Why are sections 42 and 43 necessary?
SECTION 42.
Question proposed: "That section 42 stand part of the Bill".
In deference to the wishes of Deputy O'Donovan, we will take sections 42 and 43 together.
Why is it necessary to mention the Collector-General in this section?
I understand the reason for the mention of the Collector-General is because it enables tax to be collected in his name. Somebody's name has to be used in the proceedings to recover tax.
Why not the Minister for Finance? Why does he wish to keep out of it.
The philosophy behind this goes back a long time but I do not think it makes much difference to the person who is being done for tax whether it is the Minister or the Collector-General who is involved.
The Collector-General has existed only since 1967. Presumably he was brought in when the State began legging people on a massive scale.
Again, it does not matter very much to the person who is caught for tax whether it is the Collector-General or somebody else who is involved.
It is my opinion that there is an element of upstaging in this. I might add to that the other element of upstaging in these two sections. The Collector-General is defined in the definition section and the Minister is defined and so also is the appeal Commissioner but the Revenue Commissioners are not defined.
The advice available is that by virtue of other legislation it is not necessary to define the Revenue Commissioners in this legislation.
That is not so. There is only one Collector-General. I do not think that section 43 is required. I can see the convenience of having section 42 but section 43 is a piece of tautology and it is not necessary.
There is a complicated legal background to section 43 which, as the Deputy knows, is in practically all legislation dealing with tax collectable by the Exchequer as distinct from tax collectable by the local authorities. That is one reason for having it in, but it also has legal implications. I understand that in one particular act it was omitted and led to all sorts of complications.
Does this give the Revenue Commissioners and the Collector-General an existence apart from the Department of Finance.
No. In the sense of the definition of the Appeal Commissioners it gives them a separate existence in the terms by which they are defined but it does not alter in any way the position of the Revenue Commissioners being subject to the general overall direction of the Minister.
This is the point I am getting at. Is there any danger of this sort of thing leading to the Revenue Commissioners being put in complete control of this tax? Let us presume that for some reason or other there was a difference of opinion between certain elements in this case. Such has not been unknown. If the dispute arose affecting Finance and if somebody said that the Revenue Commissioners are entitled to make decisions on financial matters, apart from what the Minister says, what, then, would be the position?
This could be a vexed question but it is quite clearly established under earlier legislation—I am putting the position broadly now and not in precise legal terms—the position is that the Revenue Commissioners are entitled to operate the various Statutes under which they collect taxes but their whole operations are under the general direction and supervision of the Minister for Finance, subject to the terms of the Statutes.
Every time that there is a change being made in taxation, the Department of Finance are written to by the Revenue Commissioners. Therefore I take it that the Department operate in the name of the Minister and are covered in this way but my point is germane to the question of why, if everybody else is defined here, the Revenue Commissioners are not. It could be an easy matter to define them.
I agree except that the legal advice I have received is that it is not necessary to define them.
Everybody knows the Revenue Commissioners.
Question put and agreed to.
Sections 43 and 44 agreed to.
FIRST SCHEDULE.
Question proposed: "That the First Schedule be the First Schedule to the Bill."
I move amendment No. 27:
In page 40, paragraph (xi), line 37, after "barristers" to add "and patent agents".
I tabled this amendment because I understand there are some patent agents who wish to be added and whose activities are not dissimilar to those of barristers, solicitors, accountants, actuaries, and so on, and that therefore they should be included. Is there any objection to that?
The decision as to whether or not certain services should be exempted is governed partly by budgetary considerations and partly by the requirements of the Directives of the EEC. I admit freely that in this case there would not be any significant loss of tax if there were to be exemption for patent agents but the general requirement of the directives is that those services ought not to be exempted which enter directly into the cost of taxable goods or taxable services. Article 6 of the second directive requires the transfer of patents, trade marks and other similar rights as well as the granting of licences with regard to those rights to be brought within the scope of the tax. The services of patent agents are, of course, directly related to such activities and consequently it would seem to be contrary to the spirit of the directive, at any rate, to exempt them.
What is the position about legal and accountancy services? Do they not enter into the cost of business as well?
This is a difficult area, to decide whether they enter in directly or indirectly. In effect, under the EEC directives there is an option in these areas.
The Minister seemed to be relying there on the fact that there is a provision which includes patents——
Transfers of patents and trade marks.
——in business costs. Is there not a similar provision saying that legal expenses and accountancy expenses are also included?
That is a greyer area. This seems to be a fairly clear situation When there is a specific requirement that the transfer of patents, trade marks and other similar rights should be brought within the scope of the tax, I think it is pretty clear that to exempt patent agents in those circumstances would be going certainly against the spirit of the directives.
Is the Minister saying that there is not a similar provision requiring legal costs and accountancy costs——
No, there is not a similar provision and this boils down to a somewhat grey area as to what enters directly and what enters indirectly into the cost of goods.
Amendment, by leave, withdrawn.
I move amendment No. 27a:
In page 40, after line 37, to insert the following paragraph:
"() The rendering of services by associations of professional persons such as are mentioned in paragraphs (x) and (xi) for all or any of their members and/or student members, shall be deemed for the purpose of this Schedule to be the rendering of a service in the course of a profession by a person such as is listed in paragraphs (x) and (xi)."
This amendment relates to the professional associations of the professions that are mentioned in paragraphs (x) and (xi) and which can, apparently, without any greyness, be exempted from the provisions of the value-added tax and the point has been made to me that the associations of these professions providing educational services for the professions should be exempted.
The advice available to me is that the kind of bodies which Deputy FitzGerald has in mind will not, in fact, be liable to the tax. There is a special provision made in section 8 (7) for a mutual body, which is a club or other similar organisation. This provision is aimed principally at bar sales and services such as dining facilities, provided by these bodies, and ensures that such sales and services will not escape the tax on the grounds that they are not supplied in the course of business. It is reasonably clear that a professional association, such as the Irish Medical Association, the Bar Council or the Incorporated Law Society or the Institute of Chartered Accountants, is not a club, or other similar organisation, as defined in that section. The services rendered by such an association would not, for that reason, be regarded as rendered in the course of business and, consequently, liability to tax would not arise. On that basis, the amendment would not be necessary.
I can see the point about their not being a club. Is that the only way in which they could be brought within the framework of the tax, if they were a club? Surely, if you do not exempt activities specifically, if they are within the framework of it, under what exemption in the First Schedule will the activities of these bodies come?
I think this hinges on whether the goods supplied or the services rendered are supplied or rendered in the course of business.
If the association is providing, for example, a course of lectures and is charging for them, is it clear that that is not a business?
That particular example would be exempt as services of an "educational nature". That is the First Schedule—(viii)—"professional services of a medical, dental, optical or educational nature other than services rendered in the course of carrying on a business which consists in whole or in part of selling goods."
"Of an educational nature".
I do not think that is the point Deputy FitzGerald is at. It is just that that arises out of the particular example he chose. At any rate, as I say, the advice available to me, which is the basis on which the Revenue Commissioners will operate, is that services rendered by the kind of bodies I have mentioned will not be regarded as liable to tax.
It is strange to put in "educational nature" with medical, dental and optical services. It is a wonder that a separate section was not put in for educational services.
Schools with hospitals and nursing homes, under (ix).
Yes. It seems to me that professional services, medical, dental and optical, go together all right but there is no connection whatever between education and these. They are being listed in a logical order.
As logical as one can be.
I know, but there is certainly nothing logical about shifting in educational services with medicine, dentistry and professional opticians. There is no connection whatever between these. It would be much better if they were separated. "Professional services of an educational nature"—this is a misuse of words. It should be "services of an educational nature". We are very fond of calling this, that and the other thing professions and the teachers like to be regarded as professional people.
I think the point of using the word " professional" there is that if they were not professional, in other words if they were done on an unpaid basis, clearly they would not arise for tax. The question is to make it clear, where they are professional in the sense of being paid, whether they are subject to tax or not and this makes it clear that they are not.
The emphasis is on the word "services". You could provide education in a different way and it would attract tax, for example, the case of the production of books, and that kind of thing. That, I take it, is the reason. Why they were lumped together is what my question asks.
I am afraid I cannot answer that question.
All right. I do think they might be changed. The thing might be changed. There is no connection whatever between the two. It might be put into a separate section. Otherwise, I will let it go at this stage.
Amendment, by leave, withdrawn.
Amendments 28 and 29 might be discussed together.
I move amendment No. 28:
In page 40, paragraph (xii), line 41, to delete "by auction" and to substitute "by a house agent, or by an auctioneer".
There is exemption in the Bill for commission on sales by public auction but not on sales by private treaty. This means that there is an anomaly. The amendment is designed to exempt all auctioneering commission on the sale of property whether it is moveable or immoveable. House agents are specifically authorised by the Auctioneers and House Agents Acts of 1947 and 1967 to negotiate sales of property. The amendment is designed to extend to them the same exemption in regard to commission as applies in regard to sales by auction. The purpose of the next amendment is to add to the list of exemptions the valuation services carried out in relation to land and buildings. It is a normal feature of an auctioneer's business to value property and it is usually done for the purpose of insurance or death duties. Consequently, the cost of such valuations does not normally form a constituent of the price of goods. If valuation fees were not exempted, this residue of taxable turnover would make every auctioneer and house agent an accountable person. There would be substantial difficulties in apportioning tax on inputs. I understand the EEC directives do not prohibit such exemption and, in the circumstances, it seems desirable that valuation fees should be exempted. Valuations are also made by chartered surveyors as part of their professional work. Exemption, therefore, extends to valuation services rendered by them also.
The intention in the framing of the Bill was that the services covered in these amendments would be exempt. I acknowledge that in reading the Bill without the amendments this could be open to doubt. Since it was the intention they should be exempted, I am prepared to accept the two amendments.
Amendments 28a and 54a form a composite proposal and may be taken together.
