The amendment has been moved and we were discussing it.
SECTION 12.
Debate resumed on amendment No. 15a:
In page 17, subsection (1), after line 9, to insert the following:
"(f) an amount equivalent to 0.5 per cent of the net amount payable to the Revenue Commissioners in respect of the taxable period”.
It was moved rather formally and the Minister was saying he would have some difficulty in accepting it.
I think I have spoken on it and there was some further discussion. I think I have set out my attitude to it.
The Minister's attitude on this does not surprise me. The point is about the collection of revenue here. We can compare figures in regard to the cost of the Revenue Commissioners' office. Of course the Revenue Commissioners do nothing but make regulations and pass on bills of this kind. The cost is about 2 per cent per year and the amendment seeks an allowance of 0.5 per cent which is the proportion in regard to the British equivalent—one half per cent of the total revenue collected. I have been complaining time and again in both Houses about the manner in which, in the last 20 years, the Revenue Commissioners have had their work done for them. Some of us do not mind paying tax but there are others who hate to pay it.
Who are those people?
The point of the amendment is to sweeten the pill a bit. At a half per cent one would get some little sweetner. Of course, I realise it would take all the dynamite, the bombs and the bullets in Ulster to upset the Revenue Commissioners in this. I commend the amendment to the Committee.
I have no intention of withdrawing this amendment and neither have I any wish to repeat what I have said on it. I would point out that VAT will cause a substantial increase in the cost of accounting in individual firms and in limited companies and if we are to get the goodwill of industry we should show a certain amount of goodwill towards industry by allowing some expenses in this respect.
Before the turnover tax was increased an allowance was given in respect of the first £100,000 but there is to be no similar allowance in regard to VAT.
I have spoken about the cost of collecting taxes and I am aware of the situation both here and in England since PAYE was introduced. We never achieved any sort of reward from the Revenue Commissioners here or from the Treasury in England for the work we did in collecting the tax, apart from the ordinary allowance for staff engaged in the normal way. Even assuming the Minister accepted it—I do not think he will—in respect of the first £100,000, the total amount involved would be only £5,000. Of course it would be a dangerous precedent and I do not think either the Commissioners or the Minister would be in favour of it.
There is a certain amount in the spirit of it but, even so, I do not think I could go along with the wording of Deputy Collins's amendment. It would come down very much in favour of those with the £100,000 and the £200,000 turnover. However, as I say, I see a certain merit in it. When I say I am not wholly approving of it, I am speaking strictly for the small retail outlets. There is an incentive at the moment in that the first £100,000 is at £2.50. There is compensation here for the retailer who has to work at night making up his tax, or something like that. I wonder how much will the Revenue Commissioners collect in addition by not allowing this first £100,000. It should be reasonably easy to calculate because they know the number of registered customers at retail level. Approximately what would the figure be? I know how difficult it is, but if it could be framed in such a way as—it may not be possible under this particular system—to give some compensation because it is something we are taking away on this tax. We are taking away the concession on the first £100,000 under the turnover tax.
I have here "The Turnover Tax: Outline of Proposals". Paragraph 11 states:
The first £50 of the taxable turnover each month will be liable to a fixed minimum tax of five shillings, the next £50 will be taxed at 1¼ per cent or threepence in the £, and the remainder at 2½ per cent or sixpence in the £. The Revenue Commissioners will have discretion to waive payment of small amounts of tax.
This is what we are talking about. Is this now being completely overlooked in this new value-added tax? Can the Minister say the same thing on this as was said about the turnover tax because paragraph 34—Cost of Administration—says:
Since the turnover tax will be administered largely in conjunction with the Income Tax no separate checking of accounts will be necessary. Collection procedures also will be the same as for PAYE and will be handled by the same staff. It will not be necessary, therefore, to set up a new organisation to administer the tax and it is expected that additions to existing staff will be on a relatively modest scale. The additional cost is estimated not to exceed 1 per cent of the yield of the tax.
Can the Minister say the same thing now on this new tax? Much as we disliked the turnover tax, people had at least got used to operating it. I suppose everybody who has been approached by people making representations about this has got the best side of the story from those making the case. That is only to be expected. But all of them have been complaining that this will cost a great deal more and surely, if that is so, there should be an effort made to give them some small concession. I think the concession suggested here is about the minimum that could, in fact, be offered.
