As this Bill is closely related to the budget for the current financial year, it would be appropriate, at the outset of my speech, to describe the economic background to the budget and to outline the action taken by the Government to improve the overall position.
Last year, unemployment among insured persons averaged 8.1 per cent, a level higher than in any year since 1958; the number of unemployed on the live register last year averaged 72,000; the total number at work fell to 10,000 below the 1971 level.
The consumer price index was up by 8½ per cent last year—the fourth successive year of high price rises—with food prices rising especially strongly and there was a ubstantial spillover effect on price in the current year. For the past three years, the growth of GNP was running at about 3 per cent. Although there were indications that the economy would expand at a rate of about 4 per cent, this was unsatisfactory because a far greater improvement is needed if we are to make fuller use of productive capacity, reduce the level of unemployment and raise the all-round standard of living.
Faced with these difficult problems of inflation, hardship due to poverty, unemployment and under-utilisation of resources, the Government set out to remedy the situation by way of an expansionary budget planned to get the economy on to a higher growth path and the granting of large social welfare increases which more than compensated the less well-off for the rise in the cost of living. The removal of food from the scope of VAT was a further step of major social significance.
The principal fiscal action to stimulate the economy was the rise of about £190 million in the combined capital and current budgets.
The capital budget for this financial year shows a rise of about 23 per cent over last year's outturn. This increase has been widely spread with substantial additional sums being earmarked for housing, industry, agricultureand telephones. These increases aredesigned to lift the growth rate appreciably and, by enhancing resources and making for their fuller use, will add to employment and boost the general levl of prosperity.
Current outlay, up by about 20 per cent, will also contribute to the stimulation of economic growth. Significant increases in the non-capital budget were attributable to the fresh instalment of the phased transfer of housing subsidies and health charges to the Exchequer, higher outlay in the sphere of education, a higher provision for security and many other items. A main feature of the current expenditure side of the budget sas, of course, been the addition to the social welfare outlay. The 1973 budget did more in the social welfare field than any of its predecessors. An idea of its extent is gained from the fact that, in a full year, the improvements will cost £68¾ million of which £52½ million will fall on the Exchequer.
This is a brief summary of the policy underlying the 1973 budget and an outline of the planned expenditure pattern which has both social and economic implications. Since borrowing to meet fully the financing requirements of the budget would over stimulate the economy, we had recourse to some increases in taxes and charges.
These increases, however, were relatively moderate when compared with net increases imposed in other recent budgets. The full year effect of the 1973 tax changes will be an increase of about 3½ per cent in tax revenue, while the budgets of 1970, 1968, 1966 and 1963 resulted in increases of 8½ per cent, 6½ per cent, 9¾ per cent and 10¾ per cent, respectively.
The major social welfare concessions and the substantial projected rise in overall Government expenditure do not, I hope, minimise the Government's equally considerable tax reform programme launched in the budget, or the variety of tax reliefs being provided in the Finance Bill. This Bill is but the first concrete step in the realisation of this long overdue reform and it is our intention to proceed quickly with the necessary research and other background work, already begun, so that reform may be a reality at the earliest possible date. I shall refer to the question in greater depth later, in my outline and brief commentary on the provisions of the Bill, when dealing with the various taxes involved.
I now turn to Part I of the Bill which deals with income tax, including sur-tax, and corporation profits tax matters. Senators will agree with the view that the plague of unemployment has ben with us for far too long and that it is of fundamental importance to put our economic activity on a firm and expansionary footing for the highly competitive years ahead. Every encouragement must, therefore, be givn to the xploitation of new ideas and improved methods which will help to secure and indeed widen employment opportunitis here for all our pople. As a supplement to the direct measures already taken by the Government to this end, the Finance Bill provids a number of indirect, but none the less valuable, incntives for increased investment, research and innovation in the years immediately ahead.
