditure to be annually about £700 million the range on which this tax will be based is about £100 million, on which it is expected that £1,500,000 will come to the Exchequer in the current year as a result of the imposition of this tax, which is about three-fourteenth parts of one per cent in the current year, and in the full year it will amount to not more than 0.7 of one per cent. I gave the case of a man with an income of £20, and the impact on his wages would be no more than 2/9 in the week.

That is an estimate.

At least it is worked out on some mathematical basis and not just a malicious shot in the dark like Senator Rooney has taken.

The point I want to make is that when the turnover tax of 2½ per cent was imposed the trade unions—and I consider that they adopted a responsible attitude towards it—made the case that it had caused an increase of up to 14 per cent, and they applied for an increase of 10 per cent in wage levels as a result.

They sought an increase of 20 per cent.

You will have to hear me out on this. The Taoiseach made the point that it should not be more than 8 per cent, and the battle went on between the Taoiseach and the trade unions. They wanted 16 and he wanted 8 and eventually they agreed on the figure of 12 per cent. That included an increase in the standard of living apart from increased costs, but at least the Taoiseach made the case that they should not claim more than 8 per cent at that time because of the operation of the turnover tax.

Nonsense: The Senator knows that that is complete nonsense. I will withdraw my charge of being malicious and add this, that the Senator did not understand what was happening at the time.

I am not going to enter into a debate on the ninth round or the reasons for it.

It is not within the section anyway.

I would not agree with that over-simplification by Senator Rooney. On the section, which is rather a large section, I have a few questions to ask. The first is on subsection (1) where we deal with the limit of £500 for a wholesaler. I understand that a wholesaler whose turnover in any month does not exceed £500 will not be, in this queer phrase used in this Bill, "an accountable person", and will not be subject to this wholesale tax. I can quite appreciate that you reach a stage where it is not worthwhile trying to collect the tax at a certain level. Later in that subsection we are dealing with the manufacturer and here the limit is £150. The manufacturer with a turnover selling goods not exceeding the total value of £150 in any month is not subject to the tax. I quite appreciate the sense in excluding a certain limit if you are going to put on this wholesale tax at all. It does not become worthwhile attempting to collect it at a certain level, but it seems that here you are on a rather slippery slope.

You are encouraging people to keep below a certain limit and there is a sort of subsidising, in a way, of a person to keep at a very slow pace. A manufacturer when this Bill is in operation would want to be watching if he is in a small way that he would not go over this £150 per month. I do not know whether that is very big or small, though I imagine it is very small, and we seem to have the situation that the person who is starting in a small way of business is being put under a little pressure to keep watching that he will stay in a small way of business and will not start growing so as to become liable to this tax. I think that is dangerous, and I do not like it particularly. I should like the comments of the Minister on it.

I cannot make any comment on subsection (4) because I do not know what it means at all. I have read it a few times and it still does not make any sense to me. The next subsection, subsection (5), deals with exemptions, and here I should like to make a comment on housing, like Senator Rooney. I do so very deliberately because in my capacity as a trade union representative I have to act for people many of whom are lower paid workers. We are all very fond of talking about the white-collar workers and relating them to the £1,385 or whatever the maximum is for the ESB clerk, a favourite topic of Senator FitzGerald. But we tend to overlook the fact that quite a good number of people climbing the scale in these various clerical employments are very lowly paid, and the position is that a man who is about to get married, aged 24 or 25, in many cases in those employments is in receipt of £500 or £600 a year, or about £11 a week. This is a man who, in our present set up, has to go out into the open market and try to borrow money in order to purchase a house. He is not catered for by local authorities. He is one of the excluded grades. He is not eligible for housing by them. The general position is that this sort of person has to go out and borrow money from the local authorities or insurance companies and pay, not the £500 mentioned by Senator Rooney, but possibly £3,000 or £4,000. That man is only earning about £11 or £12 a week.

Before such a man starts to put a bite into the mouth of his poor bride, himself, or the children when they come along, he has to pay out £5 or £6 a week in repayments. This is a very serious problem. I am very conscious of this because this is a fact which tends to to be overlooked in the structure of our society. We hear a lot of talk about the lower paid workers. I have every sympathy with them but I have greater sympathy with the sort of people who are not catered for by local authorities and who have to go out into the open market in order to purchase a house.