I move amendment No. 28a:
In page 41, paragraph (xvi), line 2, to delete all words after "baggage".
The provision of transport for persons in the State is exempt from turnover tax. One may argue whether it is a legal exemption or a concession, but no turnover tax has been charged on car hire and the Revenue have never looked for this turnover tax. In the Bill, however, for the first time a distinction is made between car hire, which is short term, and car leasing, which is long term. Both were exempt from turnover tax and were not liable to wholesale tax. Now car leasing is liable to tax at 5·26 per cent. By making car hire exempt instead of zero-rated involves increasing the tax burden because it means the tax borne on purchases by car hire firms cannot be recovered. In view of the importance of the car hire industry—one of the truly export industries we have; there are few industries which have 85 per cent of turnover derived from outside the State—and having regard to the fact that our car-hire rates are very high, nothing should be done to increase them further. It is stated they are higher than any European country with the exception of Greece. This attempt to impose taxation should not be made. There are two elements here: firstly, car leasing is to be taxable at 5·26 per cent, although it has not been taxed before; secondly, the failure to zero-rate car hire and to include it in the exempt category would prevent those concerned from recovering tax on their purchases.
Under the present system the hiring of motor cars, whether chauffeur-driven or self-drive, is regarded as exempt from tax. In relation to self-drive, this is regarded as an anomalous treatment since the hire of other goods, including caravans and boats, is liable to turnover tax at 5 per cent. The hiring of motor cars is being treated as the provision of passenger transport. On the changeover to VAT, passenger transport will be treated as exempt. It would be logical to charge car hire at 5·26 per cent, which is the rate applicable to the sale of cars at the retail stage. However, in view of the present treatment it was decided to continue to regard short-term hiring as the provision of passenger transport. Such hiring is exempt in conjunction with passenger transport. It would be illogical to allow zero-rating for the short-term hire of cars while treating other forms of passenger transport as exempt. The question of cost comes into this also. It is estimated that the cost in a full year of zero-rating short-term car hire would be about £250,000. If all passenger transport were zero-rated the cost would be about £1¼ million.
Is it the case that the effect will be to increase the tax burden on this industry, which previously did not have to pay tax on its purchases?
The position at the moment is that car-hire firms, unless they get in under the heading of dealers, suffer tax on the purchase of cars, petrol and so on and they do not recover it. Under this system they will be in the same position—they will not recover the tax they have paid on the purchase of cars and petrol. They will not be any worse off. Some people who were dealers were in a different situation. In so far as they may not be able to establish that they are dealers or have to apportion their business as between dealing and car-hire, their position would disimprove.
The Minister means that they will have to pay tax, which hitherto they did not have to pay?
As dealers they have been able to avoid the liability for tax on the cars they purchased. This does not apply to all car-hire firms.
It would be true of a fair number because the normal practice is to sell the cars at the end of the season—this makes them dealers. This would be the norm rather than the exception.
(Dublin Central): What is the position for a company which assemble cars? I am referring to assemblers with leasing arrangements. Do they pay tax?
They would be separate companies.
(Dublin Central): Would they transfer the cars and pay the tax?
Yes.
What about the ordinary car-hire firm that sell their cars at the end of the season? Are they considered to be dealers?
It is a question of how a trader does business. It depends on the number of cars he deals in; how often he changes and sells them would be taken into account. The majority of the big car hire firms do one of two things: either they are fully within the car sales business or they have a subsidiary company to which they transfer cars for sale. Most of the big car dealers are regarded as dealers in cars. That means that they buy their cars free of the 5 per cent turnover tax and, when they sell the cars to an unregistered person, they are liable to tax on the sales. If they were unregistered, that is, if they were dealing entirely in car hire, then when they bought their cars they would have suffered tax at 5 per cent of the cost price but when they sold them they would not be liable to any tax on the sales.
For the greater part of the industry tax has not been paid on the cars which they use during the period of car hire and it is only when they sell them secondhand that tax becomes payable. Now they will have to pay tax and for the greater part of the industry this means an increase in taxation. This is contrary to the spirit of this tax system and to the Minister's assurances previously on this Bill. Perhaps the Minister will have another look at this especially in view of the nature of the industry. Car hire with 85 per cent export sales is an unfortunate business to pick on.
I have gone into this matter in considerable detail with the representatives of the Car Hirers' Associations. The position was examined very closely and the proposals in the Bill are the result of these examinations. It is a considerable improvement for them on what was proposed originally.
That is not much consolation.
My understanding is that they are not unhappy with the treatment they are receiving under this arrangement. I would say also that when I spoke on a number of occasions previously about trying to avoid a change in the incidence of tax, so far as I recall, I qualified it by "as far as possible." It is not possible to qualify it precisely.
That can be done in this instance by accepting my amendment.
That raises all sorts of problems. I touched on one of these problems on the question of how one could justify a zero rate for the short term hire of cars while treating other forms of passenger transport as exempt.
Why are other forms exempt?
Because that is their existing position.
Does the Minister mean that, for instance, CIE are paying the full tax?
No.
What the Minister is doing now is taxing not only car hire but transport generally.
That is not so. All transport of passengers and goods is exempt under the present turnover system. That means that those goods which are liable and which are purchased by firms such as CIE are bought at tax paid prices. Their purchase price includes turnover tax. There is a substantial area of exemption. For instance, when CIE purchase a lorry there is no tax on that but should they purchase a bus there would be tax on that. They are liable also, of course, to tax on petrol and on a wide variety of goods that they must purchase in order to operate. Depending on the nature of the goods purchased, they could be liable both to turnover and wholesale taxes.
I take it this will not change now?
No.
The position is that the bulk of car hire is in a relatively favourable position vis-�-vis other forms of transport but it is now being decided to eliminate that. That should be reconsidered because this is the most export-orientated sector of transport. Not even Aer Lingus have as high a proportion of sales to people abroad as do the car hire firms. It does not seem the best moment in the tourist industry to start taxing that section of the industry.
(Dublin Central): If they were to be exempted would they not lose certain concessions.
They are being exempted but they are losing the concessions they have.
What they would not get would be the right to recover the tax which they had suffered earlier but, of course, that is a right which some of them do not have now because they do not qualify as dealers. It is doubtful whether they should have been entitled to this but those who have it at the moment will lose it on this Bill.
This is no moment to withdraw it.
Some of the changes that have been made in this Bill as compared with the present position consist of reliefs in aid of certain aspects of the tourist industry. I am not unsympathetic to the position of the car hire firms but the implications of zero-rating them go much further than merely the car hire business firm. It would extend to all forms of transport because I do not think that one could, logically, zero-rate them and not zero-rate other forms of passenger transport.
It is no more logical than the present situation. In Britain the whole of transport is being zero-rated. It seems that we are putting ourselves at a disadvantage.
I understood that one of the major objectives of having this Bill was not one of shifting the incidence of taxation.
Where possible.
It should be possible by zero-rating the hire of cars.
The effect of that would be to improve their position considerably.
Why?
Because they would then be in a position to recover tax which they suffered in a way which they would not be entitled to recover it now.
But they are not paying the tax now.
Some of the people involved are not able to recover tax now but those who are, recover it on such items as cars and petrol but not on buildings and all the other items that go to make up their business. Therefore, if they are zero-rated their position would be improved. The converse applies in respect of caravans, mobile homes and so on with which we shall be dealing later. We are improving their position in recognition of their situation and in recognition of the importance of the tourist industry so that one must try to balance it. It is not possible to effect a precise change-over and have no change whatsoever.
(Dublin Central): If it is zero-rated, if a car owner wants to get new upholstery on his car, he will get concessions on that.
That is right, yes.
As between increasing the burden of taxation on the car hire industry and giving it some extra concessions, having regard to the state of the tourist industry, it is obvious that we should do the latter, not the former. This is not the moment for increasing taxation in this sector. What happens about transport between here and other countries?
"Transport in the State".
It is zero-rated.
Under what heading?
Where is it, Minister? I have been looking for it. I could not see it anywhere. I may have missed it.
It is not under "services rendered outside the State" because part of the transport is rendered inside the State.
Also, services are segregated. Where does it come in? I was thinking it might be under that but then, above, you have "transport" and you have "services" in the previous Schedule. You have services segregated entirely from transport. You cannot therefore shift your feet when you transfer from one Schedule to the next. "Services rendered outside the State" might be held to cover it but not the way the previous Schedule is drafted.
It could not cover it, I submit, because a lot of the service is rendered inside the State. In the case of a plane flying from Shannon to Manchester approximately half of that journey is inside the State. You cannot say that such a service is a service rendered outside the State. It cannot be under that heading.
You could argue that the one is an exempted service and the other is a zero-rated service. My point is that since in the previous Schedule services are segregated from transport the same should be done in the Second Schedule.
Perhaps we could ask the Minister where it is because neither Deputy O'Donovan nor I can find it. Spot the ball. The Minister is having as much difficulty as we had.
I understand that it could be under No. 2.
How could it be when the service is rendered inside the State?
No. 2 of what?
Of the Second Schedule.
We are asking a question.
The question arises out of "transport in the State".
Perhaps we should leave further discussion of it to the Second Schedule?
Perhaps we could do better than that. The Minister says it should be included and he thinks it is included, and if it is not included specifically, perhaps the Minister might consider it? That would be the better way.
It is intended to do that.
Perhaps it is in it. It is better not to argue over it.
I should not have gone off on that tangent but it proved to be a productive tangent. I would ask the Minister to reconsider the car hire position in view of the condition of the tourist industry at the moment and the undesirability of taxing it more heavily. Perhaps the Minister would do that between now and the Report Stage.
