Amendment No. 107 has already been discussed with amendment No. 96.
SECTION 114.
I move amendment No. 107:
In page 139, to delete lines 14 and 15 and substitute the following:
"114.-Section 11 of the Principal Act is hereby amended-
(a) by the insertion of the following subsection after subsection (1A):".
Amendment agreed to.
I move amendment No. 108:
In page 139, between lines 43 and 44, to insert the following:
"and
(b) by the deletion of subsection (5)."
Amendment agreed to.
Section 114, as amended, agreed to.
Section 115 agreed to.
SECTION 116.
Amendment No. 110 is consequential on amendment No. 109. Amendments Nos. 109 and 110 may be discussed together by agreement. Is that agreed? Agreed.
I move amendment No. 109:
In page 140, line 27, after "person" to insert ", other than a person referred to in subsection (10),".
As outlined in the explanatory memorandum, section 116 inserts a new section 12B into the VAT Act to provide for a special scheme for means of transport supplied by taxable persons in accordance with the Seventh Directive. The amendments to section 116 are purely technical and align the motor vehicles scheme with the other Seventh Directive schemes (margin scheme and auctioneers' schemes). Both amendments are part of a package to ensure that, where a taxable person sells a means of transport which he bought from a motor dealer under the special scheme, the sale is subject to VAT and residual tax is not deductible on that supply.
Amendment agreed to.
I move amendment No. 110:
In page 142, between lines 30 and 31, to insert the following:
"(10) Notwithstanding paragraph (xxiv) of the First Schedule, the provisions of that paragraph shall not apply to——
(a) a supply by a taxable person of a means of transport, other than a motor vehicle as defined in section 12 (3) (b), which that person acquired from a taxable dealer who deducted residual tax in respect of the supply of that means of transport to that person, and
(b) a supply by a taxable person other than a taxable dealer of a motor vehicle, as defined in section 12 (3) (b), which that person acquired as stock in trade or for the purposes of a business which consists in whole or part of the hiring of motor vehicles or for use, in a driving school business, for giving driving instruction, from a taxable dealer who deducted residual tax in respect of the supply of that motor vehicle to that person.'.".
Amendment agreed to.
Section 116, as amended, agreed to.
NEW SECTION.
I move amendment No. 111:
In page 142, before section 117, to insert the following new section:
"117.—As and from 1st July, 1995 the rate of VAT on newspapers and magazines shall be 5 per cent.".
I am nervous about moving this amendment having read Mr. Vincent Browne's attack on me for sucking up to a prominent newspaper baron. I am amused that somebody who took millions of pounds from that newspaper in terms of investment in his business, and went on his knees to members of my party for doing it, is now the total convert.
You know the old saying - no good turn goes unpunished.
Exactly. I am not sucking up to the printed media now. I raise this because I believe Ireland and England are increasingly becoming a common newspaper market. Somebody discussed the other day the right to die of the Irish Press. It will be an issue arising in the near future. A number of newspapers are now effectively on life-support machines. There is obviously going to be restructuring of our newspaper market no matter what various people attempt and there is probably going to be entry into our market of English newspaper capital too, which may be a good or bad thing. If we have a common media and newspaper market with the United Kingdom and if, effectively, these islands are increasingly becoming integrated as a market, there is a considerable distortion where all the major players live in a VAT-free environment and can move into a small portion of the market where VAT is charged on newspapers. This country must face up to that issue now.
I fully accept - and I am not going to get into a long discourse on this - that the Irish newspaper industry's problems are not all to do with the VAT structure. They have to do with over-manning, the size of our population and a lot of things apart from all of this. When all those consideration are excluded from the equation, there remains the increasing position of a single newspaper market in these islands and the vast majority of the heavy players, with the big capital and most competitive strength, are operating in a VAT-free in environment. We should go to Europe and say this is bound to have an adverse effect on the viability of Irish newspapers just as in previous times we went to Europe to explain how certain difficulties gave rise to emergencies. The European Union has, in fact, recognised the legitimacy of major distortions of competition. The Irish newspaper structure is so delicate now that the Minister for Finance, Deputy Quinn, and the Minister for Enterprise and Employment, Deputy Richard Bruton, should get together to decide on a strategy to support the newspaper industry in exchange, possibly, for increased competition.
Get rid of a few journalists.
No, although I presume the Minister would like to do that. The reality is that our newspaper industry is going to have some heavy players; it may be Rupert Murdoch or Conrad Black. They will be in here fairly soon and if they operate a newspaper empire from a VAT-free base which is far larger than the newspapers with which they compete, the result is more or less inevitable.