We are, in this section, deliberately increasing the price of housing for those people. The Minister may say: "Of course, it is only five per cent. It only means a certain amount." That may be true but it means that the cost of houses will go up for those people. The more important point here is that the person has to borrow a larger sum of money and the cost of repayments will be greater and will, therefore, place a much heavier burden on those people.

The Minister, with the power he will be getting under paragraph (ii) of this subsection, should look at the possibility of exempting housing up to a certain limit. I am not speaking about the £10,000 house or the £5,000 house. I am speaking about the modest type of house which those people have to purchase. There is no other way in which they can provide a house for themselves. They are already in very serious financial difficulties. I hope the Minister will look at the possibility of this. I am not trying to make a political point or trying to be in any way malicious. This is a very serious problem and I hope the Minister will look at the possibility of doing something with regard to houses up to a certain level.

When we speak about housing we also come to the question of furnishing the house. I am reminded about somebody remarking in the Dáil that a mink coat could be put down as clothing and we would not be putting a tax on that but we would be putting a tax on other things. I am not interested in mink coats. I am talking about the problem of young married people trying to set up a home and the further difficulties that will be created for them here. Furnishing, for example, will be affected by this 5 per cent wholesale tax. It is a fantastic problem already for those people and we will make it even more difficult and expensive for them now. I suppose bedding will be subject to this 5 per cent tax. I do not know whether this will come under clothing or not. In other words, the bedding and furnishing that goes into a house will be subject to this 5 per cent tax. It will certainly make the purchase of a house much more expensive. I hope the Minister will look at this and see if there is any possibility that he could do something about the power he is taking in paragraph (ii) of this subsection.

I should like, before raising another query, to support Senator Murphy in that. I think that the purpose of this tax is to raise money by a more selective method than the turnover tax. This will be placed on goods which are not regarded as essentials. The idea behind this is one we would all support as a general principle where it is practical to implement it. The exceptions which the Minister has made are ones which are reasonable, having regard to this, and having regard to the existing taxation structure on drink, tobacco and hydrocarbon oil, which are so heavily taxed at the moment. We can quite see why they are excluded. Having regard to essentials it says "plus shelter". This takes a very high priority. It certainly takes a higher priority than some kinds of clothing although one can appreciate the Minister's difficulty in distinguishing between different types of clothing in regard to this tax.

The Minister should give serious consideration to this covering of shelter, housing. Apparently, it is the intention to tax articles which in the ordinary way are employed to build a house and articles which are installed in a house when it is built. Those articles are not normally bought frequently as replacement articles. I do not know how far this goes but I gather it covers a very wide range of goods. The Minister's estimate that, by and large, this would raise the cost of a house by 2 per cent is not the opinion of responsible people in the trade nor is it the opinion of responsible people in Government Departments and agencies involved. A higher figure has been estimated authoritatively. I generally accept most of the estimates by the Department of Finance but in this instance I rather doubt the 2 per cent. I wonder whether it has been fully and accurately calculated?

It seems to me that articles, such as sinks, which are employed in the building of a house are not articles which are replaced very often. They are installed as equipment rather than purchases. It seems to me that the Minister should exercise the power which he has under subsection (ii) to exclude that range of articles. I cannot see that the loss in revenue would be that great. It seems wrong that those articles which can be such a heavy burden on the group Senator Murphy has mentioned should be taxed.

In this country, owing to the quite extraordinary inadequacy of the local government housing programme, which represents a smaller fraction of our total building than anywhere in Europe, anybody who is not virtually destitute, has not got TB and has not got five children, is forced to go out into the open market to get a house. The burden which is placed on the incomes of the people Senator Murphy has mentioned is an intolerable one. We should try to alleviate that burden instead of adding to it.

The Minister ought to be able to prepare a list of exemptions here which would get rid of most of those problems. There is a wide range of goods which could be specified and which really belong to the building of a house rather than to the current purchases of a family. On the further question of the equipment of a house one comes up against difficulties. Carpets and curtains are not alone purchases in regard to a house when it is built. They are current purchases. Probably the majority of those articles are replacements rather than initial purchases. The Minister will be reluctant to extend instances into this field of current purchases but he should carry it as far as he can and he ought to consider some arrangement under which all this taxation on goods which are bought by people when starting married life and have to be replaced from time to time would be compensated by a marriage bonus of some kind. I see the need for taxation of this kind. I sympathise with the Minister when he cannot exempt such articles as curtains and carpets. He must realise that he is imposing a heavy burden on people who have to buy these things initially. To make a crude calculation, if he provided for every marriage in the country, without any means test, say, £50, it would not cost him more than about one-sixth of the total yield from this taxation. I am not suggesting that figure nor that it should necessarily be available to everybody, but it ought to be possible out of the proceeds of a tax like this to find some means of giving some compensation to people who are starting a family.