I have considered this whole question very carefully. There is no easy solution to it, as I tried to indicate to the Committee. Perhaps, taking a broad view of the tourist industry one will find that in the value-added tax proposals there is a balance struck, not for particular sectors, but taking the industry as a whole there is a balance struck and I have indicated some of the difficulties involved in accepting this amendment. I will look at it again because I am concerned about this aspect of it but, on the other hand, I do not want to give any impression that I am optimistic that I will find a solution because I have already gone into it in considerable depth.
We appreciate that.
Amendment by leave, withdrawn.
Amendment No. 29 agreed to.
Amendments Nos. 30 and 61 may be discussed together.
I move amendment No. 30:
"(xxiii) second-hand movable goods."
It seems to me that second-hand goods, which by definition will already have borne tax to the extent that tax existed at the time when the goods were sold first, should not be taxed twice. It is not the intention of this Bill to tax goods twice. Their inclusion under the 5.26 rate instead of zero-rating seems therefore to be a mistake, certainly not in accordance with the spirit of the Bill. Therefore I propose their deletion from the 5.26 category in the Third Schedule and their transfer to the First Schedule. I am open to conviction as to whether they should be exempted or zero-rated but they certainly should not be taxed.
The Minister was not thinking of antiques?
No. I am thinking primarily of continuing the present situation which is——
That they are taxed?
Yes.
That is wrong.
Second-hand cars?
They are subject to turnover tax.
If a car is sold four times in its lifetime, tax is paid four times on the same article. That is clearly wrong, quite indefensible.
If one private individual sells his car to another, there is no tax.
That is true. It is only in the course of business, as indeed applies in the value-added tax generally.
But supposing somebody has a car and trades it in?
There is a special provision about trade-ins—section 10: Where goods are traded-in against other goods of the same kind, the value of the traded-in good is ignored in that transaction, that is, only the net cash price is chargeable to tax.
That is fair enough.
There are other arguments I could put forward but I do not want to indulge in them if I can avoid it, except to say that what is proposed is a continuation of the present system.
What is the position in relation to antiques?
The same as any other goods. Turnover tax is levied where it is in the course of business. It is levied on the turnover.
(Dublin Central): There is one point as regards antiques. An Irish buyer buying antiques will be subject to 5.26 now. If the buyer comes from Africa or the Continent and exports them, they would be exempt. This gives an unfair advantage. If anything, we should try to keep antiques in the country.
Yes, indeed. Something more should be done to do so.
(Dublin Central): Is it because they are for the export market?
As exports, they would be zero-rated.
(Dublin Central): It is undesirable that foreigners should be given an advantage over Irish buyers.
It could be a substantial advantage.
(Dublin Central): The matter has been brought to my attention by antique dealers in this country.
I really do not think it is appropriate to deal with the question of retaining antiques in the country under the value-added tax. It raises all sorts of other things, for instance, the definition of an antique and what machinery should be operated. I doubt, even if we had the situation under the value-added tax envisaged by Deputy Fitzpatrick, if it would be regarded as a satisfactory solution to the problem. Really, it is a problem that has to be dealt with, if it is to be dealt with at all, in a comprehensive way.
I hope the Minister will deal with it very promptly because there is great concern about the extent to which the country is being denuded of treasures. I only want to make this relevant point, that when it is being dealt with I hope one aspect of dealing with it will be the removal of the exemption from the tax on their export as well as stringent measures to control exports.
I do not think that the control of exports or imports of antiques as such is a function of the Minister for Finance. I should perhaps use the word "treasures" rather than antiques; I think it conveys better what we have in mind—things of national importance, perhaps.
Does the Minister envisage that the Government might introduce other legislation to ensure this?
I cannot go that far. As far as I know, the responsibility in this area—so far as it exists—devolves on the Minister for Education.
There is a certain arrangement about articles which are more than 100 years old.
It is not effective.
I do not know how it could be made effective.
(Dublin Central): In fairness, and if it is possible, we should apply the same tax. I am not asking for a concession; I am saying we should have fair play here.
What the Deputy is saying is that we should single out antiques and treat them differently from other exports.
(Dublin Central): It would be very difficult.
I think it would be too much to ask the Minister to do it in this Bill. There would be a real difficulty in distinguishing them from other second-hand goods. I am concerned that goods should not be taxed several times over. As the Bill is drafted, it is to confine the taxation of second-hand goods to the taxation of the value added by somebody dealing in second-hand goods. I can see the logic of this. In the case of a man who makes his living in dealing with second-hand goods, and adds value to second-hand goods by dealing in them, there is no reason why that activity should be exempted from taxation. However, are we clear that we are not taxing the goods themselves?
What I said was that the Bill, as drafted, continues the present position in relation to turnover tax, so far as that applies to second-hand goods sold in the course of trade.
Surely it is undesirable to tax the goods twice as distinct from taxing the value added to them by the dealer?
In this context it is not so much the goods that are being taxed as that turnover tax is charged in relation to the price paid.
The moment I sell my car second-hand, is there turnover tax on that?
If the Deputy sells his car second-hand to an unregistered person, and assuming he is an unregistered person, there is no turnover tax payable. There would not be any VAT in such circumstances.
If a shopkeeper sells his van, what happens in that case?
A van happens to be exempt but the principle is the same. It depends whether he sells to a registered or unregistered person. If he sells to a registered person there is no tax chargeable.
If a person buys something, and if it is part of his job to buy and sell, and if he adds value to it, I see no reason why he should be exempt. If someone sells something to another person and it is not in the course of trade, it is not subject to turnover or wholesale tax. I think that is clear.
I do not think it is clear. If a firm has cars for commercial travellers and if it sells a car to an unregistered person, does it mean turnover tax is paid even though tax was paid on it when it was bought? That seems wrong.
If a garage sells a car—no matter for what purpose it was used—it would be liable to tax if it sells to an unregistered person who is not a dealer. Cars are a special case. In order to avoid tax one must not only be registered but must be a dealer in cars. The principle is much the same if it was a shop fitting that was sold. The seller, if he were a dealer, would be liable on sale to an unregistered person. Under the present turnover tax the sale of capital equipment, as distinct from stock-in-trade, is not regarded as a sale made in the course of business. It is probably an unduly restrictive view of the course of business but that is the view that is taken at present.
If somebody trades-in a car to a dealer and the dealer resells it, the trade-in price will probably be much higher than the resale price because in the trade-in price is included part of the profit on the sale of a new car. In theory, they lose money on it.
If that is the case it means their turnover is reduced, and they pay less tax.
If a vehicle is sold second-hand to an unregistered person he pays tax even though tax was paid when it was purchased. That is wrong and we should not perpetuate it in this legislation. Tax should be paid once on an article.
Tax has not been paid. The registered person purchased the car in the first instance and, because he is registered, he did not pay tax. The system we are proposing in VAT is exactly the same.
In the First Schedule there is exemption for professional services of a medical, dental, optical or educational nature and for services rendered by hospitals, nursing homes and schools. However, inputs into these services will be taxed and they will not be able to recoup the tax. I should not like them to recoup the tax from their customers, but inputs into such institutions should not be taxed. These are exempt services but the inputs into these services will be taxed. I would not like to see them put in a position where they would have to pass on a tax in the first place by reason of their exemption. The inputs should not be taxed.
They will be in no different position from that which they are at the moment because they are suffering this tax now.
In view of the nature of the services is there any possibility of de-taxing them in relation to their income? This is a very special sphere.
Yes but it is one of these items which in effect amounts to advocating that we change the incidence of taxation. I have tried to ensure that we did not change taxation in any instance where that was avoidable. If one were to accept what Deputy Collins says there would be a number of other cases which would be entitled to similar treatment. It is reasonable to assume that the cost involved would be substantial. The effect of that arrangement would be to reduce the income of the Exchequer by a substantial amount and, therefore, we would have to find that money somewhere else by putting additional tax on some other area of activity.
I accept that but I would not be in favour of taxing a person who is ill.
In effect, if one were to take that as an example and in the context of what I have said, the liability for tax might be remitted in that case but one would probably find that the person was being charged at least as much, if not more, in some other form of taxation.
I would prefer him to be taxed on cigarettes rather than being taxed because of his illness.
Earlier we discussed at considerable length the whole principle of whether we ought to try as far as possible to maintain the incidence of taxation. That is the issue that the Deputy is raising now.
What is the position with regard to trade union funds in this context?
The VAT would not apply to them.
I am talking of subscriptions paid by trade unions.
Subscriptions of that kind will not be taxed.
Is bingo included under lotteries?
Bingo has been held in the High Court to be a lottery and, therefore, it would be exempt.
The game is run generally for charitable purposes.
But it is my opinion that in some cases people spend more on it than they can afford.
The Deputy will appreciate that it has been held by the High Court to be a lottery. Therefore, in order to tax bingo there would be many difficulties involved.
I appreciate that. What is the position in respect of variety concerts which could be regarded as being a type of cultural activity?
The Deputy is probably referring to local dramatic societies.
Yes.
They would be exempt.
It is a matter of interpretation.
If they did not take place in the course of business they would not be taxable but in so far as they took place in the course of business they would be taxable.
I have in mind, for instance, a variety concert to be held in my area on Sunday night. Some of the artists taking part will be paid while others will not. The purpose of the exercise is to raise money for a local music school where children study music. I cannot see anything here to indicate that shows of this kind would be exempt. Local development associations, too, organise concerts for the purpose of raising funds for the development of the area. There are examples of this all over the country. I would ask the Minister to ensure that the proceeds of such concerts are exempt.
In relation to the kind of situation which the Deputy describes, the organisers could become taxable if proceeds exceeded £300 for each event.
This does not meet the point exactly. At a seaside resort during the summer it is possible that a show might take in, say, £200 on each of two Sunday nights in a month but there would not be any activities there during the remainder of the year.
In theory, where they become liable to tax at all they are operating in the course of business. Therefore in the type of situation described by the Deputy they could say their activities went on during the summer but coming to September or October they could show that their turnover had fallen permanently. Consequently they were not liable to tax because they were earning less than £300. In other words, there is a way out for them provided they are engaged in the type of activity described by Deputy Tully.