The Bill proposes to renw for a further two years, to 31st March, 1975, the special accelerated capital allowances for plant, machinery and industrial buildings so as to speed up investment and bring about faster growth. Section 9 renews the 100 per cent initial allowance for capital expenditure on new plant and machinery, enabling such expenditure to be written off in on year, and also ensures that a trader will not get allowances, apart from the additional 20 per cent investment allowance— being renewed in section 16—which applies in the designated areas, of more than 100 per cent of the cost of plant and machinery. Section 11 ensures the recovery of excess capital allowances which may have been obtained by virtue of an unintended loophole in existing legislation. Section 17 renews the provision for the free depreciation of new plant and machinery provided for use outside the designated areas and section 10 renews the 20 per cent initial allowance for capital expenditure incurred on industrial buildings.
Section 8 secures that the 40 per cent shipping investment allowance will not be available in respect of future contracts during the currency of the free depreciation provision being renewed by the Bill. Income from patent royalties arising to any person resident in this country will be exempt from both income tax, including sur-tax and corporation profits tax under section 34, provided the work in connection with the devising of the patented invention is carried out here, and section 21 provides tax relief for payments made by traders or professional people to any Irish university for the purpose of enabling that university to undertake research in, or engage in the teaching of, industrial relations, marketing and other approved subjects. I am hopeful that these two reliefs will herald a new bloom of creative endeavour for the benefit of the community at large.
I now turn to the other reliefs provided in Part I of the Bill. At the outset, I should mention that while the Government would be glad to be in a position to increase personal tax-free allowances in this Finance Bill, it is, however, not possible because of the present heavy commitments on the limited resources available. It is the Government's earnest wish that the special expansionary measures to which I have just referred will amply bear fruit and thus provide the resources for further alleviation of tax burdens where they bear most heavily. Within the limited resources available, the Government decided to provide relief at this time to a number of special categories.
Section 2 increases from £74 to £104 the maximum special earned income relief in respect of a wife's earnings and is designed to reduce the comparatively heavy tax burden on working wives and thereby ease the staffing problems encountered in a number of sectiors. Section 4 raises from £295 to £347 the limit on a dependent relative's income to ensure that the full dependent relative allowance can be claimed where the dependent relative has no income other than the caximum non-contributory old age pension which was increased in the budget. Section 19 exempts from tax payments to or in respect of Irish thalidomide victims from the German foundation.
With a view to facilitating the adaptation, over an extended period, to the 1972 code of occupational pension schemes approved for the purpsoes of tax reliefs under pre-1972 legislation, section 7 enables such schemes to pay in lump sum form a tax-free death-in-service benefit of up to four times the deceased employee's final remuneration, as permitted under the 1972 legislation. Section 12 raises from £350 to £450 the limit on the maximum annuity payable by registered trade unions enjoying tax exemption in respect of the income from which such annuities and other provident benefits are paid.
Section 14 secures that the benefit of the tax exemption in respect of non-bedded minerals is passed on by a holding company to their shareholders when they are paying dividends out of exempted income. I should mention in this context that the Minister for Industry and Commerceis at present reviewing the fiscal policy in relation to mining in the light of the report of the interdepartmental committee. Section 33 and the Third Schedule to the Bill extend the charge to tax of profits derived from activities and of income from employment on our section of the Continental Shelf.
This country has, I regret, been somewhat lethargic in its adoption and in its promotion of the observance of international conventions relating to fundamental human rights and freedom. In order to stimulate more public awareness of and direct involvement in this very important task the Bill makes a special two-fold provision for tax relief. Section 20 provides exemption from income tax for certain consultative bodies whose objects are the promotion of observance of the Universal Declaration of Human Rights and/or the implementation of the European Convention on Human Rights and Fundamental Freedoms, while section 15 provides that annual payments under covenant to such bodies for a period of three years or more will be recognised for income tax purposes.
Section 36 extends to 31st December, 1973, the exemption from corporation profits tax which applies to certain public utility companies, the Agricultural Credit Corporation and building societies.
Sections 13, 31, 32, 37 and 38 of the Bill arise out of and give effect to the agreement and protocol of 2nd May, 1973, between the Irish and the British Governments in regard to new arrangements for the avoidance of double taxation of dividends flowing between the two countries. The texts of the agreement and protocol are set out in the Second and Fourth Schedules, respectively, to the Bill. The new arrangements will, however, continue for a period of two years only, commencing on 6th April, 1973, and the negotiation of a further agreement will, of course, then arise.