He is taxing goods which are not current purchases but which are a capital investment. I commend to him, therefore, both the exception of goods which are clearly primarily or exclusively purchased in relation to the initial construction of a house or its equipment, or, secondly, some measure of alleviation in a subsequent Budget from this taxation by some type of marriage bonus. That will give back to people some of what they had to pay out when they are establishing a home and family, at a time when they can least afford it. Both of these are ideas which flow naturally from this section and ones which the Minister should seriously consider.

The second point I want to raise is about clarification. I have read subsection (1) (a) a number of times and I find myself completely confused by the treble negative. I can cope with a negative and with a double negative but I am always confused with a treble negative. It is the last negative that gets me down. The subsection says:

...that the following persons shall not, save as otherwise provided by this Act, be accountable—

(a) sellers who are not engaged in selling by wholesale taxable goods or whose monthly receipts from selling by wholesale taxable goods have not in any month exceeded, and are not likely in any month to exceed £500, but exempting any such seller who is——

Is this an exception to the exception or an exception to the rule? As drafted, I cannot make sense of it. I hope the Minister with his expert advice will be able to tell me what the exceptions under subsections (1) and (2) are. Can he express in short cogent sentences what subsection (1) (a) means?

I shall deal with Senator Murphy first. He raised subsection (4) of section 3 and asked what the meaning of that is. That simply means that where a person, who has been registered as accountable for the wholesale tax, sells, for example, his debts to somebody else, that somebody else gets the benefit of his sales.

I shall make that clearer. Certain people owe him money, let us say £100, a third person comes along and says: "I will buy your £100 debt for £90 and I will take a chance on collecting it." That third person would be obliged to pay the tax. It did happen in the turnover tax that retailers in the same position were able to say: Well, I do not own those debts any more, I sold them to somebody else, an agent collected them. It is the person who collects the money who is liable under that section for the tax.

I am not familiar with this practice.

With regard to the general point, the impact of the tax as a whole levied on housing, as Deputy Colley, now Minister for Industry and Commerce, who was deputising for me in the Dáil while I was in the Seanad, even though certain journalists said I was indisposed —I suppose this could be regarded as a place of some asylum from the Dáil—said in the Dáil——

It is like the genii.

Deputy Colley said when deputising for me, that the figure of 4 per cent by which it was alleged the cost of house-building would be increased was wrong. He said it would not amount to 2 per cent. There is no very scientific way of working this out but I think Senators will agree that it would not amount to 2 per cent. Firstly, the cost of building a house is made up by many elements, the principle one of which is the cost of labour, which is estimated at being in the region of 50 per cent. The cost of labour will not be in any way taxed. As well as that, the basic elements of the physical make-up of the House, such as sand, gravel and cement, and so on, are also exempt and these are calculated to make up about 50 per cent of the balance of the cost of the house, so that, on that basis, you reduce your 5 per cent by one half and that one half again by another one half and you certainly get much less than 2 per cent.

I know of no other way at the moment of calculating it but it is obvious that the impact would be rather limited. I would say, too, that, while I cannot give any undertaking, I can broaden the range of the exclusions, the range covered by sand, gravel, cement and so on. I will, of course, give the matter further consideration when the definitions come to be decided upon.

Exemptions, if I may say so, rather than definitions.

"Exemptions" is right. I cannot understand where Senator FitzGerald got the phrase "current purchases", even though I know the context within which he used it. It was not the intention to confine this to current purchases as such. I gather what he means is that people starting in life buy certain things initially, and in some cases they have to be replaced at only prolonged intervals and in some cases they have not to be replaced at all. I must say it was never the intention to exempt even isolated purchases.

Initial purchases.

Initial, or whatever the Senator likes.

I gave the Minister credit for more charity than he has.

I was wondering where the Senator got the phrase "current purchases". It is a tax on purchases and purchases are not "initial" or "current". They are just purchases.