The figure mentioned would exclude the people I have in mind in my area because in the first place the hall is not big enough to allow for proceeds of this kind. It would be a pity if activities of this kind were to be taxed.
It is a difficult area when one goes into definitions but I think we can be satisfied that the type of activity described by the Deputy, not only in his own constituency but even on a bigger scale, would almost certainly, taking the whole year together, escape liability for tax.
That is so long as the whole year can be taken together.
That would be so in practice.
Does that mean that under certain circumstances they would have to pay tax and then apply for a refund?
Yes, that could happen in rare instances.
There is a reference here to sporting events, agricultural, commercial and industrial fairs, shows or exhibitions. A lot of these activities are referred to as shows, particularly travelling shows—
I am not purporting to give an authoritative definition of this at the moment but in the context in which that appears it does not include the kind of activity that Deputy Tully has in mind.
(Dublin Central): There is one definition the Minister might explain. It is section 5 of the exemptions—provision of food and lodging otherwise than in the course of carrying on a hotel business. Are guesthouses and farmhouse holidays exempt under this section?
In section 1 "hotel" is defined as including any guesthouse, holiday hostel, holiday camp, motor hotel, motel, coach hotel, motor inn, motor court, tourist court, caravan park or camping site. On that basis the use of the words "hotel business" here would appear to bring in those activities.
(Dublin Central): Including farmhouse holidays?
If they are registered with Bord Fáilte as a guesthouse, yes, they would come under that definition.
If they are not registered, they are all right. You should not give an incentive not to register.
Are not they registered as a hotel, in fact?
Not according to Bord Fáilte.
The Revenue Commissioners have to operate some kind of rule of thumb and that would normally be the rule of thumb they would operate in regard to farmhouses taking in visitors.
Will not that discourage people from registering?
There are advantages in registering also. They have to weigh the advantages and the disadvantages but the real problem with the Revenue Commissioners is, how do they operate? They have to have some basis of operation. There are certainly advantages.
(Dublin Central): There are advantages with regard to equipping the guesthouses.
I was thinking of advantages apart from the value-added tax.
Yes—Bord Fáilte listing.
Registering is not simply a question of their being not anxious to register. It is the other way around. Bord Fáilte are rather sticky about some of the registrations.
We had some discussion about what particular professional services are included or excluded. I am still not clear on why we have picked on particular groups. I have been approached in respect of consultants, farm management consultants in particular. There is a whole range of consultant services provided which are similar in character to those provided by solicitors and accountants. It is not clear to me why we pick on these particular professions. I wonder would the Minister reconsider this question. If people are providing consultancy services, whether farm management, legal, or economic, whatever it may be, should we not decide to have consultants in or out rather than draw a line down the middle of them? I do not know how I can reply to a man who writes to me as a farm management consultant and what grounds I can give for saying that he should be excluded from the exemption when a solicitor is exempted.
In the second EEC directive, Annexe B, Item No. 8, there is a list of items required to be brought in—item 8 reads:
Services provided by consultants, engineers, planning officers and similar services in the technical, economic or scientific fields.
It is very good that industrial consultants should be included considering there are so many charities among them. I am afraid I want to come back to 13 and 14. Here we have banking and insurance services excluded and then "lending money otherwise than by hire purchase". In other words, that is another example of the system of not making the rich poor but making the poor poorer because when you borrow money from a bank you not alone get it at a cheaper rate but you get off income tax on it. In the other case you pay the value-added tax, in fact, on the transaction and that includes the money end of the transaction. Am I not right in that?
That is correct.
Is this not particuarly objectionable since it is well known and accepted that the method poor people have of obtaining consumer durables is by hire purchase transactions? I know there is another end to hire purchase transactions also in that industrial goods or industrial machinery is now often bought but, on the whole, it is almost entirely the purchase of consumer durables. Why is not the interest end of the hire purchase transaction exempt the same as if you borrow money from a bank or, indeed, you can borrow money not alone from a bank but it says, "lending money or affording credit". Borrow money from anybody and you are exempt. I am sure I will be told that this would create difficulties. That is the only answer I can think of that comes up. Perhaps the Minister would tell us why it is that this discrimination is deliberately put in here.
The Deputy will recall that we went into this at considerable length in the earlier part of the discussion.
I do not remember it. I remember we made a few remarks about it.
We went into it at considerable length.
I could not agree that this is one of the things that we went into at considerable length. We went into various things at considerable length all right but this is not one of them.
I do not want to go into the whole discussion again except to say that basically the reason that I was unable to agree to some amendments which were down, which were designed to achieve what Deputy O'Donovan is talking about, was that the effect of doing so would be to distort fairly considerably the existing patterns of trade, to drive people from one form of transaction into another directly because of the operation of the value-added tax and that we have been trying to achieve a situation in which the operation of the tax is neutral as far as possible as between one type of business and another.
The Minister talks about distorting. Change does not necessarily mean distortion.
No, but it should happen ideally as a result of market conditions, better service provided by one rather than another, not because of the introduction of a form of taxation.
Let us forget that for a moment. What is the Minister's answer to the case I have made to him that this is a further imposition on the poorer sections of the community?
It is not a further imposition in the sense that these transactions are at present subject to turnover tax.
I appreciate this but this is no defence.
I am answering the question put by Deputy O'Donovan. I think his question was as to what justification there is for this further imposition. I say it is not a fresh imposition. As regards his earlier point, the answer is that it would have the effect, because of introducing this form of taxation, of altering the patterns of trade and I do not think that we are justified in doing this solely by reason of the system of taxation that we introduce, which is all-embracing and should, ideally anyway, not affect the patterns of trade but should simply be a tax on trade as it operates and let other factors, market factors, be the factors which operate to change the pattern of the trade.
When completely new taxation of this sort is made I see no reason why opportunity should not be taken, since you are deliberately excluding banking and insurance services—is not there distinct distortion here? There is, of course. There is a distortion here.
Yes.
There is no new distortion as against what is happening at the moment. No new distortion would be introduced by the value-added tax as proposed in the Bill as against what is happening at the moment.
But, surely, with hire purchase it would?
No, because it is already subject to turnover tax.
But the interest on hire purchase is not.
Yes, it is.
Is it?
Yes, it is. That is what I am saying.
(Dublin Central): That is what obtains today, as far as I know.
I know it is what obtains today but the fact is that you have here a completely new system of taxation being introduced. The reason the Minister gave us for excluding banks and insurance was that in the case of banking it was impossible to make out the turnover.
That was one answer. Deputy FitzGerald tabled amendments 5c and 5d. Amendment 5c aimed at inserting after "transaction" the words "and not including hire purchase charges or charges for any other services being services which are exempted by the First Schedule". We discussed these amendments at considerable length and they were withdrawn.
I cannot understand why you exclude the lending of money, or the affording of credit. Not only are the banks excluded, so is every money-lender. In other words, you deliberately keep in this system of credit. I cannot understand why we should deliberately put this into a new system of taxation. Since we have heard so much about EEC directives, is there any directive about this from the EEC?
It is a question of interpreting the EEC directive. There is room for argument on the interpretation, as is evidenced by the fact that some of the countries operating VAT include it and others do not include it.
In other words, we are free to do as we like.
I do not intend any discourtesy to Deputy O'Donovan, but we went into this at considerable length and I do not want to go back over it again.
I remember a minor discussion about it and we were told at the time it would come up in the Schedule. This is why I am raising it on the Schedule.
If the Deputy looks back on the reports he will find we went on at some length about it.
We were told it would come up on the Schedule.
It came up specifically on the amendments.
I can see why the Minister and the Revenue Commissioners want to let sleeping dogs lie. That is what they are doing here. The Minister used the words "distort the existing pattern". The existing pattern is all wrong and there is no reason it should not be distorted and straightened out. It is extremely crooked as it is.
Could the Minister tell us whether the countries who recently introduced VAT have left out hire purchase, or is it the other way around?
Full hire purchase charges are included in Germany, France and Luxembourg. I understand Luxembourg is one of the most recent; Germany included it in 1968 and I understand it has been included in France for the longest period. In the Netherlands and Belgium the charges are exempted.
Question put and agreed to.
First Schedule agreed to.
The Committee adjourned at 12.55 p.m. and resumed at 3 p.m.
SECOND SCHEDULE.
Question proposed: "That the Second Schedule be the Second Schedule to the Bill."
I move amendment No. 31.
In page 41, lines 40 and 41, to delete the words after "aircraft".
Amendment No. 54 may be related to No. 31. Therefore, both these amendments may be taken together.
It seems to me that while it is one matter to have a separate tax regime in respect of customs duties for aircraft and ships on international routes from that which applies to them on domestic routes, I do not see that that analogy should apply in respect of value-added tax. If it is decided that the sale or disposal of goods on aircraft or ships travelling outside the State should not be amenable to value-added tax and that the adding of value in the process of disposing of them on these vehicles should be excluded, it seems to me that we ought to exclude it on all ships or aircraft domestically as well as externally. For that reason I propose the deletion of the words after "aircraft". These other activities listed in amendment 54 are excluded in Britain. I do not see any reason for having a different practice here. I do not see any advantage in failing to zero-rate these services and there cannot be any EEC argument for not doing so.
In passing I would like to say that I doubt if the last remark made by Deputy FitzGerald is absolutely cast-iron. I think it is irrelevant and as the remark I would make might be irrelevant also, I shall not follow the point. Under the proposals in the Bill the zero-rate will apply to repairs and maintenance of ships and aircraft engaged in international trade. To the extent that such craft are used in connection with goods transported within the State any tax suffered will qualify for credit but since passenger transport is exempt and not zero-rated it seems to me that it would be inappropriate to have a zero-rating for the repair of ships and aircrafts generally. That would seem to be getting close to a matter we were discussing before lunch in respect of car hire as to where one should draw the line. If one were to accept this proposal one might find oneself in the position of having to zero-rate all passenger transport with the consequences which I outlined earlier.