I would prefer to zero rate Irish newspapers rather than exempt them in order to give them some support in these circumstances. I know from the head of one newspaper that they would be willing to give an absolute undertaking to pass on any VAT reduction in price reductions because they believe they are already overpriced. The Minister must face up to this. We cannot continue to charge 12.25 per cent VAT on Irish newspapers when the English newspaper industry, in the vast majority of its territory, is VAT free.
Finally, I accept that English newspapers, for sale in Ireland, also attract VAT. That is not an answer to the problem. Irish newspapers need a VAT-free environment to have any prospect of success. I am not licking up to anybody. I do not care who survives and who does not. I do not care whether it is Dr. O'Reilly, Major McDowell or Dr. de Valera. I am simply pointing out that the Irish newspaper industry is in crisis and the Irish Government is not assisting by retaining VAT on Irish newspapers in circumstances where major foreign competitors operate in a VAT-free environment.
No one, on any side of the House, would ever accuse the Deputy of trying to lick up to anybody. I am familiar with this area from my prior experience as Minister for Enterprise and Employment and I met the proprietors of the newspapers on a number of occasions.
I want to give some facts in relation to the effect this amendment would have if passed. The cost in the current year would be £4.6 million. The full cost, of a 5 per cent rate of VAT on newspapers, in foregone revenue would be of the order of £15.3 million.
I accept that the amendment is too widely cast. Magazines should not be included in it.
It is only an outlay.
I share the Deputy's concerns about newspapers but the removal of VAT would not have the kind of positive effects suggested. I do not know if the Deputy intended to convey the impression - I formed it while listening to his contribution - that English newspapers sold in Ireland are VAT-free.
No. I said they were subject to VAT.
They are subject to VAT and if magazines were excluded, the net annual cost would be £13 million. That is still a considerable sum of money. The Irish newspaper industry is going through a major crisis. It will either be organised into a new regime, forced into a new regime or collapse into a new regime. At present there is an ongoing forum - organised by the Minister for Enterprise and Employment, Deputy Richard Bruton - to see if some progress can be made on this issue. In so far as we are——
It sounds like the Forum for Peace and Reconciliation. The most seriously affected person has not attended.
Yes but it still raises some issues not raised before. To return to the question of VAT and its removal, I do not think the measure proposed by the Deputy - I know the sincerity with which he proposes it - would give any effective relief to the structural cost problems of Irish newspapers. It would not change the competitive basis of the British newspapers, particularly the broadsheets which are themselves engaged in a massively destructive price war. One only has to look at the weekend deals on offer. To get The Independent on Sunday or The Sunday Timesfor ten pence, having bought one or other on Saturday, defies all threshold costs. Newsagents have informed me that this amounts to little more than dumping, in the short term, to try to force a competitor to crack. They then gain a market share and subsequently return to a line of profit. I do not want to get into a long debate on the future of the newspaper industry.
The Deputy raised a separate question with regard to seeking a derogation from the Commission because we are in a singular market. We are in a single English-speaking two-island market in many respects for the purpose of the newspaper industry. EU law already permits us to apply a reduced rate as low as 5 per cent. In these circumstances the Commission would say that the solution is in our own hands. An application for a derogation could be made but I cannot see how such a request could gain the required approval of the Commission and all other member states. It would be extremely difficult, if not impossible, to demonstrate credibly that a tax-based distortion of competition exists. All newspapers sold in Ireland are liable to the same rate. There have been no suggestions of cross-Border smuggling. The fact that——
Obviously advertising in British-based newspapers does not yield revenue here. Is there VAT on newspaper advertisements?
If an Irish-based company places an advertisement in a British newspaper, the British newspaper is obliged to remit the VAT to Ireland.
If a Guinness advertisement appears in The Daily Mirrior,which is based in London, is it at a lower or zero rate of VAT?
Guinness would pay Irish VAT directly to Revenue on that service.
Particularly if part of St. James's Gate was in the advertisement.
We could safely say Bush-mills or somebody else.
How would it be assessed? If the advertisement appears in the global edition of The Daily Mirror, how is the Irish portion of VAT assessed?
It would not be assessed. If the London company places an advertisement in the UK it has nothing to do with Ireland.
We need to understand two elements here: the copy price VAT and the advertising VAT.
That is an interesting point but is not related to this amendment.