Purchase of a house is a capital investment and is treated as such for all our national accounting purposes and, therefore, the materials that go into it are not current purchases. What the Minister is saying is that he is now taxing capital investment and not current purchases. It was not my understanding that the intention was to tax capital investment on dwellings. I understood it to be a tax on current purchases as, indeed, the turnover tax is intended to be. The Minister is introducing a new tax on investment.

No, I am talking about tax on consumer purchases.

A house is not a consumer-purchase. It is a capital investment.

The Senator is also talking about furniture and fittings.

I spoke in different terms about them and made a different suggestion to the Minister about them.

The suggestion is that there should be a kind of marriage bonus. That would not be practical.

My suggestion would be very practical, I think.

When one comes to make exclusions in the operation of a tax of this nature, one gets into tremendous difficulty, and into fields so wide that the implementation of the tax would hardly be worthwhile. If I repeat what is in the explanatory memorandum about the treble negative, it might be helpful as far as section 3, subsection (1) (a) is concerned. It says here:

(a) provides, in effect, that the persons accountable for and liable to pay wholesale tax shall be

(i) persons, other than manufacturers, whose wholesale sales of taxable goods exceed £500 a month in value;

(ii) manufacturers whose monthly receipts from sales of taxable goods exceed £150; and

(iii) retailers whose purchases of taxable goods are made on a similar scale to those of wholesalers;

I think that it is reasonably clear.

The explanatory memorandum is perfectly clear. It was the Bill which was worrying me. My question to the Minister is why have the words "but excepting any such seller" here? I want to know what is that an exception to? Is it an exception to the first or the second negative?

It is an exception from the exemption.

I am not at all sure that will get us anywhere. The phrase is "that the following persons shall not ...be accountable". Is the Minister suggesting that the "but excepting" refers to that particular "not"; it is not an exception to the phrase "sellers who are not engaged in selling". As a matter of drafting, it is very unsatisfactory to have something saying "except" which is in a clause which itself is governed by another clause because the effect, of course, could be the direct opposite, depending upon which of the two previous clauses this is an exception to.

Arising out of the Minister's reply.

On a point of order, the Minister has not replied.

I am not expected to jump up at every point.

On this question of the increase in the cost of housing as a result of this tax, I would have thought that the calculation involved was one which should be available to the Government and that the Board of Works should be able to furnish it at ten minutes notice, because the percentage of the average constituents going into any average housing scheme is available. Therefore, the effect of the tax on this could and should have been calculated and made available right at the start.

I agree, as raised by Senator Garret FitzGerald, that this will again hit the newly married couples setting up homes. I suggest to the Minister that it is not the first time when a tax was being brought in that the Government found a way of compensating any particularly deserving party affected by the tax. In the debate on the Housing Bill I adverted to something equivalent to this tax; in other words, the necessity to encourage young people, before marriage, to embark upon a savings campaign which would provide a substantial contribution towards the cost of their housing. If the Minister could marry the relief to be granted, to offset the present tax, to the necessity for increasing savings by young people prior to marriage, then he would have achieved a very desirable result and something which would be very worthwhile. In other words, grant some kind of additional bonus or increase in interest yield or increased housing grant to people who availed of a savings scheme prior to marriage and who had saved a certain amount. By that means, both targets would be achieved. But, in equity, the Government are bound to compensate the newly marrieds for any additional burden likely to be imposed upon them, and which will be imposed upon them, by the tax in Finance (No. 2) Bill.

When I raised the point regarding the tax on housing, I also coupled with it the fact that the Minister has taken discretion to exempt goods purchased for the Electricity Supply Board because he considers that an essential service. He should have regard to the need for housing and he should consider that housing is an essential service for the community and should be one of the end products, if you like, of the goods and services which should be exempted from tax in this case. The Minister should find it quite easy to ensure that the tax will not be applied to building materials or furniture which will go into new dwelling houses. He mentioned that a portion of the cost of the houses will not be subject to this tax but, of course, we are discussing the effect of the tax so far as housing is concerned. Considering he has mentioned that a very large sum of money has been put on paper for the provision of local authority houses this year, it can be expected that a substantial amount of that money will be subscribed towards the payment of tax through the contractors and those who engage in the building of houses.