The proposal in amendment No. 54 is on the lines of that set out in the British Bill but it goes further in that it proposes a zero-rate for all passenger and goods transport whereas the British proposal is that, in relation to transport within the State, the zero rate will be confined to public passenger transport. However, all we are proposing in the Bill is a continuation of the present treatment under the turnover and wholesale taxes and as I have indicated on a number of occasions we should continue the present treatment where it is possible to do so.
A question that bothers me is how one distinguishes whether he is preparing or maintaining a ship or aircraft engaged in international commercial transport or engaged in domestic use. I have had a good deal of experience of this and I know there is no such distinction. An Aer Lingus aircraft is scheduled in the course of the day to go to Shannon or to the Isle of Man or to London or Paris and back. It would be indiscriminately allocated to tasks in the domestic or international sphere. The same is true of ships. As drafted it would seem to be impossible to apply the tax in this case unless it could be done by some arbitrary method. In so far as Aer Lingus are engaged predominantly in international commercial transport I suppose what the Minister intends is to say that repairs and services to such aircrafts will be regarded as being for the purpose of international commercial travel although that aircraft may make its next trip to Shannon or to Cork. If that is the case this Schedule, in effect will zero-rate the maintenance and repair of all aircraft regardless of its activity. Is the Minister, then, going to distinguish between them and the aircraft of a private company which may be engaged in domestic transport? In respect of ships the same applies. It may well be that ships which engage in coastal trade may make trips to Liverpool. It seems impracticable to introduce this distinction here in any way that will not involve either a very arbitrary distinction between particular ships and particular companies or, alternatively, that will not require such generous treatment that in effect would do what I propose. Therefore I believe I should press this amendment.
The Deputy is introducing an unnecessary complication here in that companies like Aer Lingus, B & I and others would be registered in the normal way. Therefore, they will get credit for whatever tax they suffer. This provision is intended to cover the case, say, of a foreign ship putting into a port. They could be treated immediately without complications arising, straight away, as coming within the terms of the Bill. We do not see any problem arising for people like Aer Lingus.
I am concerned with discriminating between Aer Lingus and any other company. Suppose there is another company which is engaged to a rather greater extent in domestic transport?
But if they are registered—if this is part of their business they would be registered—they would be entitled therefore to get a deduction for any tax they suffer.
(Dublin Central): What would be the situation where we had tour companies from England bringing across their own buses and perhaps repairs would have to be carried out in this country—or vice versa?
They would get relief for it?
Not under this provision; they could not. They do not come within this particular provision.
Perhaps I do not understand the Minister fully. If somebody does repairs or servicing on a ship or aircraft, either that is taxed or it is not taxed. If it is taxed it must be passed on to the consumer in some way; if it is not, it is not passed on. I do not think the Minister can dismiss this by saying that the company is registered and therefore it does not arise.
It says: "goods delivered on board ships or aircraft going to places outside the State; and the repairing and servicing of ships and aircraft engaged in international commercial transport of passengers and goods." That would apply to practically every ship and every plane because they are usually engaged in international transport of goods and passengers. Very few ships are confined to Irish waters and very few planes travel only from one part to another of this country. Therefore this, in effect, applies to every ship and every plane, I assume.
As I said, it is intended to enable the situation to be dealt with if, for instance, a foreign ship puts into Cork and has some repairs carried out. In their case if we did not have this provision it would be very difficult to pass on credit for the tax. In the case of the kinds of ships and aircraft Deputy Tully is describing I think it is inconceivable that they would be owned by a company which is not registered and if it is registered they can get relief from any tax they suffer.
How does the Minister mean they can get relief from tax?
Under the ordinary provisions of the VAT system they can either set it off against whatever other liability they have or claim a refund.
It appears to me that all of them are covered by the section as being people who can claim a refund. Give me any instance of one that is not, unless it is a tramp steamer going from Cork to Drogheda and back again, coasters.
The kind of people the Deputy is talking about would be registered but the people I am talking about, such as the owners of a ship putting into Cork, would not be registered under VAT.
They may be registered but they still have to pay tax on the services they provide as the Minister is not prepared to exonerate passenger transport from the tax. Is not that right? The Minister seems to be suggesting that it does not matter whether they pay it or not because they can recover it from the consumer.
Is there any necessity to include the portion of the section which Deputy FitzGerald has suggested should be taken out. I think it means the same thing without this portion.
If we do that, what will be our position in relation to the case I have described of a ship putting into Cork and having repairs carried out?
It would come under "goods delivered on board ships or aircraft... and servicing of ships." That portion of it possibly might be needed. I think we are arguing over nothing.
If we amended it so as to eliminate the words "going to places outside the State" or eliminate the words "engaged in international commercial transport of passengers and goods" and if I modify my amendment in that way, would the Minister accept that, and if not, what difference does it make anyway and why is he so concerned to keep it this way? The Minister says it does not matter which way you do it and then insists that you must do it one way. I am getting a bit suspicious.
An example of the kind of situation within the State would be aircraft flying between Galway and the Aran Islands. They are operating within the State.
Is there any reason why, if every other aircraft is getting an exemption, you should——
There is. In their case their position would be that they would be exempt, which means they could not claim credit for tax they suffered but they would then be treated the same as all other transport within the State. How do you justify treating them differently from, say, CIE?
You are treating the Dublin-Cork and Dublin-Shannon air services differently from the Galway-Aran air services, because, as I understand it, the aircraft involved are predominantly engaged in international commercial transport and this zero rating applies to them.
That is it. There would be an apportionment of cost.
That is not what the section says, apportionment of costs does not come into this.
Within the State it covers that?
No, it does not.
If they are plying within the State?
No. If they also ply outside the State then they are entitled to a 100 per cent refund, as I read it, whereas the example the Minister has given would not be entitled to a refund at all. As there is so little involved, I do not think it is worthwhile excluding it.
Deputy Tully is right, because this does not say that that proportion of the repairing and servicing which relates to that proportion of the time they spend outside the State is exempt. It says: "where aircraft or ships are engaged in international commercial transport——"
Yes, I accept this.
All these are so engaged. Therefore, all repairs and services should be exempt but none of the repairs and services——
May I suggest to the Minister that since Deputy FitzGerald's amendment would not exactly meet the situation, the Minister could have a look again at it because I am quite sure he is in sympathy with the point being made here?
What I want to ensure is that transport services within the State are all treated in the same way. It may be necessary to amend No. 5 of the Second Schedule in order to achieve that.
In view of the very minor issue involved in regard to the case he referred to, there is only the one I could think of——
I am sure if we get down to it we shall think of many more.
Helicopter services.
Helicopter services are very limited.
What does it matter? Helicopter services costing £70 an hour to hire are not directly in competition with CIE buses and if the Galway-Aran service is zero rated, if the Minister introduces, as it appears he now intends to do as a result of my intervention, provision for apportionment, will Aer Lingus have to apportion all their activities between national and domestic in order to deal with the Galway-Aran service? I think that is ridiculous. Perhaps the Minister would take a lenient view in this case.
I am looking at it the other way around. If we are to do something which has the effect of zero-rating internal transport services, on what principle can I do this unless I do it for all the internal transport services?
There is a difference between the air service to the Aran Islands and any other type of service. They are not competing on a commercial basis.
I shall have a look at it.
Amendment, by leave, withdrawn.
I move amendment No. 31a:
In page 42, after line 3, to insert a new paragraph as follows:
"() harvest twine".
This is an input into agriculture which seems to have been overlooked. It is my advice that harvest twine is a product of such a character that nobody would use it for anything except harvesting.
They do not even use it for that now.
In zero-rating harvest twine one is not opening the way to a loophole for ordinary twine.
It is a very small item.
One of the problems is that it is a small item. The effect of doing what is proposed would be to oblige perhaps the great majority of hardware merchants and country shops to operate three rates of tax on their sales rather than two. We are often told of the problems that are said to arise for the shops in operating two rates. The creation of a third rate would, I think, be regarded as intolerable.
How does the Minister mean a third rate?
They would have to distinguish in their invoices between the three rates of tax.
Will the Minister take my word for it that the amount of binder twine being sold in country shops at present for a very limited period is incredibly small?
Nevertheless it would mean that for even a small quantity the shops would be involved in invoicing with three rates instead of two.
Would such a shop not be selling feedingstuffs and fertilisers as well?
Yes, but we have certain minimum quantities to which the zero-rating applies for these items and it is designed to ensure that it only involves people who make these kind of sales on a big scale and will exclude virtually all the general hardware merchants and country shops.
The debate here is costing more than all the tax on binder twine for the next five years.
In view of Deputy Tully's cogent argument I withdraw the amendment.
Amendment, by leave, withdrawn.
I move amendment No. 32:
In page 42, after line 13, to insert a new paragraph as follows:
"() animal feeding stuffs."
With No. 32 we could discuss No. 38.
The Minister has already made the concession in the redrafting of the Bill of including in certain schedules as zero-rated some of the key inputs into agriculture, that is feedingstuffs and fertilisers. To complete that he ought to include seeds also. My first amendment regarding animal feeding stuffs was drafted before the Minister made this change. I think it can be withdrawn at this stage. However, the very logic the Minister has been applying will require him I think to include seeds. I do not understand why they should be cut out. Feeding stuffs, fertilisers and seeds are the only major inputs into agriculture. The Minister must in all logic include seeds.