But this particular amendment would come down very much in favour of the big man—the man with the £200,000 or the £100,000 turnover. This would be substantial. Originally it was a set amount in relation to what your turnover was and that probably favoured the smaller man. It was of no significance to the larger concern.
How can the Deputy say it was of no significance?
I am trying to retain what we have already.
It was a fixed amount.
The present system is that on the first £100,000 it is £2.50 and 5 per cent after that. That is for all in respect of turnover tax. If we accept this amendment it could be very substantial, in my opinion, for the larger retailer.
But could you not put a limit on it and say that, after a certain amount there will be no allowance made? Could it not be dealt with in that way?
I do not want to go over the same ground again but, perhaps, I could just briefly recap what I said. The first point I want to make is that under the present system there is an allowance which works out at £2.25p on the first £100 each month and on no more. On that point, it is true there is no equivalent arrangement on value-added tax, but one should not forget that there are benefits accruing under the value-added tax which did not operate under the turnover tax system, and particularly for the retailer because he is entitled to claim in respect of tax for which he cannot claim at the moment, and, secondly, and more importantly from the point of view of the ordinary small retailer, his liquidity position will be substantially improved. There is, therefore, a set-off against the loss of this small concession that he gets at the moment. Apart from that, on the basis of this proposed amendment, the real objection to it is that touched on by Deputy Fitzpatrick; it would not operate equitably. First of all, the bigger your turnover the bigger the benefit you would get from it and I would assume that, in the main, it would be felt that the people who should mainly gain should be the small retailer. On this basis, as I say, the bigger your turnover the bigger the benefit. As was pointed out by Deputy Gallagher, if you are in a really big way of business, the amount you would get from this would not compensate you at all for the administration in which you might be involved.
Secondly, it would not operate equitably as between the different rates of tax. That is, while it should not be more expensive to operate the 16.37 per cent rate, it would yield a proportionately bigger allownace in respect of the goods subject to the 16.37 per cent rate and that would mean, taking admittedly a fairly extreme example, jewellers would benefit far more than, say, ordinary retail grocers. Those who are engaged in selling goods at the 30.26 per cent rate would be the most favoured of all so that it would not, as I say, operate equitably and there is built into the value-added tax a compensating factor which does not operate under the present system. For these reasons I am afraid I cannot agree to the amendment.
Amendment put.
The Committee divided: Tá, 5; Níl, 6.
Tá
- Barry, Peter
- Collins, Edward
- FitzGerald, Garret
- O’Donovan, John
- Tully, James.
Níl
- Colley, George
- Fitzpatrick, Tom (Dublin Central)
- Gallagher, James
- Healy, Augustine A
- Kenneally, William
- Smith, Michael.
Amendment declared lost.
I shall offer a similar type of amendment on Report Stage.
Amendment No. 16 is consequential and there can be no discussion on it.
Amendment No. 16 not moved.
I move amendment No. 16a:
In page 17, subsection (2), after "person" in line 22, to add "within 19 days after the date of receipt by the Collector General of the return specified in the regulations".
The purpose of this amendment is to ensure that, where a repayment of tax is due because of an excess payment, the Revenue Commissioners, will have the same obligation to repay within 19 days as they impose on the taxpayer. This is a "goose and gander" amendment if I may put it in those terms and, as such, I am sure will commend itself to the sense of fair play of the committee and the Minister.
It would certainly commend itself to my sense of fair play if it were a "goose and gander" operation but, of course, it is not. I am sure that the Committee can visualize the situation in which a taxpayer might owe a greater amount of tax than what was due to be refunded to him from a previous taxable period. There would be little point, therefore, in providing in this amendment that he must get a repayment and then be followed for whatever is owed from a previous taxable period. Also there could be special circumstances which would be known to Revenue Commissioners and which might make it imprudent for them to repay the tax without the kind of examination which could not be carried out within a period of 19 days.