Briefly, the new arrangements ensure that, as far as possible, the position of the Irish Exchequer and of Irish residents who have shares in companies located in Britatin or Northern Ireland will not be adversely affected during the currency of the new arrangements. Under these arrangements the tax credit relating to dividends allowable under the new British system will be paid to all shareholders resident here other than direct investors, that is, companies with a stake of 10 per cent or more in the company paying the dividend.
Direct investors, however, will be allowed a credit against Irish income tax in respect of so much of the British corporation tax on the profits out of which the dividends are paid as cannot be allowed against our corporation profits tax. On the other hand, British residents will continue to be entitled to exemption from Irish income tax in respect of dividends received from companies in this country except that, in the case of dividends paid by Irish companies to direct investors in Britain, income tax of up to 5 per cent on those dividends will be retained here so as to safeguard the Irish Exchequer. Britain will, however, give relief against corporation tax for Irish income tax so retained, as well as for the Irish corporation profits tax underlying dividents paid to direct investors in Britain.
Much attention has been focussed in the other House and outside on section 3 of the Bill which secures, in the case of taxpayers whose net income for income tax purposes exceeds £2,500 a year, the recoupment of the budget income in social welfare children's allowances. Marginal relief from this recoupment is provided where net income slightly exceeds that figure—the recoupment does not, of course, apply for sur-tax purposes. The Government considered that a line must be drawn at a certain income level so as to direct Exchequer family assistance to the most needy. To do otherwise would clearly be wasteful of scarce resources. The Bill's proposal will, however, only affect a rather small proportion of tapayers, some 5 per cent or about 40,000 in all, as far as can be estimated at this stage.
Section 6 of the Bill is designed to remove a legal doubt as to the validity of tax assessments on the personal representative of a deceased member of a partnership in respect of that member's share of the partnership profits arising prior to his death and section 18 authorises the administrator of a statutory superannuation scheme to deduct the appropriate tax from refunded contributions.
I now come to the question of tax reform and the remaining sections of Part I of the Bill. As the Minister for Finance indicated in his Budget statement and in reply to debates in the other House, considerable progress has been made towards the simplification of personal taxation and I am hopeful that it will be possible to introduce the necessary legislation in the present year. It will then be possible to divert the necessary staff and resources to an in-depth examination of more fundamental aspects of personal taxation. Progressing concurrently with work towards the simplification of personal taxation is the examination of the detailed comments of interested parties on the question of changes in company taxation on the lines set out in last year's White Paper on the subject. We are not at this stage in a position to put forward concrete proposals in this regard but, subject to EEC and other developments in this field, we hope to be able to do so at an early date.
Tax avoidance, which is socially and economically undesirable, must also be curtatiled and scare resources channelled into the most worthy avenues. Conscientious taxpayers must not be put at a disadvantage vis-á-vis defaulters and I am certain that Senaors will support the Government's efforts to create the climate which will ensure that obligations in this matter will be duly fulfilled.
It is in this light that the remaining sections of Part I of the Bill, namely, sections 1, 5, 22, 23, and the First Schedule, sections 24, 25 to 30, 35, 39 and the Fifth Schedule and sections 40 to 46 have been drafted.
Section 43 is designed to impose the same penalty—of £20 plus £20 per day with a separate penalty on the secretary where a body of persons is involved—for failure to remit PAYE as applies in the case of failure toremit VAT. Section 1 imposes the same minimum interest charge of £5 in respect of overdue tav collected under PAYE by employers as applies in the case of overdue VAT. Section 35 ensures that interest on unpaid PAYE tax, VAT and stamp duty will not be allowed as a deduction for income tax or corporation profits tax purposes.
Section 22 is designed to facilitate penalty proceedings for the payment of PAYE tax estimated to be due by specifying that a certificate signed by an officer of the Revenue Commissioners that the tax so estimated is payable will constitute prima facie evidence to that effect.