It has not been found possible to zero-rate all animal feeding stuffs because certain goods such as oatmeal, turnips, potatoes and cabbage are also commonly used as human food. Similarly there would be difficulty in distinguishing fertilisers from general purpose chemicals. The solution we have come up with was to confine the zero-rate to those goods which come within the definition of "feeding stuffs and fertilisers" as defined in the Fertilisers, Feedingstuffs and Mineral Mixtures Act, 1955. The special flat rate in relation to farm sales, the 1 per cent flat rate and so on have all been calculated on the basis of what is included and what is left out in the Bill as it stands. We have zero-rated as much as it is possible to distinguish as being clearly attributable to agriculture and to nothing else.
I am wondering what the Minister found so repulsive about zero-rating food which is used for human consumption.
I think the Minister meant that as an argument for zero-rating human food also. We are coming to that.
The Minister has 10 km packages here. Could he not shove in animal feedingstuffs and get rid of the argument about food that might be eaten by humans. Could he not shove up this 10 km? I do not know that animal feedingstuffs come in 10 km packages.
That, we are advised by manufacturers, is the minimum quantity which they sell at commercial rates.
There is not much sold for agricultural purposes in packages of that size?
Commercially, yes.
Perhaps for hens, certainly not for pigs.
The objective was to avoid creating a third rate for the ordinary general shop. We are assured that this quantity is such that it will not impinge on the ordinary shop.
The Minister means it will cover everything? It is very low. It is a long time since I handled agricultural feedingstuffs but it was not usually sent around in packages of 22 Ibs.
I would consider an amendment to increase it.
The quarter cwt. used to be the smallest measure.
I would consider an amendment to increase it if the Deputy wishes.
Regarding seeds, the Minister has made the point that with fertilisers and feedstuffs there are some problems. I did not understand the problem in respect of fertilisers and in relation to feeding stuffs I cannot see that there might be some problem in so far as some might be for human consumption as well as for animal consumption.
It must be borne in mind that what we are trying to do is try to avoid a situation in which we would be creating a third rate for general country shops and hardware stores. Therefore, we want to ensure that we are keeping out of this particular category "animal feeding stuffs and fertilisers," anything which, on the one hand, could be interpreted as being for agricultural inputs and on the other, for ordinary general use. There are considerable difficulties of definition as to seeds for agriculture and seeds for flowers.
It is all right so long as people don't eat them.
We are trying to achieve a situation where we are not creating a third rate for the ordinary shop. If a shop sells these kind of goods and we are zero-rating them, we are then creating a third rate.
I question the basis of the Minister's arguments in relation to what a farmer grows. For instance cereal seeds are not handled by hardware shops. There are certain large supply companies who do this.
If we begin to try to define the kind of seeds involved we will find that the definition will have to be sufficiently wide so as to allow in the kind of seeds that are sold but we do not want to do that.
Surely that would not be too difficult.
The Deputy would be surprised at how difficult it would be.
The bulk of farmers engaged in this activity would be buying seeds such as barley, oats, potatoes, turnips and seeds for certain garden products. These seeds are handled by specialised firms and not by small country shops. We should not be increasing the cost of production in these fields.
It should not increase the cost of production because the farmer will regain credit in respect of the tax he has suffered. Admittedly it is worked out on an average basis but nevertheless it is calculated that he will recover the amount of tax he suffers on his income.
I admire the ingenuity of the Minister in introducing a higher rate of tax and insisting that he must keep that, then being in the position where he can refuse to zero-rate things on the grounds that he will be introducing a third-rate tax.
These are the practical steps with which we are faced. In view of the arguments made by Deputies against a two-rate tax, I cannot see how they can argue now for a three-rate tax.
Amendment, by leave, withdrawn.
I move amendment No. 33:
In page 42, paragraph (x), line 23, to delete "roads" and substitute "houses, caravans, mobile homes, roads".—
Amendments Nos. 33, 34 and 35 may be related and, therefore, may be taken together.
I would imagine that No. 33 is somewhat different from No. 35. However we will take them together. In this section a number of items are included but they stop at "roads". I suggest that "roads" should be taken out and put at the end and put "houses, caravans, and mobile homes" in also. These are items that should not have been excluded.
This amendment purports to extend the zero-rating for outlay on roads, harbours and sewerage works by the State and by local authorities to outlay on houses, caravans and mobile homes provided by these local authorities. Almost all materials that go into road and harbour-making and also into sewerage works are exempt under our present system of tax. Consequently the zero-rating continues the present arrangement with the minimum change. As against this the effective rate of the present sales tax on caravans and mobile homes is 30.25 per cent while the average on a house is about 3 per cent. Therefore, if the amendment were accepted there would be a complete elimination of the tax on houses, caravans and mobile homes supplied by the State or local authorities. It is estimated that the cost of this to the Exchequer would be about £2 million a year. Although there might be some compensating savings by way of State grants and local authority expenditure it is difficult to come by these. Therefore we would be in a position of having to find this money somewhere and, so, we are back to the old problem as to whether to take money off with the one hand and put it back with the other. Changes of this kind tend to disturb consumer prices. I presume that Deputy Tully is aware that the Bill, as now amended, provides a substantial measure of relief for caravans and mobile homes by proposing that the rate of tax should be 16.37 per cent as against 30.26 per cent proposed originally. In addition, under section 20 (3) the Minister will have power, by order, to allow repayment of tax suffered in certain circumstances. I have not announced this before but we intend to use this power to order a repayment of all but 3.1 per cent of the tax suffered on caravans and mobile homes which have been converted into permanent fixed residences. Therefore there is a very substantial relief involved in what we are doing here for caravans and mobile homes generally and in particular for those that are converted into permanent residences. In fact we are reducing the tax to the same level as for ordinary house purchase. In these circumstances I would suggest that the Deputy would not press this amendment.
Will this be written into the legislation by way of amendment?
The amendment is in which allows the Minister to order repayment in certain circumstances. However, it is now on record that I intend to do this so I am committed to it.
There is one other point: The Minister is aware of the situation throughout the country regarding housing accommodation. My object in putting this down is an attempt to make it as easy as possible mainly for local authorities anxious to find even temporary accommodation for people. Some local authorities go a long way with this by providing mobile homes particularly. I believe the effort should be made. The Minister asked where would the money be found, that is over £2 million, but I seem to recollect that earlier Deputy FitzGerald was able to prove that the amount of excess over and above what is produced by the present taxation which would come in would be in excess of the £2 million.
£3·7 million.
This is one way in which the Minister can balance his books without causing too much upset. Again I ask the Minister to look at this case where the mobile homes and caravans are being provided by local authorities to alleviate bad housing conditions.
Does the Deputy appreciate the full significance of what I said? Where a local authority is providing a caravan or mobile home as a permanent fixed residence what we are doing is to reduce the incidence of tax to precisely the same as it would be on an ordinary house.
"Permanent fixed residence" are the words I am a little uneasy about because, in most cases, people who move into caravans or mobile homes do not do so as permanent fixed residence. They may, in fact, be the residents all their lives but is not the intention either of the people going in or of the local authority who put them in that they should so remain.
The Deputy may recall a discussion in another context on this point—I think it was on last year's Finance Bill—when I went to very considerable trouble to try to find a solution and we could not do so under existing legislation. We can under value-added tax. I again draw the Deputy's attention to the fact that for caravans and mobile homes generally we are reducing the rate from 30.26 to 16.37. For those which are being converted into permanent fixed residences—and this is where we had the problem before in defining it; substantially it involves their being in the ordinary sense immovable——
If the wheels are taken off a caravan will that make it a permanent fixture?
It needs a little more than that, but I do not think there will be any problem where a local authority are providing these. We have been in touch with the local authority about it.
I know that you have been in touch with local authority officials and while I have great respect for them, and for the civil servants, at the same time their interpretations of things and ours as elected representatives very often clash when it comes to something like this. I am not anxious to delay the proceedings but may I point out that if somebody comes to me saying he cannot get a house, that the local authority may be able to build a house in four or five years, or an old person who says he has no hope of getting a house for a considerable time and a caravan becomes available or a mobile home either from the local authority or from some charitable body or in some way, will the fact that the person does not intend to remain permanently there affect the issue?
No, the intention will have nothing to do with it.
If the Minister says that I accept it and I withdraw that amendment.
They are provided by the local authority in lieu of accommodation.
The test will probably work out on this basis: if they are so fixed that they become rateable, then they will be treated in exactly the same way as an ordinary house.
There is a problem there also because they will not become rateable until the valuation officer examines the dwelling. Usually this is pretty soon but it could be two or three years. So, there would have to be some other system adopted.
We are satisfied from our fairly detailed consultations on this problem with the local authorities that the vast bulk of the problems with which we were all concerned can be overcome under VAT.
Amendment No. 33, by leave, withdrawn.
I move amendment No. 34:
In page 42, to add to the Schedule a new paragraph as follows: "() new houses not exceeding 100 square metres in area."
What I am trying to do here is exclude certain types of houses. I believe houses built for people who want modest accommodation should be excluded from any type of value-added tax. This is dealt with in another way in the Housing Act where houses which go over a certain size are excluded for grant purposes and rates remission purposes. I believe what I suggest would be a help.
The Deputy will appreciate that what we are doing in the Bill is continuing the present situation.
I was afraid the Minister would say that. I should like to change the present situation for the better.
Amendment, by leave, withdrawn.
I move amendment No. 35:
In page 42, after line 24, to add a new paragraph as follows:
"() materials commonly used in the construction of buildings (including haybarns, harbours, bridges and roads) being—
(a) blocks, beams, piles, pillars, posts, slabs, lintels, cills and members of concrete, whether reinforced or not,
(b) cement, concrete, lime, mortar, plaster, stone and bricks,
(c) dampcourse felts and other materials normally supplied as dampcourses,
(d) earth, sand and gravel,
(e) floor and wall tiles of concrete or clay,
(f) flue liners and chimney pots,
(g) glass in the sheet, but not including mirrors,
(h) insulation material in the form of sheets, slabs or rolls,
(i) nails, screws, bolts, nuts, hinges, locks, fasteners and fittings for doors, windows and tubing.