It affects the revenue of Irish newspapers and the competitive position in relation to UK newspapers.
It should not distort the competition because it would be a claimable input to claim it back. It should not distort competition for a tradable activity.
To return to the Deputy's amendment. The forfeiture of £13 million would have no effect on the companies. It would not compel Irish newspapers to restructure their companies which they must do. It is not acceptable and I will give a tangible reason. If they assured us that they would pass on the reduction in VAT to the consumer it would only facilitate a reduction of six pence in the cost. The price difference between Irish and British newspapers is 50 per cent in some cases.
If they were zero rated it would greatly assist them because they would get VAT credits back on their income.
In putting down this amendment, Deputy McDowell is attempting to raise the issue of the structure of the Irish newspaper industry.
I do not want to. This is the Finance Bill.
There is a forum at present where many of these concerns can be expressed. I do not know if it is possible for Deputies to attend that forum but it should be.
They can be attacked there.
Like the Minister, I have to be rational and say that the proposed removal of VAT would make absolutely no difference to the long term future of the Irish newspaper industry. As the Minister correctly pointed out, UK newspapers sold here attract the same rate of VAT. There is no competition distortion evident. The reduction of six pence in the price of a newspaper could possibly have a marginal effect on sales but I doubt it because a somewhat lower marginal effect would apply to UK newspapers. In this particular instance, VAT is not the mechanism which will change the structure of Irish newspapers. If this is thought out properly everyone will agree with that. The Minister made an interesting comment which more or less supports the claim by one major Irish newspaper proprietor who said: "It is a single English-speaking market.". This has been the contention of major proprietor of newspapers in Ireland. His newspaper accounts for only 40 per cent of the readership in that particular area. That is somewhat at odds with the comments from other Government Ministers backing up the claim of an authority that it would be in a dominant position. It should be further discussed at the forum on the newspaper industry.
I accept there are deep structural problems in the newspaper industry and taking a strictly moralistic, high minded view of the position of one newspaper group in the market — which has never been particularly nice to me or my party — is not the way to proceed. More factors are involved than a high moral tone. The Minister and I can be highly moral and idealistic on occasion, but we take a pragmatic businesslike approach. The newspaper industry is in crisis and a large number of jobs may be affected. However, the VAT change would not be the solution.
The growth in the sales of UK Sunday newspapers in Ireland has been phenomenal. One of the leading expensive UK Sunday newspapers has increased its sales here astoundingly. If high moralistic tones are to be adopted we will see the best part of 1,000 jobs lost.
Having listened to the Minister and Deputy Gregory one might prefer to say nothing. The Minister is more familiar with the situation than any of us having been Minister for Enterprise and Employment but the newspaper industry is adamant that VAT on newspapers is a major contributory factor to the imbalance in competition from outside the country and has made repeated representations to that effect. I met board members of the Cork Examiner and they were convinced that this imbalance would be somewhat corrected if newspapers were zero rated for VAT. There has been major rationalisation at the Cork Examinerand the most modern technology has been introduced to try to make the company as competitive as possible.
Although this may be more appropriate to another forum, there is an amendment tabled which, if accepted, would be welcomed by the newspaper industry. I urge the Minister to consider it.
VAT in isolation will not make a substantial difference to the newspaper industry. Given the serious crisis in the newspaper industry there may well be a role for the State to play once solutions begin to be found and it would be no harm if the Department signalled that. The VAT issue might be important in the mix of costs that exists. However, it is without doubt the printing and production costs that are most important. Perhaps having printing facilities in one place only, for the UK and Ireland might be part of the way forward.
We must recognise there is one market for daily and Sunday newspapers between the two islands. Independent Newspapers is not in a dominant position in that context. The debate as to how the question of abuse of a dominant position is to be answered will be interesting but if we are to have an independent Irish newspaper industry we had better adopt some realistic and serious views.
In a major review of the industry it would be important to highlight VAT as a legitimate cost factor but it must not be considered in isolation. Today is not the time to change it.
When I was Minister for Communications the national newspapers strongly put the case for a reduction in VAT. That Government reduced VAT to 10 per cent. I know the Department of Enterprise and Employment is responsible for competition policy, but what Department has responsibility for media policy?
The Minister for Arts, Culture and the Gaeltacht might have a view on that.
When this issue first arose when I was Minister for Enterprise and Employment an interdepartmental working party was set up, as Deputy McCreevy will recall, to look at the problems of the newspaper industry. It was led by the Department of Enterprise and Employment. The Department of Arts, Culture and the Gaeltacht has responsibility for broad-casting but not for the newspapers as such - yet it has an interest in them.