Therefore, the Minister should take power here and exercise discretion in order to exempt building materials used for the construction of new dwellinghouses, whether they be local authority houses or private houses.

May I deal with Senator FitzGerald's point again and go through the section rather than the explanatory memorandum? Section 3, subsection (1) says:

The person accountable for and liable to pay wholesale tax shall be the seller of goods....

but the next subsection exempts sellers who are not engaged in selling by wholesale taxable goods; in other words, people who are not wholesalers or whose monthly receipts from selling by wholesale in any one month do not exceed £500. But there could be, within this definition, people who are manufacturers and selling in a wholesale way. Therefore, we excluded a manufacturer, or a person who, though selling by retail, may be regarded as a wholesaler; in other words, people who buy bulk purchases from manufacturers and sell through their own retail outlets, such as chain stores. They are selling by retail but they got their goods on a wholesale basis. These people are sellers but they are excepted from the exemption.

Now we have already in subsection (a) excepted sellers who are not selling by wholesale, or wholesalers whose sales do not exceed £500 a month. Out of that exception we have excepted manufacturers because some manufacturers sell direct to retail outlets. It would be impractical to catch all manufacturers, and for that reason we have this further exemption of manufacturers whose monthly receipts from selling taxable goods have not in any month exceeded, and are not likely in any month to exceed, £150. That is a paraphrase of what is there. I feel sure Senator FitzGerald understands it exactly, unless he is possibly objecting to the pattern or the format of the section as a whole up to the end of subsection (1). I do not know if I have made myself clear.

There is one point I want to raise with the Minister. Does this refer to average monthly receipts or to a specific month? A manufacturer's average in a year might be only £150 but in one month he might sell £1,500 worth. I am wondering now does this £150 relate to an average month or to a specific month?

Later on in the section it says that if he runs over £150 in two months in succession he would be caught in the third month. He would have to pay in the third month. There is no question of averaging. It is a question of taking one month after another.

I am still in difficulties with this. The words are "excepting any such seller". They refer to the immediately preceding sentence which is "sellers... whose monthly receipts from selling by wholesale taxable goods have not in any month exceeded, and are not likely in any month to exceed £500..." Some manufacturers and retailers who are exempted by that exemption are exempted in a very particular sense in line 7 but there is this limited exemption on people whose sales do not exceed £500. I am not sure the Minister intends this at all, yet that is the way it reads. I do not think anyone could read it strictly in any other way. The words "excepting any such seller" must refer to what is immediately preceding.

If it is right as the Senator reads it, it is all right.

I am reading it right?

You are, yes.

Then I am more confused.

I will try to explain it again.

We start off with sellers of goods. They are all in, but we exempt sellers who are not engaged in selling by wholesale, or, if they are wholesalers, whose monthly sales do not exceed £500. We start off in paragraph (a) with sellers who are not wholesalers, and, if they are, whose sales do not exceed £500 a month. In exempting any such seller we go back again to the word "sellers" immediately after small (a). In other words, the small (a) takes the sellers described there out of the liability for tax, but if such seller is a manufacturer or a person who carries on a retail trade on such a scale as to be akin to a wholesaler, he does not get in under (a). This exemption is meant to apply to a seller who is not engaged in selling by wholesale taxable goods.

That is not what it says. "Any such seller" seems to refer to the immediately preceding sentence, that is, sellers whose monthly receipts have not in any month exceeded and are not likely in any month to exceed £500. The Minister takes "any such seller" back to the previous subclause. That is not my reading of it. I am not saying my reading is right, but there is the devil of a lot of ambiguity in it.

I have taken specific advice from the parliamentary draftsman and that advice is that the reading or interpretation I have given is the correct one.

I have two short questions. Under subsection (5) does the wholesale tax apply to general sales of electricity?

It does not? Why then is the generation of electricity covered? Does it apply to private concerns?

The Senator must have been engaged elsewhere when someone else raised this. I shall deal with it quickly. In the generation of electricity the end product is not regarded as coming within the category of goods. Therefore, for statutory purposes the Electricity Supply Board do not deal in goods. We have said that the generation of electricity is an activity within the ambit of these goods. Therefore, we regard the Electricity Supply Board as accountable persons. If one registered wholesaler buys from another registered wholesaler there is no accountability for tax as between them, but the ESB being a registered wholesaler has to buy raw materials such as coal, oil and other equipment necessary for their undertaking. They are not accountable to other persons from whom they buy because they are registered themselves. They do not pass on anything except electricity which is not taxable.