(j) paint and distemper.
(k) plaster board,
(l) polyethylene film of a kind commonly used by builders or farmers for the purposes of their occupation,
(m) roofing felts and semi-solid substances used as a substitute for roofing felts,
(n) roofing tiles, including ridge and hip tiles and slates,
(o) sheets of metal or of other material, other than glass, not further worked than painted, sprayed or similarly finished.
(p) steel or aluminium in the form of angles, tees, joists, channels, bars, wire, extrusions or plate, not further worked than galvanised, sprayed, or similarly finished,
(q) tar, asphalt, bitumen and pitch,
(r) timber, including plywood, blockboard, laminated wood, reconstituted wood and wood veneer sold in the form of planks, sheets or beams and not further worked than sawn lengthwise, planed, moulded, tongued, grooved or v-sheeted,
(s) tubing and gutters of metal, clay, cement, rubber, plastic or similar material of a kind normally supplied for structural purposes or for use as a conduit for cable, liquids, steam, gases or sewerage;”.
I have simply lifted this from a section of Part 3 in an effort to have included much of the material which I think should be included for zero-rating. Without going through the rigmarole here perhaps the Minister would comment on it. The effect is simply to reduce the tax from 5.26 to zero.
Effectively I do not think the Deputy would achieve by his amendment what he wants to achieve because, unless housing itself is zero-rated, the effect of zero-rating materials that go into it would be only short-term because ultimately, when you reach the price of the house, that would be subject to tax and you would then lose the benefit of the zero-rating of the commodities that went into it.
If I build my own house and buy the materials myself surely I cannot lose? Even where a person gets a contractor to build a house for him and if the material he puts into the house is not taxed or is zero rated surely it means that when the house is completed it will cost so much less and that there is no way in which the 5.26 can be applied to it when it is finished and built on contract? Certainly if you purchase a house I can see the Minister's point but if a contractor or a person himself builds it I do not see how it could possibly be included. The materials would be excluded.
The position is that if a contractor builds it and if, say, the materials are not subject to tax, he would then charge a price on foot of the contract which presumably would be somewhat lower because of the fact that the materials were not taxed but the service he is rendering is measured by the cost of the contract and this would itself be subject to what amounts effectively to 3 per cent and we are back again to square one.
No. If the cost of all the materials is reduced by, say, £200 because of the fact that the materials making up the price of the house are not taxed the contractor's price to the person who wants the house built will be £200 less and this will be £200 which the person will not have to pay.
No.
Why not?
Because there would be tax levied on the contract price of the house which has the same effect as envisaged by Deputy Tully. This 3 per cent effect is the estimated content at the moment of the tax that goes into the material. If you take that tax off but tax the contract price of the house at what amounts to 3 per cent the price of the house to the purchaser is the contract price which is less by the amount of tax that was not charged plus 3 per cent which is the same amount of tax again. You do not save anything. Apart from that we go back to the old problem that what the Deputy is proposing is a departure from what we are doing at the moment.
A welcome departure if we would only accept it. I do not accept the Minister's first argument. Suppose the house is £3,000 and there is a 3 per cent tax on that. If the tax is not put on the materials the house may be built for £2,800. How can the Minister tell me that the tax on £2,800 would be the same as the tax on £3,000?
Under the system as we envisage it in the Bill the builder is getting credit for the tax which he paid on the various items of materials he put into the house. Effectively he is zero-rated because he gets the tax back.
He gets it back from the fellow who builds the house.
That is the point. In the end it does not cost the builder any more but the tax that is levied on the price of the house amounts to 3 per cent of the final price.
I am not worrying about the builder. He will look after himself. I am worrying about the fellow who is getting the house built.
Yes, but does the Deputy want to propose that houses as such should not be taxed under VAT? That would achieve what he has in mind. What he proposes here would not achieve it.
I have already proposed that and it has been dumped out.
This would not achieve what the Deputy wants.
It may be a smaller amount than we are talking about. Three per cent of £200 would only be £6. Let us fix £200 as a difference.
The only way this could benefit would be in the case of somebody building his own house. If he is dealing with a contractor he does not benefit in the long run. If he is building his own house, and if this is happening on a large scale, I am afraid there is a provision in the Bill that could bring them in. The reason is that at the moment the tax charged on materials which normally go into a house works out at 3 per cent. On the basis of not disturbing it we have this arranged to come back to the same thing.
The Minister is obviously not going to give ground so there is no point in holding up the proceedings.
(Dublin Central): The status quo is being maintained.
That is right.
All legislation coming before the Dáil should be an improvement on previous legislation and I would like to see an improvement here.
Amendment, by leave, withdrawn.
I move amendment No. 36:
In page 42, to add to the Schedule a new paragraph as follows:
"() food and non-alcoholic drink for human consumption."
I am afraid it will take us some time to discuss this one and we have not got unlimited time. Amendment No. 36 with No. 58 forms a composite proposal. Amendment No. 37 is similar to 36 and No. 39 may be related. I suggest we take Nos. 36, 37, 39 and 58 together.
Amendment No. 36 is very simple. I cannot see why food and non-alcoholic drink for human consumption should be taxed anymore than is necessary and I do not think it is necessary here. In Britain they have excluded food. I do not know why we should include it. The Minister should give way on this issue without any great delay.
I would endorse that and recommend my own amendment. There is a great deal to be said for zero-rating food but to make the necessary adjustment so as to avoid a considerable loss of taxation. There is no problem about ensuring there is no loss of revenue. The effect of taxing in that way would be that better-off people would pay a little more tax and less well-off people would pay less tax because their expenditure is more orientated towards food.
I wish to emphatically endorse what has been said on this. The amount of money spent on essential foodstuffs is what I am more interested in. There is an unanswerable case for zero-rating these foods especially in the light of EEC conditions in which the price of food will increase substantially. I do not know how incomes will increase in the meantime but this tax on food will be a heavy burden on the lower income groups especially.
Would the Minister tell us what is the general practice in the EEC countries?
We have been over this ground at some length before. The amount of revenue involved is so substantial that it could not be done without finding it in an alternative way. To find it in an alternative way would involve increasing substantially the tax on items which in this context may be dismissed as being non-essential but when one comes down to it may well be found to be regarded in another way. I hope that Deputy FitzGerald in proposing an amendment on the Report Stage, will favour us with a list of the items the tax on which he would propose to increase substantially. Leaving that aside, there is the problem about altering the rates and altering the prices and the consequences of that on the cost of living over and above that involved in the actual change in the tax rates.
We could fall back on Deputy Brian Lenihan's tax on expensive cars, furs, and jewels.
You will not get that kind of money from them.
How much does the tax on food bring in?
If we were to accept amendment No. 36, that is to take tax off food and non-alcoholic drink, it is estimated to cost in a full year about £15 million.
This does not make a great impression on me in a £900 million budget.
I hope we will hear the details of the items which Deputies propose should be higher taxed to make up £15 million. May I answer Deputy Tully's question about the EEC countries? It is proposed in Britain not to impose tax on most foods. In Belgium it is 6 per cent on most foods; in the Netherlands 4 per cent on essential foods; in Luxembourg 5 per cent on essential foods; in Germany 5½ per cent on main foods; in France 7½ per cent on most solid foods; in Denmark 15 per cent and in Norway 20 per cent.
What is the tax on other foods in the Netherlands?
I understand that in effect it is 4 per cent on all foods.
I would be concerned primarily with essential foodstuffs which can be defined easily and which should be zero-rated. This would decrease the burden on the lower income groups. The Minister has mentioned the figure of £15 million but if he limits the exemption to essential foodstuffs he will probably find that this figure could be reduced to £10 million. If he is serious—
I do not wish to become involved in this. I am sure Deputy O'Donovan will prick up his ears.
I have done so already.
The buoyancy in revenue has been calculated already in our budget. In effect, it is spent in our calculations. From my point of view it is not enough to say that buoyancy in revenue will make up the difference. I must find this over and above buoyancy.
If the Minister is serious about offsetting the increase in prices that will result from our entry into Europe why not zero-rate essential foods?
I will undertake to make available such information as I can get in regard to the estimated yields of particular items of foodstuffs and on alternative items which could be substituted to raise the revenue. I will do anything I can to assist in that regard.
In my capacity as a trade union official I travel a lot for the purpose of negotiating on behalf of those who are in the lower income bracket. I am amazed always at the number of people who are still living on what used be described as bread-and-spread, people whose only items of food are bread, margarine, tea and sugar. Occasionally they may have butter and in so far as meat is concerned they can afford it only if they earn a little extra money by way of overtime. The importance to this category of people of what we are talking of cannot be over-estimated. These people never say they are hungry.
They have enough to eat of the types of food they can afford to buy but it is sad that even if we make ourselves unpopular by so doing, we are not able to put greater taxation on certain items which only the better off can afford. I do not think a sum of £15 million is insurmountable and I would be glad if the Minister would oblige me with the information to which he has referred.
Although there have been substantial increases in pensions there is an extra-ordinary number of pensioners who cannot afford to live as we would wish them to be able to live. There is also another point in relation to wage fixing. When it comes to the question of formulating wage claims the cost of food is always raised by people who will prove that because of certain increases in food prices they have found it necessary to seek increases that are greater than what employers would consider reasonable. I would suggest to the Minister that one way in which we might be able to dampen the present attempt to go overboard in respect of wage demands—I believe that an attempt is being made now among certain groups to do that—would be by removing tax from foodstuffs. This would be a worthwhile exercise. Of course the Minister has no magic wand that can produce £15 million but every effort should be made towards reducing the cost of essential foods.
