This section makes the necessary consequential changes in the Third Schedule to the VAT Act, the 10 per cent category, arising from the replacement of the present two-tier system of VAT on cars, motor cycles, television and radio sets, gramophones and gramophone records. A certain amount of VAT was trapped at the manufacturer level which was the equivalent of 25 per cent or 30 per cent. It became built into the price at that level and subsequently a 10 per cent VAT rate was applied. There was an element of cascading, in other words tax on tax. These were the highest rates of VAT applied to any goods. Under the directive a two-tier tax of that kind is not allowable. There must be one rate running through the cycle of distribution. This single rate must apply, without any in-built VAT. So, we cannot maintain the two-tier system any more and what is being done is that the second tier, the simple 10 per cent rate, is being applied to all these goods and the revenue lost by the abolition of the first tier of the two-tier VAT is to be made up by the imposition of appropriate excise duties on these goods. It is a very limited list of goods: cars, television sets, radios, gramophones and gramophone records and one or two other things like motor cycles.
SECTION 21.
I take it this facilitates fair trading between imported and home produced goods. The previous arrangement could have operated against home manufacturers.
It will not change the situation at all. It is just a rearrangement of the VAT and excise duties. The amount of tax on the item will be the same.
I appreciate that. The time at which you pay it and the length of time for which you have to provide it if you are dealing as a home producer, as I understood it, would have been a disadvantage in relation to the imported goods and this evens it out.
There were some complaints about that some years ago and, following meetings with the trade interests, arrangements were made with which the trade interests professed themselves to be satisfied.
This came up at an earlier discussion when we were speaking particularly about VAT. I would hope the rates would not be the same because we are back again to the story where it is profitable for people living near the Border areas to evade excise duty, that is anybody living on the island at this stage of the game with modern transport. This is probably a budgetary matter and not something we will be dealing with here. It is a loss to the nation and it is certainly unfair trading when legitimate dealers are trying to deal with this sort of situation.
It is a budgetary matter.
Will the legislation be brought in with the budget to impose the customs or excise duty which will have to be imposed as a result of the overlapping of taxes or how will it be done?
Discussions are in progress between the Revenue Commissioners and the trading interests. Broadly speaking, it would be the intention that these excise duties would very closely match what has been there. The points advanced by the trading interests are being taken into consideration. Any major change in the incidence of tax would be a budgetary matter. The Minister for Finance said he would take into account Deputy Cogan's point.
I know that. I was just making the point again.
There is a technical amendment to sections 21 and 10 which it is proposed to move in the Dáil on Report Stage. This is the second of two rather technical matters in relation to which the Minister indicated at the inaugural meeting of 11 October that a Report Stage amendment might be necessary. He said the matters would be mentioned as the Committee came to the sections of the Bill involved. The Minister is now advised that an amendment to sections 21 and 10 is required in order to secure parity of definition of certain goods for VAT and excise purposes. Those goods are motor vehicles, radio and TV sets, gramophones and gramophone records for which it is proposed to have a single VAT rate of 10 per cent in lieu of the present two-tier VAT arrangements involving a " trapped " tier of an effective 25 or 30 per cent at manufacture-import level, and 10 per cent at all subsequent stages of distribution, plus an appropriate excise to make good the VAT loss from termination of the " trapped " tier of VAT. The necessary amendments are being finalised by the parliamentary draftsman and accordingly notice is now being given of the Minister's intention to move the amendments on Report Stage.