Section 46 aligns the income tax penalty for fraudulently made incorrect returns or statements by a body of persons to the VAT penalty of £1,000 and section 45 raises from £50 to £100 the penalty for failure to produce records in connection with claims for exports tax relief. In short, these provision are designed to align the penalty provisions for the various taxes and thus provide greater ease of administration.
Anti-avoidance measures are contained in section 5 which deals with tax on income accumulated under a trust, section 23 and the First Schedule to the Bill which restrict tax relief in respect of life insurance premiums to policies of at least ten years: this applies only to policies made on the lives of persons under 56 years of age. Section 24 restricts tax relief in respect of business entertainment expenditure to expenditure wholly, exclusively and necessarily incurred for the purpose of the trade or profession with the similar restriction on capital allowances for plant and machinery used in this connection. Sections 25 to 30 which are designed to restrict capital allowances in the case of expensive cars to what these allowances would have been if the cars had cost only £2,500. Section 40 which withdraws the right to certain allowances in respect of industrial buildings where contrived transactions between companies of a group can result in the cost of such buildings being written off for tax purposes at a greatly accelerated rate and section 44 which is intended to prevent tax avoidance through the medium of friendly societies.
Section 39 and the Fifth Schedule to the Bill aim at disallowing the tax saving to purchasing companies of companies which are dormant or near dormant and have accumulated substantial tax losses. It is not intended that ailing companies with sizeable employment will be affected by these provisions and the section will be liberally interpreted so as not to discourage worthwhile mergers in bona fide cases where tax saving is not the primary motive in the purchase of the ailing company. Sections 41 and 42 deal with benefits in kind. The purpose of section 41 is to stop a tax avoidance device which enables some benefits in kind to escape tax because they are provided, not by the employing company, but by an associated company. Benefits in kind provided by non-trading bodies will, by virtue of section 42, be charged to tax in the hands of the directors or employees in the same way as similar benefits provided by trading bodies.
I now come to Part II of the Bill which is largely concerned with the increases in customs and excise duties imposed in the budget. Sections 47, 48 and 49 are concerned with the beer, spirits and tobacco increases respectively. While any Government approaches tax increases with some reluctance, we felt justified in imposing these moderate increases in view of the remarkable buoyancy of revenue from the "old reliables". We are also confident that consumers appreciated that these increases were essential to enable the undertaking of this year's unprecedented improvement in the lot of the poor and disadvantaged.
Section 50 deals with the imposition of a special excise duty on tobacco stocks held by manufacturers at 5 p.m. on budget day. This is in line with the practice in recent years when the tobacco duty was increased and is designed to divert to the Exchequer the enhanced value of stocks held by manufacturers on budget day. The Minister for Finance introduced an amendment to this section at the Committee Stage in the Dáil to give full relief from this special excise duty to the small manufacturers, who specialise in plug and twist tobaccos and whose clientele—which consists largely of elderly rural people—presents little scope for passing on the rise in the duty on stocks. I am satisfied that this concession was warranted in order to avoid the risk of a loss of employment that might result from a contraction in sales by these small manufacturers.
Section 51 provides for the use, under certain circumstances, of materials other than tobacco in the manufacture of cigarettes for export, while section 52 confirms a number of orders made by the Government under the Imposition of Duties Act, 1957.
Part III of the Bill is concerned with death duties and contains the interim reliefs in the field of estate duty which are designed to alleviate the greatest hardships of the system pending its replacement by a new system of capital taxation. Senators will appreciate that the abolition of estate duty, to which the Government are totally committed, could not be done without making provision for an alternative form of capital taxation. Quite apart from the revenue involved, which is substantial, a balanced system of taxation requires that large holdings of wealth should be taxed, in addition to whatever other forms of taxation apply to income and expenditure.
The exemption limits for estate duty and for legacy and succession duty are raised from £7,500 to £10,000 by sections 53 and 54 of the Bill. Section 55 increases the rates of legacy duty and succession duty, which are payable only in respect of property passing outside the lineal family. The very valuable abatements of estate duty in favour of widows and dependent children are increased to twice their present levels by section 56. The limit for the application of artificial valuation to agricultural land, by virtue of which the great majority of farms escape estate duty, is raised from £2,000 to £3,000 by section 57.