I should like to propose an amendment in due course to have this ambiguity clarified. I am just mentioning that now.

Question put and agreed to.
Sections 4 to 10, inclusive, agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill".

Subsection (2) provides:

Tax as aforesaid shall not be charged on any article which is declared by the Minister for Finance by order to be an article not chargeable with such tax as aforesaid on being imported into the State, or which is an article imported by a person registered under section 4 of this Act.

I wonder if the Minister can say anything about that subsection as to what is the intention of it, why it is there or what is the purpose of it?

If a person who is accountable imports goods then that person will not have to pay tax at the import point because when he pays on these goods he will, being a registered person, be accountable for whatever quantity of these goods he pays on. The other part of the subsection refers to our requirement to comply with the Brussels Nomenclature.

When goods are brought into this country and they are now liable for customs duty, they are defined under the Brussels Nomenclature and it is that definition an importer has to use in describing goods he has imported. Because of the necessity of customs procedure to define articles in the precise terms of the Brussels Nomenclature, the general terms of exemptions which have been enumerated in section 3 (5) cannot be used here and, therefore, a detailed list in customs terms of the goods exempted from wholesale tax will have to be drawn up. This will be done in good time before 1st October when the tax becomes operative.

The Minister suggests he could use this subsection to exempt somebody from paying tax because that person is registered. What is stated here is that tax shall be paid on an article declared in this Finance Bill as being chargeable and so on, but it is not set out that particular people shall be exempted because they pay tax by some other system. I wonder if the Minister is right in the first part of the statement. In regard to the second part, I was simply anxious for an assurance that this provision would be used to apply to the import regime engaged in transactions involving commodities identical with a list of articles being sold internally. I should like an assurance that there will be no differentiation.

What the Senator said is exactly so. The same goods will be liable to the same tax. The Senator referred to imports. I did not say that because a person was accountable I can relieve him of customs or any other duty properly chargeable. I do not quite catch the Senator's reference to the other point of my statement.

Exemption of people all round comes under subsection (3) of this section.

The Minister has not done anything here about ensuring that transactions not completed before 1st October——

It is not in the section.

I am relating it to imports. I am speaking about items subject to this tax which have not been paid for before 1st October. It is possible that Government loans and grants may be unpaid and I am suggesting that if people have begun but not completed transactions before 1st October because of delay in the payment of Government grants and loans, they should be excluded from the tax in relation to these transactions. Some provision should be made to ensure that where applications for loans and grants have been made before 1st October but the loans and grants have not been paid, those concerned who have while awaiting payments of such loans and grants negotiated certain transactions, should be exempt from this tax. Otherwise, the effect of the Bill will be to compel people to clear their own accounts and have all their payments made, even those depending on loans and grants.

As far as this section is concerned, the person who imports goods and who has a contract made in connection with them is entitled under the Customs Consolidation Act, 1876 to add to the price of the goods any duty that has in the meantime been imposed. It is intended for the purpose of this section, as far as taxable goods are concerned, to apply the same procedure so as to permit an increase in the price of goods to compensate for the wholesale tax.

On the general question, even if it is not relevant, I should like to say that a concession of the nature Senator Rooney has suggested was given initially on the application of the turnover tax. In other words, persons who had certain transactions completed but not paid for before the operative date were permitted to be relieved from payment of turnover tax on such transactions. Subsequently it proved to be the case that there were so many evasions by so many people who deliberately got away with it—even though the transactions were not contemplated before the operative date they pretended they had been negotiated but not paid for—that I am afraid I must stick to 1st October as being the operative date.

I was aware of the point made by the Minister in regard to turnover tax evasion and I knew the problem could affect the Minister here but I was referring to transactions uncompleted because of delays on the part of the Government in the issue of payments of loans and grants.

There may be exemptions from the tax in regard to imported goods by order of the Minister. I ask the Minister under subsection (2) to exempt educational goods. Already, students bear a heavy burden of cost on textbooks, instruments and so on and it would be unfair to add a further five per cent to that burden. Would the Minister consider giving sympathetic consideration to exempting imported educational articles?

Yes, I will consider that.

They are already subject to 2½ per cent turnover tax and another 5 per cent on top of that——

I will consider it.

