Special Committee on the Finance Bill, 1992 debate -
Wednesday, 13 May 1992

SECTION 160.

Mr. B. Ahern

I move amendment No. 126:

In page 172, between lines 37 and 38, to insert the following paragraph:

"(b) in subsection (1A) (inserted by the Act of 1986) by the substitution of the following paragraphs for paragraphs (b) and (c):

‘(b) An invoice or other document required to be issued under this section shall not be deemed by paragraph (a) to be issued unless the person, who is required to issue such invoice or other document, as the case may be, has been authorised by the Revenue Commissioners to issue such invoice or other document to a recipient who has been authorised by the Revenue Commissioners in accordance with paragraph (c), and he complies with such conditions as may be specified by regulations.

(c) A person who receives the transmissions referred to in paragraphs (a) and (b) shall not be deemed to be issued with an invoice or other document, as the case may be, required to be issued under this section unless he has been authorised in that respect by the Revenue Commissioners and he complies with such conditions as may be specified by regulations.

(d) The Revenue Commissioners may, in accordance with regulations, cancel an authorisation under paragraph (b) or (c).',".

Section 160 of the Bill makes a number of changes to section 17 of the VAT Act which concerns the issuing of invoices. Subsection 17 (1) (a) which was inserted by the 1986 Finance Act provides for the issue of invoices by electronic means. As currently drafted, subsection 17 (1) (a) is open to the interpretation that it grants an automatic right to traders to issue electronic invoices. Draft regulations prepared in consultation with trade interests, under consideration by the parliamentary draftsman, follow the more usual approach, that authority to issue electronic invoices would be subject to appropriate authorisation on a case by case basis by the Revenue Commissioners. Such an approach is necessary to provide an appropriate measure of control in order to ensure that abuse or misuse of the electronic invoice facility does not arise. Section 17 (1) (a) is being amended accordingly to permit such an approach. In reality, any trader who is interested in issuing electronic invoices and who fulfils the necessary control conditions will be authorised to do so.

Amendment agreed to.

Chairman

Is the section agreed to?

Mr. Noonan (Limerick East)

I would like information on the invoice provisions.

Mr. B. Ahern

The section amends section 17 of the VAT Act which deals with invoices and other documentation. The section amends section 17 to require the issue by taxable persons with an annual taxable turnover of in excess of £2 million of a monthly controlled statement of all the supplies to each taxable person. This provision will have effect from 1 November 1992. The section also gives effect to the new EC VAT arrangements in relation to the issue of invoices and similar documentation by taxable persons and by flat rate farmers. These provisions will have effect from 1 January.

Mr. Noonan (Limerick East)

Explain the £2 million figure to me.

Mr. B. Ahern

A supplier who is dealing with a large number of companies must, if his annual sales are over £2 million, provide a monthly control statement of those he is actually supplying to the Revenue Commissioners.

Mr. Noonan (Limerick East)

Why is it pitched at so high a level? It seems high for lay people.

Mr. B. Ahern

This concerns cash-and-carry people and wholesalers who are large traders. It does not apply to small traders. It relates to inter-checking.

Mr. Noonan (Limerick East)

It is in the interests of compliance? Are you trying to track small traders through the large wholesaler?

Mr. B. Ahern

It makes tracking and cross-matching far easier.

Mr. Noonan (Limerick East)

Will computer print-outs suffice on the basis of your amendment?

Mr. B. Ahern

Yes, a computer printout would be used.

Mr. Noonan (Limerick East)

You are not putting a major, bureaucratic imposition on the cash-and-carry business?

Mr. B. Ahern

No. I will put a note on record for those who might be interested. The monthly control statement has been introduced to deal with an increasingly prevalent form of evasion. This involves businesses channelling purchases from the same supplier through a number of different accounts. To give an example, "Customer Evader Limited" would have its purchases from a major supplier charged to two accounts, "Evader 1" and "Evader 2". The purchases and sales going through account No. 1 would be disclosed for VAT purposes but purchases and sales in respect of account No. 2 would be suppressed. When carried out skilfully this type of fraud might not be detected during a VAT audit. The use of bi-traders or multiple accounts makes it difficult for the Inspector of Taxes to form an accurate picture of traders' purchases and supplies in a particular taxable period. So the monthly control statement summarises all the traders purchases from an individual supplier, regardless of the operation of multiple accounts or of additional cash purchases. The statement will thus serve as an effective audit trail for inspectors of taxes in identifying and investigating purchases and sales patterns both of selected traders or suppliers and of trade sectors being examined in depth for control purposes.

A sectoral examination of the drinks trade which is being carried out by the Revenue Commissioners has established that the use of multiple accounts is widespread, suggesting, at the very least, a passive form of collusion by some suppliers involving a significant loss of VAT and direct taxes. The monthly control statement is a direct response to this abuse. It is an attempt to close off access to the supply of off-statement goods. Regarding the question on the £2 million threshold, as abuse of the type described is centred primarily on the production and wholesale and sales stages, it is sufficient to limit the requirement by means of the £2 million turnover threshold to the larger firms. In that way we do not place any burden on a smaller operation which could be tracked and checked by a VAT inspector.

Mr. Noonan (Limerick East)

Is that £40,000 a week?

Mr. B. Ahern

Yes.

Mr. Noonan (Limerick East)

Is that a small turnover?

Mr. B. Ahern

It is small in context; we are talking about wholesalers, the major multiples, the cash-and-carry suppliers and manufacturers.

Mr. Noonan (Limerick East)

Would it apply to the breweries, and so on?

Mr. B. Ahern

There are examples of this which are important. It would be applicable to brewers. There are examples of publicans who buy from the trade and are checked in the normal way through the accounts of Irish Distillers, Guinness, and so forth. Substantial quantities of spirits and goods can be bought for cash in wholesalers. If there is not the tracking mechanism the VAT and tax can be easily avoided.

Section 160, as amended, agreed to.