Sections 58 and 59 provide that the first £7,500 of superannuation death benefits and insurance policy benefits, respectively, will be excluded from the estate for estate duty purposes.
Some securities—for example certain Government, semi-State and local authority stocks—are exempt from estate duty where the owner is neither domiciled nor ordinarily resident in the State. Section 60 of the Bill provides that a similar exemption will apply to units of a unit trust scheme all of whose underlying securities are of this type.
At present when a person who jointly holds a bank deposit account dies, the bank may not pay out a balance exceeding £1,000 to the surviving joint-depositor unless a certificate or consent from the Revenue Commissioners is produced. This provision is designed to prevent death duty evasion through non-disclosure. Section 61 proposes to extend this restriction to all institutions accepting deposits from the public.
In Part IV of the Bill there are two Chapters, the first dealing with the stamp duties changes announced in the budget and the second providing for the implementation of an EEC directive relating to stamp duty on capital companies.
In Chapter 1, section 62 is a commencement provision and section 63 is consequential on the exemption from duty of mortgages up to £10,000 which is provided in section 64, together with a reduction in the rates of duty charged on sales of houses and lands up to £10,000 in value. These reliefs are of substantial benefit to persons buying moderately-priced houses. As announced in the budget, we decided to recoup part of the cost of these reliefs by increasing, from 10 per cent to 15 per cent, the rate of stamp duty on certain contracts for the construction, alteration and enlargement of offices, and the necessary provision is contained in section 65. As we were anxious that the stamp duty reliefs should operate from the earliest practicable date, the Government made an order under the Imposition of Duties Act, 1957, bringing the changes into effect from 1st June last. The provisions of this Chapter of the Bill will replace the provisions of the order which is, accordingly, revoked in section 66.
Chapter II of Part IV of the Bill implements an EEC Directive, issued in 1969, concerning indirect taxes on the raising of capital by companies and firms. One of the purposes of the Treaty which established the European Economic Community was the creation of an economic union whose characteristics are similar to those of a domestic market. One of the essential conditions for achieving this union is the promotion of the free movement of capital. The differing indirect taxes in force in the member states on the raising of capital give rise to discrimination, double taxation and disparities which interfere with the free movement of capital. To prevent these interferences, the tax on the raising of capital within the EEC by a company or firm should be charged once only and the level of the tax should be the same in all member states. In short, the theme of the directive is that harmonisation of the duties on the raising of capital is essential, both as regards the structure and the rates of duty. The directive sets out the lines which that harmonisation should follow and this Chapter of the Bill provides accordingly. The present company capital duty and loan capital duty require to be abolished and a new stamp duty imposed in their stead.
Section 67 contains the necessary definitions appertaining to this Chapter, including provision that the Chapter will become operative from 1st August, 1973, or the date of the passing of the Bill, whichever is the later. In this connection I should mention that any company that paid stamp duty under the present system in respect of a transaction which took place after 1st January, 1973, will have the option of having the duty reassessed under the new system.
Section 68 sets out the transactions which will give rise to a charge of stamp duty. This section also prescribes the effective centre of management of a company as the criterion for determining the location of a company for the purpose of the new duty whereas, under the present system, the relevant factor is the registered office, which, of course, would not always be in the same place as the effective centre of management.
Section 69 provides that the rate of stamp duty to be charged in respect of capital contributions will be 1 per cent, which is the lowest rate permissible under the directive and which is the common rate which all member states will be required to charge as from 1st January, 1976. This compares with a rate of 0.25 per cent in the case of the present company capital duty and 0.125 per cent in the case of the present loan capital duty.
The base on which the new stamp duty will be charged will, as provided in section 70, be the amount of the actual value of the assets contributed to the company or firm instead of, as under the present system, the nominal value of the shares issued. Section 71 abolishes the present company capital duty and loan capital duty and gives taxpayers the option, to which I have already referred, of having these duties reassessed in the case of transactions since 1st January, 1973.