In respect of VAT on newspapers the Competition Authority's interim report on the study of the newspapers states in paragraph 8.5.1:
It is clear that some Irish newspapers are in serious financial difficulties. Their sales have fallen sharply. It is clear that total sales of Irish newspapers have recorded a long term decline. This seems to be attributable at least in part to real increases in cover price over a prolonged period of time to the extent that a significant price gap in favour of UK newspapers has emerged. This is more likely to reflect the high cost structure of Irish newspapers than the result of predatory pricing by UK newspapers. The Authority does not believe that reductions in newspaper prices have caused the difficulties experienced by Irish newspapers. The root causes of these difficulties must be sought elsewhere.
The newspaper industry is in serious peril. At one level there is a UK market for sports news and tabloid news of one type or another, yet in the domestic cultural field there is a different market altogether. There are two overlapping markets for the purposes of competition analysis which are interacting in a potentially destructive way.
Deputy McCreevy referred to the sales of one Sunday newspaper and I presume he was referring to The Sunday Times. The Sunday Times gives a television guide for the entire week. One would not have to buy the RTE guide if one bought The Sunday Times. There is a week’s reading in such a newspaper. If somebody has limited means and wants to get maximum value he might buy it — that is just one reason among others.
My preferred solution — and it must ultimately emerge — is for the State to assist in the construction and capital cost of a state of the art printing press is totally independent in editorial terms and clearly maintained. It would be properly held by a trust without State ownership and some independent structure would maintain and guarantee its autonomy and independence. Different newspaper could access the printing. The Daily Mirror and The Sun have circulations of two to four million while the combined print run of the daily newspapers in this country is less than 400,000 and certainly less than 0.5 million. There would be some operational and technical difficulties. Security would be required to prevent one newspaper taking another’s scoop. Following the early editions, newspaper seem to raid each other’s stories fairly regularly anyway.
In so far as there is a solution, it is not the removal of VAT. To reply directly to Deputy Cullen's question, I think we could make a case and I would be open to persuasion in that respect if I were sure that other components would be put in place and that some amelioration in this area could be considered. To that extent, Deputy McDowell's amendment is constructive but not if given in isolation. I met with the newspapers and the deputation to which Deputy Wallace referred. The newspaper proprietors are simply not prepared to address outrageous internal cost structures at all levels.
I am not talking about overpaid printers. The working conditions and expenses associated with journalists would be attractive to anybody working as a Deputy or civil servant. It is very easy to blame the guy with the ink on his hands down at the printing press where there are restrictive practices and old traditions but they are only part of the problem. It would be wrong at this time for us to forgo tax revenue for an industry that is not prepared to address some of its own internal cost structures in face of serious competition. I would be happy to argue along those lines and provide some financial assistance as part of an overall approach. It is the only solution for what is a cultural as well as a commercial asset in this country.
That is a very interesting announcement from the Minister has made which will be analysed. I am not sure this committee has any further role at this point.
I welcome what the Minister has said because I have never been so naive as to believe that just a cutback in VAT would solve the problem and I emphasised that at the beginning. I share the Minister's view that there is a cultural dimension to this but I want to put on record my complete abhorrence of a suggestion made the other day at this forum that the State should subsidise some of the papers in difficulties. I hope that is not contemplated for a moment.
Absolutely not.
It is all very well to talk about £12 million in the context of the print industry. When I went home last night and looked through yesterday's PQs, I found one from the Department of Education on the cost of producing the coloured version of the White Paper with all the glossy photographs. I hope the Minister's Department is aware of the cost because I was utterly shocked by it. The publication before Easter was done on an emergency basis by Government presses and did not cost anything. The total cost of the last week's publication was £262,500. If the Minister is worried about controlling public expenditure, he should examine the expenditure of a quarter of a million pounds on a glossy publication. I was rocked back on my heels. It is not the only one. There is an increasing number of expensive publications being produced.
Everyday.
The chairman's own brother published something on communicating Europe which was an unbelievable——
Disgraceful.
The Department of Finance has not gone into this area but with other Government Departments, things are becoming bigger, better and glossier.
It has got to a frightening stage now. I am not asking people to produce things on Oifig an tSoláthair tissue paper but it struck me that, as an emergency measure, the White Paper was produced quite cheaply and anyone who was interested in education could read it. Now over a quarter of a million pounds has been spend on a reader friendly form——
We will not go into education policy today.