However, on the general issue in this matter I should say that the Revenue Commissioners are confident that they will be able to process claims within three weeks of the receipt of the returns. Therefore, in the normal way, each taxpayer who has submitted a properly completed return showing an excess of tax deductible over his tax liability, and who does not owe any arrears, can expect to be repaid within three weeks of the lodgment of his return. This would be the normal practice. The only cases in which this would be departed from would be, as I have indicated, the kind of case in which there were arrears of tax due from some previous taxable period, or there were some special circumstances arising which necessitated special investigation by the Revenue Commissioners. These would be the unusual cases. The normal and the vast majority of cases would operate on the basis of a refund within three weeks of the lodgment of the claim.
On the first point with regard to the arrears, the section provides at present that if, in relation to any taxable period, the total amount deductible exceeds the amount which, but for this section, would be payable in respect of such period, the excess shall be repaid to the accountable person. The Minister seems to be suggesting that that means that they will not be repaid if the Revenue Commissioners feel they are owed money for any other period. If that is the case the sub-section bothers me a little because it does not seem to mean what it appears to say. If it is the Minister's intention that where somebody pays an excess amount for a certain period but is due to pay arrears in respect of an earlier period he should not be repaid his tax, which is a proposition one could sustain, the sub-section should say so, but it does not. My reading of that, as a layman, would be that that sub-section obliges the Revenue Commissioners at some time to actually physically repay the tax and not to offset it against a claim in respect of an earlier period. If that is not the reading of it then, in the hands of the Revenue Commissioners, English ceases to mean what it says apparently. Before I go on would the Minister clarify that point?
I would agree with Deputy FitzGerald that if all that was relevant in this were what is in the sub-section before us, his interpretation would be correct. However, there is a long-standing right, under the common law, I think—it is so long-standing that it must be—which enables the Revenue Commissioners to set off against any sum due by them to a taxpayer any sum due by the taxpayer to the Revenue. This applies to all sums due to the Revenue.
If that is so what is wrong with my amendment? If that common law rule applies obviously the obligation to repay within 19 days would have no more weight than a general obligation to repay in a situation where arrears exist. The Minister's objection to my amendment would seem to be ill-founded.
We are getting into legal interpretation now. I think the position would be that where a Statute specifically stated, as is proposed in this amendment, that the repayment must be made in respect of a claim due for a particular taxable period, and must be paid within 19 days, it would overrule the general proposition which I have outlined.
The common law then is more devious than I thought it was.
It is very devious.
I can see a need to modify my amendment on that point. As regards the other point about the right of the Revenue Commissioners, simply because they have doubts as to whether the claim is well founded, not to pay what is due, that is a principle we should not admit. If the Revenue Commissioners have doubts they should be enabled to proceed in the matter. I do not think we can admit the principle that simply because the Revenue Commissioners claim to have doubts about somebody they should not repay what is due to be repaid. One could provide some procedure by which they could initiate proceedings of some kind which would enable them to hold on to the money but I think it is arguing very much against the public interest to leave it that the Revenue Commissioners have all the control and that they can enforce the payment of anything due to them within 19 days, or whatever the figure may be, and that they can arbitrarily hang on to money if they simply say there is a doubt about whether a direct return was made. That is not acceptable.
I am glad Deputy FitzGerald talked about the public interest. This is very relevant to this matter and it is what we are concerned with: not to ride roughshod over the individual taxpayer but certainly to ensure that the powers of the Revenue are adequate to collect the revenue which the Oireachtas decides should be collected. It is in that general context that the argument I have advanced should be considered. I also think that there is a question of practicality here. If one could show that the Revenue Commissioners at the moment, or in recent years, tended to indulge in the kind of activity envisaged by Deputy FitzGerald there would be a stronger case, but I am not aware of any complaints to that effect.
The Minister feels that there is no trouble in getting money out of the Revenue when it is due to you?
That is not quite what I have said. When one establishes that one is entitled to a refund from the Revenue Commissioners under any forms of tax one gets it. There is a delay, perhaps, in the machine which could be speeded up with advantage and some steps are being taken to do that. There is certainly no evidence of a disposition on the part of the Revenue Commissioners to act unreasonably in this regard.
If there are quite a number of claims at the one time, even though somebody is entitled to a refund, is it not the ploy to send out a new set of forms and ask to have them refilled and in this way delay it—not refuse to pay it. Eventually the money is paid but I am afraid there have been very serious complaints about delays even for small amounts of money.
In my business we are entitled to a rebate on the price of fuel for a bus service, fuel used in respect of licence to service. We claim within three months for the fuel we buy at the full rate. We have no problem whatsoever. It rotates and the cheque comes without any problem whatsoever.