Section 72 provides an exemption from the new duty in the case of certain merger and take-over transactions and section 73 exempts certain public bodies and cultural, charitable and educational organisations. Section 74 provides for appeals on the question of the value of the assets on which duty may be charged while section 75 provides for the recovery of duty and the furnishing of information in relation to liable transactions.
Part V of the Bill deals with value-added tax. It implements the major changes in VAT announced in the budget. These changes involve the removal of the tax from food and the necessary increases on other items. In addition, Part V provides for some matters of detail, designed to facilitate administration or prevent avoidance. The opportunity is being taken to effect also some necessary modifications of penalty provisions and to incorporate in the statute some minor matters which are at present provided for in ministerial orders made under the Value-Added Tax Act, 1972.
Anything which affects the price of essential foodstuffs is a matter of basic importance for the poorer sections of our community since they spend a large proportion of their incomes on food. By contrast, the food expenditure of well-off people represents a much smaller proportion of their incomes. A tax on food, therefore, bears relatively heavily on poorer people. The removal of such tax through a zero rating for VAT purposes is a practical step to give relief to people on limited means.
The exact definition of the commodities to be zero rated was settled after discussions with trading interests. The results are indicated in the Bill—sections 78 and 88 refer. They have also been published in a Press notice for the information of traders generally. As well as essential foods the zero rating covers oral medicines. On the other hand, the concession will not extend to certain luxury items which affect family outlay only marginally. Neither will it extend to catering but I might mention here that it is being provided in section 87 that an exemption for catering services will be provided for patients in hospitals and pupils in schools.
It is, of course, essential that when VAT is removed from food, there will be a corresponding reduction of 5 per cent in retail prices. My colleague, the Minister for Industry and Commerce, is attending to this aspect. We have, of course, been anxious to give the relief as quickly as possible. However, it was found that it would not be practicable for traders to make the necessary preparations to operate the proposed VAT changes before September and the date set is Monday, 3rd September. Making the change on a Monday will give traders the advantage of a week-end to complete preparations and should help to ensure a full and general reduction of prices of the goods to be zero rated.
The transfer of food and oral medicines to the zero rate of VAT necessitates increases in other rates of VAT. These increases are provided for in section 80 of the Bill. In addition to meeting the cost of the reliefs given in respect of food, et cetera, the increases are designed to provide a relatively modest contribution of some £2.6 million this year towards general budgetary needs. When account is taken of the food concession, I think that the increases in VAT on other items will not be a financial burden on anyone.
I might mention that the effective rate of VAT on building work, which is about 3 per cent, is not being increased; in fact, as a result of the adjustments, there will be a slight marginal reduction in the rate for building work.
The changes in VAT to which I have referred—that is the zero rating of food, et cetera, and the offsetting increases on other items—are calculated to have a net downward effect equivalent to 0.5 per cent on the consumer price index. Among the various items which enter into the base of the index food has a high weighting, as would be expected in view of the importance of food costs in the household budget.
Having now outlined the salient features of the proposed VAT changes, I will move on to some matters of detail.
Section 79 relates to what are called "self-services", that is, services rendered by a trader for his own business or in connection with it. It replaces an existing statutory provision and ensures that VAT will be neutral as between services provided within a firm and similar services by an outside contractor. Chiefly in mind here is the position of commercial firms supplying catering services for businesses. Section 80 provides that a commercial caterer will be accountable for tax on the value of food used by him in rendering his services, whether or not he himself purchased the food. This is essentially an anti-avoidance provision.
Section 80 also enables the Revenue Commissioners to settle doubts by making formal statutory determinations of the rates of VAT appropriate in particular cases. Such determinations by the Revenue Commissioners will, of course, be subject to appeal to the appeal commissioners—and from them to the courts.
Under sections 81 and 85, small traders who have not been registered for VAT, but who want to get tax credit for the VAT element which they have borne on stocks held on 3rd September, will be able to do so by becoming registered for VAT.
