This section amends section 19 of the VAT Act, dealing with tax returns, so as to provide for the delayed accounting system for VAT on imported goods which I have already described. The existing effective provisions regarding imports remain essentially unchanged. As I have already indicated, at present registered persons are entitled to import goods for business purposes free of VAT with the exception of the two-tier goods. Under the new arrangements such importations will have to be accounted for in the regular VAT return. The effect is purely technical and limited to the documentation.
SECTION 15.
Question proposed: "That section 15 stand part of the Bill."
Question put and agreed to.
NEW SECTION.
Amendment No. 51 is consequential on amendment No. 35 and they may be discussed together.
I move amendment No. 35:
In page 17, before section 16, to insert the following section:
The following section shall be substituted for section 23 of the Principal Act:
‘(1) Where, in relation to any period consisting of one taxable period or of two or more consecutive taxable periods, the Revenue Commissioners have reason to believe that an amount of tax is due and payable to them by a person in any of the following circumstances:
(a) the total amount of tax payable by the person was greater than the total amount of tax (if any) paid by him,
(b) the total amount of tax refunded to the person in accordance with section 20 (1) was greater than the amount (if any) properly refundable to him, or
(c) an amount of tax is payable by the person and a refund under section 20 (1) has been made to the person,
then, without prejudice to any other action which may be taken, they may, in accordance with regulations but subject to section 30, make an estimate in one sum of the total amount of tax which in their opinion should have been paid or the total amount of tax (including a nil amount) which in accordance with section 20 (1) should have been refunded, as the case may be, in respect of the taxable period or periods comprised in such period and may serve a notice on the person specifying—
(i) the total amount of tax so estimated,
(ii) the total amount of tax (if any) paid by the person or refunded to the person in relation to the said period, and
(iii) the total amount so due and payable as aforesaid (referred to subsequently in this section as "‘the amount due'").
(2) Where notice is served on a person under subsection (1), the following provisions shall apply:
(a) the person may, if he claims that the amount due is excessive, on giving notice to the Revenue Commissioners within the period of twenty-one days from the date of the service of the notice, appeal to the Appeal Commissioners, and
(b) on the expiration of the said period, if no notice of appeal is received or, if notice of appeal is received, on determination of the appeal by agreement or otherwise, the amount due, or the amended amount due as determined in relation to the appeal, shall become due and payable as if the tax were tax which the person was liable to pay for the taxable period during which the period of fourteen days from the date of the service of the notice under subsection (1) expired or the appeal was determined by agreement or otherwise, whichever taxable period is the later.'.".
This amendment extends the scope of section 23 of the VAT Act which provides for the estimation by the Revenue Commissioners of amounts considered to be due and for the settlement of appeals against such estimates. At present the section applies only where a person has paid an amount of tax which is considered to be inadequate and the amendment aims at extending it to other common situations arising in connection with traders' returns. These are (1) where a person has claimed and been allowed a repayment which is later found to be excessive and (2) where a person has claimed and been allowed a repayment and it is later considered that he should in fact have made a payment.
A VAT repayment arises in the normal way when the tax which a trader has paid to his suppliers in a tax period is greater than the amount due on his sales. Certain traders are in a continuing repayment position, for example, exporters and some persons selling zero-rated goods; but experience of operating the tax has revealed that most taxpayers, even the largest, have occasional repayments. The ordinary shopkeeper is likely to be due a repayment for the tax period when he is invoiced for his supplies of Christmas or other seasonal goods liable at the 20 per cent VAT rate, and a large supermarket is likely to be due a repayment, for example, when it is about to open a new branch and is invoiced for the additional stocks.
The general policy of the Revenue Commissioners is to make repayments with the minimum of delay in order to minimise the liquidity difficulties of traders and it is essential for the smoother running of the tax that provision be made for estimation of amounts due and the associated appeal procedure arising from such claims. That is why this amendment is extending, as I have indicated, the provisions in relation to estimation and appeal procedures to the additional areas I have outlined.
We have the 1972 Act, the EEC directive, the Acts consequential on the directive and now we have this amendment which appears to me to interpret the directive in a more liberal way than the Bill we have before us. Is that allowable under the directive?
I understand that this is not required by the directive.
It is liberalising it.
The intention is to try to ensure that all this procedure of refunds, estimations and appeals will work as smoothly as possible in the interests of traders. It would be wrong to deny that it is also intended to help the Revenue Commissioners.
I do not fully appreciate the purpose of the amendment. At the moment, during September and October it is more likely for small shopkeepers and also large shopkeepers to be due a VAT refund because in that period they probably got a lot of Christmas goods which they will not sell until November and December. Even though they have a lot of sales in November and December the shopkeepers might not be paid until January or February and, therefore, they would have a VAT refund. Unless the refund looks very excessive, the Revenue Commissioners give this refund fairly quickly. What benefit will this section be? I do not understand how it will improve the matter. As far as I can make out it will slow down the repayment to the taxpayer rather than speed it up.
There is provision at present for estimates being made rather than waiting for the precise figures, and appeals against such estimates. Those provisions at present apply only where a person is paid an amount of tax which is considered by the Revenue Commissioners to be inadequate. This amendment proposes to extend the estimation and appeals procedure to two other cases (1) where a person has claimed and been allowed a repayment which is later found to be excessive and (2) where a person has claimed and been allowed a repayment and it is later considered that he should in fact have made a payment.