That is routine, of course. I have been threatening to do something about this but the only way anyone can do anything about it, the only way one can challenge it, is by way of questions in the Dáil and I can assure the Minister he will get sick of the number of questions in a period of months.
I said earlier that where it is established money is due to the taxpayer to say that the Commissioners deliberately evade paying that money is not good enough. It is not sufficient to say that the Commissioners deliberately send out further forms to delay payment still further.
Why then, if a person proves that a refund is due and he gets a set of forms and sends them in, in six weeks he gets the same forms, sends them in and gets the same forms again six weeks later? Surely there is some explanation?
If there are cases like that the Deputy should let us know about them. I think his interpretation of the reason is a wrong interpretation. Delays in paying such money are due simply to a mistake on the part of some junior member of the staff.
That is a very old excuse.
I had a case today in which a Deputy wrote to me complaining about getting a form from the Revenue Commissioners which did not contain the year on it. He wrote back—he is not a member of my party—pointing this out and the form was sent back to him again, again without the year on it. The only reason for this is simply a mistake on the part of a member of the staff. Deputies must appreciate the enormous amount of work involved. It is nearly inevitable that there would be mistakes. There is no deliberate policy on the part of the Commissioners to refuse to refund money due to taxpayers. There is, of course, the legal remedy open to a taxpayer.
We know all about that. We know how a fellow who has lost his job and is looking for a refund of a few pounds due to him in respect of PAYE will be anxious to rush to the courts and bring a case.
Is there in the Bill provision in respect of the period within which the refund must be made?
In the normal case it would be within three weeks.
Then it would be repaid within three weeks if the form were accurately rendered?
That is the position.
Would there be a method of appeal after the elapsing of such a period? Would there be an appeal directly to the Revenue Commissioners or to somebody in that office who would be fairly independent and who would consider it on its merits?
There is a provision in the Bill later on giving a right of appeal and indeed we are strengthening it to cover this kind of case.
How strong would the appeal be?
It would be an appeal to the Commissioners, the same right as is given under the Income Tax Acts.
Unless the appeal was immediate it would not be of any great value.
It would be years before the Commissioners heard it.
The amendment could be withdrawn and resubmitted at Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 16b:
In page 17, to delete subsection (3).
This amendment is designed to eliminate a provision that would permit business expenses being allowed for value-added tax to be graded in the same way as they are in income tax and corporation profits tax. It is not clear to me why a distinction should be made between the two and it suggests to me that, if we leave this subsection in, we shall, in fact, be imposing a tax on a tax, which would be against the principles behind the value-added tax. It is for this reason that I propose the abolition of the subsection.
The basic purpose of the Bill is to change over to value-added tax with a minimum of change in the tax incidence. The restrictions provided in section 12 (3) in general continue the corresponding restrictions which exist under the turnover and wholesale tax system and they are, therefore, in line with this basic purpose. However, in regard to the question of the comparison with income tax and corporation profits tax, there are differences between them, on the one hand, and value-added tax on the other. For instance, although the cost of a motor car, say, or petrol may qualify as a deduction for income tax, there are circumstances in which the amount allowed, or part of it, may be assessed again as a benefit in kind on another person and this, of course, is not possible under value-added tax.
Secondly—this is from the point of view of the protection of the revenue—the claims which are made under the income tax code can be rather closely examined by a Revenue official before they are allowed and, because of this, reasonable apportionments can be made in regard to expenditure which is only partly incurred for business purposes and partly incurred for private purposes. However, in the case of value-added tax, the taxpayer will merely show the totals on his return and the Revenue will not be in a position to check this except on a spot-check basis. For these reasons there is a difference both in theory and in practice between allowances which might be given under VAT and allowances under the income tax code. The restrictions which are provided in sub-paragraph (e) of subsection (3) are basic to the operation of VAT. This prevents a deduction for tax which is referable to exempted activities or to activities which are outside the scope of the business. The other ones from (a) to (d) are in the interest of tax security.