Question put and agreed to.
SECTION 12.
Question proposed: "That section 12 stand part of the Bill."

I raised the question yesterday on the Second Stage debate about the turnover tax and the possibility of eliminating the separate administration of it as regards goods in any event and incorporating it with this so that the retailers would not have to continue to fill up forms. Unfortunately, I was not here when the Minister replied but I understand that his reply was that this would not cover cases of services. I appreciate this, and should have made this clear when I was speaking. Where you have services that would not be covered by wholesalers you must need to retain the type of administration that you have for the turnover tax. That is quite acceptable, but what is not acceptable is that where you have retailers selling goods which have passed through wholesalers in the normal way or are produced by manufacturers, they should have to continue to fill up these forms when without any additional burden the wholesalers involved could carry this by simply paying 2½ per cent on their turnover.

Some additional wholesalers might have to be brought in over and above those covered by this tax, but they would be already dealing with turnover tax in respect of retailers buying the goods tax paid, so that that would not create any problem. Maybe I have not fully understood the Minister's reply which I did not hear, but could he not at least eliminate the administration of turnover tax on retailers even if it has to remain in the case of the provision of services? This seems to be relevant to the question of the care and management of this tax by the Revenue Commissioners.

I would not accept that this is relevant but I will be irrelevant for Senator FitzGerald's sake. I dealt with the point he made on services last night. He did not refer to the point I made about the danger of the cascading of this tax, that if it is dealt with only at wholesale level ultimately there might be mark-ups passed on at a higher level.

But the Minister this morning——

I have only half-finished my argument. Nevertheless, the danger is there of mark-ups being made effective before the tax is applied. I said that last night as part of the argument against the point made by the Senator. I did say, of course, this morning, that there are certain powers now vested in the Minister for Industry and Commerce about the control of prices, but nevertheless, they are not always effective and there is always the danger of mark-ups creeping into the sale value and, therefore, into the percentage added for tax purposes which would have to be carried by the consumer. I did make one other point, and it was that there are many goods coming to the retail shops that never passed through wholesalers—bought at fruit and vegetable markets, food coming direct from farmers, etc. There are a lot of difficulties involved. As the Senator knows, retailers would not be involved in this tax.

I do not think that the Minister's reply is convincing on the question of cascading. I feel that I am dealing with a skilled practitioner of the three-card trick, that when one thing fails he hops to the other position. This morning he was using the fact that the Minister for Industry and Commerce had these powers and that he could use them effectively in another direction.

I was referring Senator Rooney to the case made by Senator FitzGerald.

The Minister is not entitled to use one argument he made to Senator Rooney and the opposite which he made to me. I think that if the Minister for Industry and Commerce has powers he will use them effectively. The Minister this morning clearly implied that he believes the same thing. His point now is that they are ineffective and, therefore, this cascading of prices might operate. This tax is to operate on £100 million worth of goods but we have heard nothing up to now from the Minister about this cascading. It is only mentioned by him when he thinks it is convenient. This is a very poor form of argument. There is no problem about cascading with the appeal mechanism.

The only other point the Minister made in this extremely weak defence for imposing a continuing administrative burden on 30,000 retailers is that some of them may buy goods direct from farmers and thereby evade payment of tax. I can think of nothing that we should be more anxious to achieve than that they should buy direct from farmers, and if some minor incentive can be given to them to avoid middlemen and buy direct from the farmers it should be given effect to. Why the Minister should take this as a great argument against a change I cannot understand, but he has failed to meet the case for abolishing the tax in its application to 30,000 retailers. The Minister has totally failed to reply to the point. If he cannot do it now he should at least do it next year, study the administrative machinery for this and eliminate the necessity for filling up all those 30,000 forms.

Question put and agreed to.
Section 13 agreed to.
Title agreed to.
Bill reported without recommendation.

I have handed in two recommendations and it would be helpful if we could have them before us on the Report Stage. I think that they are being typed.

I hope that we will have the recommendations in type before we act on them.

The House will wait until we see if we can get these recommendations in a suitable time. If not we can have the matter adjourned to a later hour. Would the House agree to adjourn consideration of the Report Stage of the Finance Bill until we get the recommendations, and proceed immediately to No. 8, which I take is formal?

Report Stage ordered to be taken later today.
Top
Share