Select Committee on Finance and General Affairs debate -
Thursday, 11 May 1995

SECTION 123.

Mr. Quinn

I move amendment No. 117:

In page 145, between lines 24 and 25, to insert the following:

"(e) by the insertion of the following paragraph after paragraph (xx)—

‘(xxa) greyhound feeding stuff which is packaged, advertised or held out for sale solely as greyhound feeding stuff, and which is supplied in units of not less than 10 kilograms;.".

This amendment amends the Sixth Schedule of the VAT Act which lists the goods and services liable at the 12.5 per cent rate. It reduces the VAT rate applicable to greyhound feeding stuff from 21 per cent to 12.5 per cent. The change will have effect from 1 July 1995, it will cost approximately £150,000 in 1995 and £0.5 million in a full year. The reduction in VAT will benefit the Irish manufacturers of greyhound feeding stuff and reduce the VAT differential on greyhound feed between Ireland and the UK where a zero rate applies. Colleagues may have been lobbied in relation to this.

Mr. M. McDowell

Are hares included?

Amendment agreed to.

Question proposed: "That section 123, as amended, stand part of the Bill."

Mr. Quinn

This section amends the Sixth Schedule of the VAT which lists those goods and services chargeable at the 12.5 per cent rate. The amendment to subsection (a) is part of the package dealing with the VAT treatment of golfing facilities. Section 112 removes the VAT exemption for green-fee type turnover of member owned golf clubs and State or local authority owned golf courses where such turnover exceeds £20,000. This section makes these services taxable at the 12.5 per cent with effect from 1 January next.

The remaining changes in the Sixth Schedule arise from the provisions of the Seventh Directive. One of the rules in the directive is that the reduced rate of 12.5 per cent, the so-called "parking" rate, will not apply in any margin or option scheme transaction. This requires an amendment to each of the paragraphs in the Sixth Schedule where supplies of goods are taxed at the parking rate. The amendments to paragraphs (b), (c), (e) and (f) reflect this. The effect of the amendment is that the goods in question are taxed at 12.5 per cent rate in all normal supplies but at the 21 per cent rate when the margin of the auctioneer's commission only is the taxable amount. The amendment to paragraph (d) is a technical drafting one. The amendments to paragraphs (b), (c), (e) and (f) will have effect from 1 July this year.

Chairman

What is the estimated revenue from these provisions?

Mr. Quinn

It will probably be less than £0.5 million. This has not been brought in as a revenue collection measure, but to introduce equality.

Mr. McCormack

As with section 110, is this relevant only when people complain?

Mr. Quinn

It is mandatory and applicable across the board.

Mr. McCormack

In that case, I appeal to the Minister to again look at some aspects of it because this is not like other sporting activities. Such golf clubs are voluntary and nobody makes any money from them, unlike commercial ones where people are employed. In these golf clubs the captain performs a full-time job without pay. He is like a manager because he is there practically every day. We cannot compare such clubs with commercial ones. Members establish, build up and run the golf club and they should not be liable for VAT. Most golf clubs plough any excess revenue back into the club or levy members.

Mr. Cullen

I have no difficulty with the Minister's wish to level the playing field, but I do not agree with the way he has gone about it. I believe an exercise was carried out to see what type of income could be generated by this and it transpired that it would be marginal, if not non-existent. The State and the EU poured enormous sums of money into the development of golf facilities but it is clear that the majority of those facilities are struggling to survive. A difficulty for commercial clubs is that VAT is chargeable; they should be treated in the same way as members' clubs.

The State has invested Structural Funds in these golf clubs. I would have no difficulty applying VAT in a few years' time when investments are beginning to show some returns. From what I see, the money poured into the majority of facilities, privately owned or otherwise, is not making a return. I am a golfer and I have travelled to most of these facilities - I wish I had more time to do so, but in this job I do not - and I am concerned about the viability of many of these facilities.

Members' golf clubs are struggling because of the opening up of this area and they reinvest every penny they have. Because of the maintenance of golf courses and the standards required — new clubs have set high standards — members' golf clubs are struggling to catch up and their green-fee income is dropping as they try to compete. They require continued investment. The charges or the green-fee set by the commercial clubs have dropped dramatically because people could not afford to pay them. Given the level of State investment and that under the Structural Funds and the fact that most of these facilities are struggling to survive, VAT should not be imposed on members' clubs and it should dropped from commercial ones. I have no difficulty revisiting this in a few years' time when they are up and running. At present it is unhelpful to their survival.