I am not entirely clear on what the Minister meant by saying that this already exists in the turnover and wholesale tax codes, because in those codes there is no deduction of taxes. This is the merit of VAT as the Minister has been putting it to us. I do not understand that reference. Obviously I am missing some point which the Minister might develop a little more fully. As regards security of tax it seems to me that in so far as the expenses set out here will also be returned for income tax purposes, any attempt to overstate them at this point could be caught in due course by making provision that the expenses agreed for income tax purposes should be furnished to the VAT section of the Revenue Commission to check out that the amounts involved stand and any adjustments that are necessary could be made at that point. I do not think that the security of tax is much of a problem. Perhaps the Minister could explain his point about these deductions being made already under turnover and wholesale tax.
What I said was that the aim was to change turnover and wholesale tax to value-added tax with the minimum change in the incidence of taxation and that to allow these, which are not allowed under the present code, would not be in accordance with that aim.
No deductions are allowed under the present code because they do not arise.
That is what I am saying.
If no deductions for expenses are allowed at all the Minister can hardly argue that these should not be allowed when, in fact, he is introducing the principle of a refund of tax in respect of in-puts of purchases of the taxpayer. If they are to be allowed then entertainment expenses and expenses of that kind should be allowed like all other expenses. The Minister is introducing a new principle here in distinguishing these expenses from other expenditure which would be invoiced and in respect of which tax could be repaid.
I do not think I am, but I do not want to go on arguing about it except to draw attention to the fact that the effect of the amendment would be to abolish paragraph (e).
That is easily remedied. I accept that and I could amend my amendment accordingly.
I did not mean that and I do not accept the amendment.
Is there any provision in the Bill to cover a case of goods being destroyed after wholesale tax had been paid on them? Supposing they were destroyed by fire or something else.
There is provision for that.
I do not think there was under the turnover tax system.
Under that system tax was only charged on sales and if goods were destroyed tax could not be charged on them.
Under the new system you will be allowed to discount the tax paid?
Mr. T. J. Fitzpatrick (Dublin Central)
If the goods carry wholesale tax.
It is specific.
Amendment, by leave, withdrawn.
Question proposed: "That section 12 stand part of the Bill."
I wish to raise a point on the section, particularly subsection (1). There are a number of items listed and the reference is to the computing of the amount of tax payable by an accountable person in respect of any taxable period. This is in pursuance of the principle that tax should not be paid on tax or paid twice, but one of the things that is omitted rather conspicuously is the provision that tax should not be payable where the goods in question had already been taxed at the wholesale level. This would seem to me to be something that should operate automatically but I was taken aback to find that in one important instance involving large sums of money, the Revenue Commissioners have insisted on charging VAT on goods in respect of which wholesale tax has been paid. This is totally unacceptable and the point is self-evident because of the principle that tax should not be charged twice on the same goods. I hope I will get support on this point——
May I ask the Deputy to be more specific. I have not got his point.
This arises because in the existing code of wholesale and turnover taxes there is provision in respect of certain department stores. It affects about half a dozen large department stores.
If I may interrupt the Deputy, I think what he is talking about comes under section 34.
The very point I am making is that it is not covered by that section and it seems to me that one of a number of solutions ought to be inserted in this section.
I, too, thought it would be more relevant in section 34.
Then perhaps I had better raise it again when we come to section 34. The fact is it has been excluded from section 34 and I thought a possible solution could be inserted in the section we are now discussing—some provision in respect of tax paid in the form of wholesale tax on goods where it can be shown that the same goods are not covered in this respect elsewhere. Perhaps I have misread this section and that an amendment here would not meet the point. If that is the case I will let it go now and perhaps the Minister may meet me at a later stage.
I am in difficulty here. We are getting back to the problem that was raised the last day. The Deputy is now talking about a possible amendment to cover a section which is not before the House. I am aware of what he has in mind and, as far as I know from my reading of the Bill, it would be more appropriate in section 34. The Deputy says it is not provided for there but as far as I can gather that section seems to be the one in which it could be provided for. I would therefore propose to deal with this under that section.
I would be inclined to take the side of the Minister in saying that I cannot see how it could be covered in section 12. Neither can I find where it is covered in section 34.
It is not.
Deputy FitzGerald seems to be saying that if he cannot raise it here he can raise it on section 34 and possibly submit an amendment on the Report Stage.
When we come to section 34 I do not want to be told that it would have been more appropriate on section 12.
I undertake not to do that.
Question put and agreed to.