At the moment the estimation procedure does not apply and the appeals in relation to such estimation do not apply to those cases. The effect of this amendment should be to make it possible for the operation of estimation and appeal to operate in relation to a wider number of areas and, therefore, the whole thing to be smoother. At present in those cases one has to follow a more rigid procedure which is slower.
I was not aware that the Revenue Commissioners could not appeal regarding VAT in the cases the Minister has mentioned. I was under the impression that under recent legislation they could. The normal way that an estimated assessment is raised by the VAT commissioners is that, if a person does not send in his VAT return by the 19th of the month and ignores the reminder, he then gets an estimated assessment. When he sends in his VAT returns the estimate is cancelled. Another reason why the estimated assessment is raised is when a person has not made any returns. I did not know that under existing law they could not do what is now proposed. I was under the impression that when it was found that a person had claimed incorrectly they could do what is now proposed.
I understand that at present in the two cases outlined and covered by the amendment the Revenue Commissioners have to go to court in order to recover the excess tax which was repaid to the taxpayer. It is in the interests of taxpayers generally that the procedure in relation to refunds and recovery of excessive refunds and so on should be as smooth as possible. The procedure at present applying where a person has paid an amount of tax which is considered to be inadequate, makes the Revenue Commissioner's job easier in the sense that they do not necessarily have to go to court to recover the excess amount but in these other cases at present they have to go to court. While what is proposed in this amendment is, of course, a help to the Revenue Commissioners, it is also a help to the traders generally that the procedure in this should be less rigid than it is now.
I go along with that. I am not aware of any case that went before the court but presumably there were cases. I understand now that this is a logical extension of the VAT system regarding estimated assessments. What happens at present when the VAT inspection takes place and this turns up, is that if a person has over-claimed, whether it is due to an error or not, the Revenue Commissioners agree to subtract the amount from the next VAT claim. I did not know they had to go to court.
I do not wish to go into too much detail on that because we might unearth certain procedures that may not have been entirely, strictly speaking, correct. I do not know, and I am deliberately not inquiring into it.
That is all right.
I agree to the amendment.
At present one has to go to court if there is a difference between the Revenue Commissioners and the trader as to the overpayment. The fact that from now on court procedure is out might create a disadvantage for a person who might not be as well up as the Revenue Commissioners when it comes to calculating the overpayment. Before this the Revenue Commissioners had to prove the overpayment in court. I do not know what the new procedure will be.
Both the trader and the Revenue Commissioners can go to court at present and can continue to go to court if they are not satisfied. This is to facilitate a more practical approach to it. I am informed that the number of these claims has grown very considerably and that each year there are now 80,000 claims and about £100 million in repayments of VAT are involved. The informal procedures previously adopted are not appropriate when we are dealing with these numbers and this amount of money.
Perhaps this informal rule of thumb adopted by the Revenue Commissioners worked if nobody knew anything different. On a point of information, did a case ever go to court?
Yes.
Amendment agreed to.
NEW SECTION.
I move amendment No. 36:
In page 17, before section 16, to insert the following section:
"Section 26 of the Principal Act is hereby amended—
(a) by the insertion, in subsection (1), after ‘11 (7),', of ‘12A,',
(b) by the insertion after subsection (2) of the following subsection:
‘(2A) Any person who, otherwise than under and in accordance with section 12A or 17 (4) (a), issues an invoice in which an amount of flat-rate addition is stated shall be liable to a penalty of £20.', and
(c) by the insertion, in subsection (3), after ‘(2)' of ‘or (2A)'.".
Amendment agreed to.
Section 16 agreed to.
NEW SECTION.
I move amendment No. 37:
In page 18, before section 17, to insert the following section:
" Section 30 of the Principal Act is hereby amended—
(a) by the substitution of the following subsection for subsection (3):
‘(3) Proceedings may not be commenced by virtue of subsection (2) against the personal representative of a deceased person at a time when, by virtue of paragraph (b) of subsection (5), an estimation of tax may not be made on the said personal representative in respect of tax which became due by such person before his death.',
and
(b) by the substitution, in sub-section (5), of the following paragraph for paragraph (b):
‘(b) No estimation of tax shall be made by virtue of this subsection later than three years after the expiration of the year in which the deceased person died, in a case in which the grant of probate or letters of administration was made in that year, and no such estimation shall be made later than two years after the expiration of the year in which such grant was made in any other case, but the foregoing provisions of this subsection shall have effect subject to the proviso that where the personal representative—
(i) after the year in which the deceased person died, lodges a corrective affidavit for the purposes of assessment of estate duty or delivers an additional affidavit under section 38 of the Capital Acquisitions Tax Act, 1976, or
(ii) is liable to deliver an additional affidavit under the said section 38, has been so notified by the Revenue Commissioners and did not deliver the said additional affidavit in the year in which the deceased person died,
such estimation may be made at any time before the expiration of two years after the end of the year in which the corrective affidavit was lodged or the additional affidavit was or is delivered.'.".
This amendment redefines the time limit for the making of VAT estimates and the taking of proceedings following the death of a taxable person. It is consequential on the abolition of estate duty and the introduction of capital acquisitions tax and is essentially a terminological adjustment. Section 30 of the VAT Act imposes a two-year time limit on estimates and proceedings following the year in which a corrective affidavit is lodged for the purpose of assessment to estate duty. The amendment applies the two-year limit by reference to the year in which the corrective affidavit was lodged for estate duty purposes or action is taken in regard to the delivery of an additional affidavit for capital acquisitions tax purposes. A similar adjustment was made for income tax purposes by section 11 of the Finance Act, 1978.
Amendment agreed to.