Mr. M. Ahern

I note in this section that green-fees will be liable to VAT. Members' fees in commercial golf clubs are also liable to VAT. I take it that members subscription will not be liable to VAT in members clubs. Will the Minister ensure that the same applies to commercial clubs so they will compete on a level playing field ? Is the Minister restricted by Europe because these clubs are commercial?

Mr. M. McDowell

I presume the rate is 21 per cent at present. Is there any way the Minister could reduce it to 5 per cent? In other words, leave one set of golf clubs alone and bring the other down to its level.

Mr. Quinn

I will try to assist the Deputies in relation to this matter. There has been a substantial investment in golfing facilities, some of which comes from EU Structural Funds and some from commercial interests, because there is an increase in the number of people playing golf. I am not a golfer, but I am aware of the increase in costs, the demand for membership and the difficulties many people have trying to get into clubs.

Mr. M. McDowell

The Minister makes a lot of VAT on new facilities.

Mr. Quinn

This has been introduced to assist commercial developers who have provided a lot of capital, in addition to whatever assistance they may have received, and VAT inputs. They are obliged to charge VAT because they are providing a commercial service. Deputy McCormack and Deputy Cullen made the point that private clubs, members only clubs, who have no VAT other than——

Chairman

The bar.

Mr. Quinn

——excise duties on the bar, cannot charge themselves VAT. If they open their clubs to visitors and their income is over £20,000 from non-members paying green fees, then they become liable for VAT. We are not saying that every external green fee sold by a private members' club to facilitate the development and improvement of facilities is liable for VAT. It depends on the scale of their activity in selling green fees. One can only have so many people on a golf course at any one time because there is a capacity constraint. I am sure someone could work out the number of green fees required - it would be based on the rate of green fee - to occupy the golf course with commercial punters playing golf. Competition distortion begins at that level. The threshold has been calculated on the basis of £20,000, but the Revenue Commissioners presume that at that level it will not augment the income of a small private golf club which is generating and reinvesting additional revenue. We are talking about serious competition distortion.

Chairman

It has been said, and the Minister has confirmed, that most of these members' clubs can only claim back VAT in respect of costs associated with the bar as a source of revenue. However, they will now be able to claim back costs associated with developing the golf course, greens, etc. Some of these could benefit from this, which could cost money.

Mr. Cullen

One of the greatest sources of revenue for charities is golf classics which are held almost every day throughout the country. We could do nothing all day except play golf.

Mr. Quinn

Even charitable political parties, including my own.

Mr. Cullen

All political parties. This is a source of income for many charities, particularly local ones. They organise a competition, establish a cost structure and then try to get as many people as possible on the course. However, owners of courses will now charge them VAT in addition to the fees charged for the day. Many clubs will not charge for the course.

Mr. McCreevy

There will be no green fees.

Mr. Cullen

That is the theory. I do not want the Revenue Commissioners saying the course was hired for the day.

Mr. Quinn

They will just charge double the fee for the dinner.

Mr. Cullen

Some of the smaller golf clubs do not have dinner.

Chairman

Is it not true that golf clubs whose green fees are less than the £20,000 threshold can opt for the VAT system?

Mr. Quinn

They can waive their right if they wish and then opt for that system. If their gross turnover of green fees is less than £20,000, they can apply to waive their right.

Chairman

Once they opt for the system they can charge all their costs for maintaining and developing the course.

Mr. Quinn

On an apportioned basis.

Mr. McCreevy

I am sure it is the same as a small trader or business person who supplies services and who has the option of registering for VAT if their threshold is below £20,000. The Minister explained the situation as regards apportioning the different expenses.

I sympathise with Deputy's Cullen point. However, on the other hand, considerable distortions have arisen as a result of commercial golf courses paying VAT on all their income. He made valid points about the survival of members' and commercial golf clubs in the future. Perhaps we should impose a zero rate on them all from the beginning. However, I do not know if that is possible under EU VAT law. This will only affect a small number of courses. The income from green fees in some members' golf clubs is approximately £1 million.

Mr. Cullen

That is the exception. I do not want to legislate for clubs such as Killarney and Lahinch.

Mr. Quinn

Would the Deputy not accept the 21 per cent then?

Mr. Cullen

Approximately two or three clubs would accept that.

Chairman

I will move on because Members are anxious to discuss other sections.

Mr. Cullen

I will put an amendment on Report Stage.

Question put and agreed to.

Sections 124 to 130, inclusive, agreed to.