Normally, traders have 19 days of grace for payment of VAT after the end of a taxable period. Section 82 is necessitated by the provision—made in the Tenth Schedule—for extension of the normal July-August taxable period to end on 2nd September this year. Tax in respect of this taxable period will be payable on or before 19th September.
In sections 83 and 84 penalties for certain offences under the Value-Added Tax Act, 1972, are being increased. The change brings them into line with similar penalties under the income tax code.
Section 86 provides that, in the absence of agreement between the parties concerned, prices quoted in existing contracts will be adjusted where this is necessitated by the changes in respect of VAT.
Section 87 provides for the exemption of horses and greyhounds from VAT. It has been found that, due to the frequency of importations, the operation of VAT was affecting the functioning of these industries. The exemption now provided is considered to be the best solution.
Section 87 also provides an exemption from VAT in respect of the natural or artificial insemination of cattle, sheep and pigs. This will remove an anomaly arising out of the VAT arrangements for agriculture.
Section 88, which deals with zero ratings, includes provisions of importance for agriculture. It extends the zero rate, which at present applies to manufactured fertilisers and feeding stuffs and also to cover oral medicines for animals as well as seeds and plants for the production of food. It is calculated that these reliefs for farmers will suffice to offset the extra input tax which will arise for them from the increased VAT rates on other items.
Under VAT, farmers are not required to register for the tax but are compensated for the tax on their inputs by a 1 per cent tax addition to the prices of their outputs. This addition by unregistered farmers does not affect food prices, since the traders who buy from farmers are usually registered for VAT: these traders, therefore, get a refund from the Revenue Commissioners in respect of the 1 per cent tax addition which they have paid to farmers.
Section 88 also incorporates certain zero ratings already provided by ministerial orders made under the 1972 Act. An example is the zero rate for the life saving services of the Royal National Lifeboat Institution.
Section 89 makes some necessary changes consequential on the zero ratings and exemptions which I have just mentioned. It also provides for the consolidation in the legislation of certain ministerial orders, apart from those referred to in connection with zero rating.
Section 90 and the Tenth Schedule provide for various amendments of the 1972 VAT Act. These are mainly of a consequential or supplementary nature. Only one of the amendments merits specific mention. It extends the definition of manufacturer to include a person who supplies materials to another for the purposes of having motor cars, television sets, or any of the other goods which are at present liable to the 30.26 per cent rate of VAT, manufactured or assembled on his behalf. The 30.26 per cent will, of course, be increased to 36.75 per cent under section 80 from 3rd September. Of the full 36.75 per cent, 30 percentage points will effectively apply at the manufacturer level only. The amendment, which is to take effect immediately on the enactment of the Bill, is designed to ensure that linked companies cannot make arrangements to reduce the element of value of such goods to which the tax levied at manufacturer level only will apply.
Apart from some routine and consequential matters the main content of Part VI of the Bill relates to the vehicle excise duties increases, imposed in the budget, which are contained in sections 93 to 95 inclusive. Section 93 increases the rates of road tax on motor cars, motor cycles, agricultural tractors and other tractors. In the case of commercial goods vehicles there are increases on vehicles up to about 8 tons unladen weight and reductions on heavier vehicles. There is no change in the road tax on small public service vehicles, taxis and hearses.
A new charge to be levied when a vehicle is registered for the first time is imposed in section 94. This charge will go some way towards covering the costs incurred by licensing authorities on the first registration of a vehicle. The increase in driving licence fees is contained in section 95.
A tax exemption is provided in section 92 for securities issued in this country by certain European bodies. The section will put such securities in the same tax position as securities issued by certain semi-State bodies. Section 91 contains the usual annual provisions relating to the annuity charged on the Central Fund and paid into the capital services redemption account.
Section 96 repeals a number of enactments to the extent necessary to comply with the EEC directive on stamp duty to which I referred earlier. Section 97 is a routine provision regarding the care and management of the taxes and duties imposed in the Bill. Section 98 contains the necessary citation, construction and commencement provisions.
The provisions of the Bill will I believe contribute in no small measure to the development of this country as a progressive society based on social justice and accordingly, I recommend it to the House.