——and there is not a photograph of a single Opposition Deputy in it.
Amendment, by leave, withdrawn.
Section 117 agreed to.
Sections 118 and 119 agreed to.
NEW SECTIONS.
I move amendment No. 112:
In page 143, before section 120, to insert the following new section:
120.—(1) Section 19 of the Principal Act is hereby amended in the definition of ‘accounting period' in subparagraph (i) of paragraph (aa) (inserted by the Finance Act, 1989) of subsection (3) by the substitution of the following definition for the definition of ‘accounting period':
‘"accounting period" means a period, as determined by the Collector-General from time to time in any particular case, consisting of a number of consecutive taxable periods not exceeding six or such other period not exceeding a continuous period of twelve months as may be specified by the Collector-General:
Provided that-
(I) where an accounting period begins before the end of a taxable period, the period of time from the beginning of the accounting period to the end of the taxable period during which the accounting period begins shall, for the purposes of this paragraph, be treated as if such period of time were a taxable period, and
(II) where an accounting period ends after the beginning of a taxable period, the period of time from the beginning of the taxable period during which the accounting period ends to the end of the accounting period shall, for the purposes of this paragraph, be treated as if such period of time were a taxable period,
and any references in this paragraph to a taxable period shall be construed accordingly;'.
(2) Subsection (1) shall take effect as on and from such day or days as the Minister for Finance may by order or orders appoint, either generally or with reference to any particular category of taxable person to whom section 19 (3) (aa) of the Value-Added Tax Act, 1972, applies.".
The amendment introduces a new section to the Bill which amends section 19 of the Value-Added Tax Act which sets out when VAT is due and payable. Subsection (3) (aa) of section 19 allows certain traders, at the discretion of the Collector General, the option of submitting their VAT return on an annual as opposed to a more usual bi-monthly basis. This facility is made available by the Collector General to traders whose annual VAT payments do not exceed an administratively determined threshold currently at £5,000. Traders who make their VAT payment by direct debit are also permitted to make a single annual return regardless of the level of their liability. The annual return is currently based on the year ending 31 August. The proposed amendment will allow the Collector General to nominate the trader's own accounting period as the basis for the annual return if the trader so wishes. This is a response to a desire expressed by some traders to align their annual VAT accounting date with their own commercial accounting date and it is common sense.
I absolutely agree. It may even be a good idea if the Revenue Commissioners insist upon it.
Amendment agreed to.
I move amendment No. 113:
In page 143, before section 120, to insert the following new section:
121.—Section 20 of the Principal Act is hereby amended by the insertion of the following subsection after subsection (5) (inserted by the Act of 1992):
‘(6) Where the Revenue Commissioners refund any amount due under subsection (1) or subsection (5), they may if they so determine refund any such amount directly into an account, specified by the person to whom the amount is due, in a financial institution.'.".
This new section amends section 20 of the Value-Added Tax Act which sets out the circumstances in which refunds of VAT are made. At present repayments are usually made by means of a cheque issued by the office of the Collector General. This amendment allows Revenue to make VAT repayments directly to traders through the banking system. This proposal will be beneficial both to the taxpayer and to Revenue. It will make the repayment system more efficient and secure for the taxpayer. We are on line in one direction so it should also operate the other way.
Amendment agreed to.
I move amendment No. 114:
In page 143, before section 120, to insert the following new section:
122.—Section 22 of the Principal Act is hereby amended in subsection (1) by the insertion of the following proviso to that subsection:
‘Provided that where the Revenue Commissioners are satisfied that the amount so estimated is excessive, they may amend the amount so estimated by reducing it and serve notice on the person concerned of the revised amount estimated and such notice shall supersede any previous notice issued under this subsection.'.".
The amendment introduces a new section which amends section 22 of the Value-Added Tax Act which deals with estimates of VAT. Where a taxpayer does not submit a VAT return by the due date, the Revenue Commissioners issue a section 22 estimate of the liability for the period. The amendment provides that where the Revenue Commissioners are satisfied that the estimate issued for non-submission of a VAT return is too high, the amount of the estimate can be reduced. Again, it is management procedure.
I initially thought this was a technical amendment. However, it is actually a very worthwhile suggestion. If I remember correctly, there was terrible difficulty getting section 22 estimates changed even though the VAT inspector knew they were wrong.
That is right. It is being introduced for precisely that reason.
I am very glad of that. It is a worth while suggestion.
Amendment agreed to.