Nobody would be more pleased than I if that could be achieved. However it is not possible to assess realistically what can be done without the kind of information that I have mentioned. Different Deputies may have different queries so I will have to await their queries and then give them whatever information I have. Also I would like Deputies to consider the fact that if this exemption in respect of food-stuffs could be achieved there is no guarantee that, as a consequence, the items from which the tax had been removed would be reduced by 5 per cent. I have considerable doubts in that respect. If, however, as a result of our deliberations anybody can put forward a solution that is practicable and workable, I will be happy to hear it.
I used take the view that is implicit in the Minister's legislation that nowadays minimum incomes are sufficient to enable people to buy essential foods but careful study of the household budget inquiry for 1965/66 has forced me away from that view. I am probably on record at the time of the turnover tax as going against the principle that food should be exempt from tax. However I was forced to change my view on that when, after examination of the household budget inquiry, I realised how much the house-hold budgets of poorer and larger families are so heavily orientated towards food.
The Minister should have regard to the EEC position. During the EEC debate I went to considerable trouble to make the case that the overall effect of the cost of living because of EEC membership would be almost negligible because of extra reductions in tariffs which will have the effect of offsetting increases in food prices. In all honesty I must make it clear that while in the overall that is true, larger and poorer families will be worse off because if one takes consumption of mutton, beef, and butter, the overall proportion of the total family budget of the nation for these items represents 5¾ per cent; for a larger family it can be as high as 8½ or 9 per cent. As such families will buy less tariff protected goods and will secure less of the benefits of reduced tariffs the effect on the larger proportion of their income devoted to these particular items will increase. Therefore, although membership will not result in any significant effect in the cost of living as a whole, there will be a shift in the burden towards poorer and larger families. That is something we cannot ignore and those who advocate membership of the EEC have the duty to try to mitigate this particular effect and to ensure that overall the neutrality of EEC membership on the cost of living will not be destroyed by the way in which, unless something is done on the food side, it will operate against larger families.
There is a simple approach to this. Perhaps it is over simple but let us be clear. If food is zero-rated, the money can be recovered by increasing by as little as one-fifth the burden of taxation on those goods bearing wholesale tax. Roughly 40 per cent of goods are in the categories of bearing wholesale tax. They yield just 70 per cent of the total amount of taxation from wholesale and turnover tax. Fifteen per cent is yielded by the tax on food so that a relatively small increase in the tax on goods which bear the wholesale tax, that is the 40 per cent of goods which bear it, and which contribute 70 per cent of total taxation, a relatively small increase of only one-fifth would completely offset and counterbalance the elimination of the tax on food. It seems to me the effect of such a change in the incidence of taxation would undoubtedly be beneficial for it is quite clear the poorer and larger families cannot buy large quantities of the goods which bear wholesale tax, cars, radios and television, and a range of household goods at the intermediate level. Such families do have to spend more on food. So that here is a way which is simple.
I am not saying it is the only way of doing it. There may be difficulties in it and there may be improvements on it but it is a way which is first of all simple; secondly, it involves no loss of revenue; and thirdly, it will involve a shift in the cost of living which will favour the larger and poorer families against smaller and richer ones. The timing of this will be of immense importance coinciding as it would with the beginning of that process of price changes in EEC which will bear no harder on the nation as a whole but which will bear harder on larger and poorer families. For those reasons, and also because I think Deputy Tully is right in saying that these increases in the price of food psychologically have the greatest bearing on wage claims and because of the very serious situation we face on wage claims now and the dangers to our economy from excessive increases, I think it is vital that the Minister should re-consider his position on this and should consider a course of action along the lines I suggest.
There are various approaches but I would favour a simple approach to kill two birds with one stone, get away from the multiplicity of tax rates. I personally, speaking for myself rather than my party, would be inclined to favour the system under which all goods bear turnover tax and in which the present 30 per cent wholesale tax system which is proposed in this Bill can now be modified so as to reduce to something like 20 per cent and apply it to the whole range of goods involved in wholesale tax. You would then have a 5 per cent tax paid at retail level, no other tax paid at retail level and 15 per cent approximately wholesale tax instead of the 11 per cent.
Five per cent at retail level on items other than food.
Yes. Thank you for the correction. Five per cent at retail level on items other than food. And then there would be approximately 15 per cent or so of a wholesale tax added on top of that making 20 percent altogether applicable to those goods which at present bear wholesale tax.
Did the Deputy examine the items which are subject to wholesale tax?
I appreciate that many of them are items which are bought fairly frequently but they are not bought as frequently as food is bought whatever the effect and whatever the objections may be—and nobody wants taxes to increase on anything—clearly the net effect of this on the social point of view would be beneficial and the simplification of tax would be enormous. The Minister asks would the EEC regard such a wide range of goods as luxuries. I think as long as the range of goods is a minority of the total goods—and we are talking of goods representing 40 per cent of total sales—I think that one could get away with that and it would be a benefit in tax simplification and the social benefit would be enormous.
Unlike Deputy FitzGerald I do not have to beat my breast at all because I have always been absolutely against taxation on food. Personally I think one of the reasons why Britain has been such a powerful industrial country is because they have never taxed food.
And are still not doing so.
Quite. I think it is probable that the Minister will come up with sufficiently strong objections to exempting all foodstuffs from turnover tax, the 5 per cent rate, but if one goes into a grocer's shop, you see all kinds of packaged foods and a great deal of money must be spent by every section of the community on things such as cornflakes and other packaged foods. This does not alter the fact that I am very much with Deputy Tully. I admit that he has a great deal of more recent experience of this matter than I have although, when I was a young man I had a good deal of experience of it, as much as anybody. I think of the exemption of essential foodstuffs which featured so very much in budgets in the 1920s in this country—2d off tea and ½d on sugar and so on. I agree with Deputy Tully that it is a feature of our attitude nowadays that nobody uses bread and spread and so on. I believe, and Deputy Tully knows as well as I do, that the lowest paid workers with large families have no option but to eat potatoes and bread with some fat, dripping, margarine or butter. Certainly if the turnover tax cannot be eliminated for all foods, and since we are speaking about social matters, I do not see that there is a coercive argument for taking turnover tax off the special packaged goods with which grocers shops are now stocked. Bread, margarine, butter, tea and sugar—yes.
I have given a list to the Minister. Perhaps he would read it out.
Yes, and if anybody wants more information I shall be able to furnish it. It is a list that Deputy Collins made out to show what the loss in revenue would be if the following items were zero-rated. What would be exempt? I do not know. We should have to look into which would be the more appropriate ones: bread, butter, margarine, tea, sugar, red meats, that is beef, mutton, pork and bacon; white meats, fish, potatoes and household vegetables.
That would cover in a broad sense all essential foodstuffs.
Another essential matter we would have to bear in mind would be what would be the effect on shopkeepers of handling a third rate because they would have a third rate to handle.
Not if my proposition were accepted.
That is true but I think when Deputy FitzGerald examines the position perhaps he will support it but I do not think anybody else will.
Would the Minister like to develop that point because the worst that happens here is that a 16 per cent rate is raised to 20 per cent on goods which are by definition non-essential. Why does the Minister think that this is something that will not be supported?
Because I think when you get down to the practical aspects of the matter and list the items and the increases you will have on particular items, Deputies may have a different view of the situation. However, in the light of this discussion I suggest that if a workable system can be produced to tax on essential foods I should certainly be very happy and I shall have an open mind on it if this can be produced. In the meantime I am not aware of it from my examination of it that it is possible but if the combined wisdom of this Committee can do it I shall be very happy with it. Perhaps in the circumstances we could cut this discussion short pending what comes up.
I have no objection at all.
Are we to divide on this now?
The Minister has agreed to have another look at it and if something cannot be done, in order to have a discussion we can re introduce it.
Let us be clear on the procedure in case there is any misunderstanding. What I envisage is that with these amendments withdrawn, we go ahead and finish our work on this Committee. Any Deputy on the Committee who wants information of the kind I have indicated and who asks for it will be given anything we have. Then, at the Report Stage whatever amendments might be introduced on foot of this information could be discussed.
Does the Minister appreciate that we are not, I think, entitled to propose an increase in taxation—is that right?
Yes. I have had a suggested entry ruled out.
Imposing a charge on the Exchequer?
Yes, or on the public.
I am not sure that if, in fact, it has a compensating reduction in taxation at the same time and that the net effect is not to increase it——
I am afraid that was not the ruling given to me. The ruling given to me was a charge on the Exchequer or on the public.
Could that be abandoned by agreement? Otherwise we are put in the position of not being able to put forward our proposition. I think the Minister is right in putting to us that we should responsibly put forward an alternative proposition. It is up to the Opposition to put forward an alternative proposition. To be frustrated in acting responsibly by the Rules of Order would be absurd.
That would be a matter for the Ceann Comhairle.
If the net effect of a proposal put forward is, while it is changing incidence of taxation on certain items, over all it is not increasing the charge, would that be ruled out of order?
Amendments such as that would have to be to two different sections. The amendment I put to one section was ruled out because it was reducing the income and the other one was ruled out because it was increasing the charge on the public.
It would be a matter for the Ceann Comhairle. He will rule it out seemingly if it involves a charge in any section.
Surely the House could proceed by agreement?
No. There is one alternative which I am sure the Minister would not be ready to accept. We seem to be running later than I thought we would. I suggest that for our next meeting we might have some figures and if the Chairman is agreeable this amendment could be deferred rather than withdrawn.
The trouble is that it might take a little time for Deputies to formulate their proposals.
The Minister has already got a list of foodstuffs which we would like to have zero-rated.
That is one particular view.
All of us can think of hundreds but that is not the object of the exercise. If we could decide on a reasonable list. The only thing we would have to give the Minister is what we think should be substituted. It is there the difficulty might arise.
I am just wondering if it would create an impossible precedent if I were to put forward amendments and then oppose them.
It appears to be the only way in which it could de done, or if some of the Government——
Only the Minister can do it.
It is a possible thought.
It is not one that appeals to me though.
It is generous of the Minister to even think of it.
We have our representatives in the Seanad. If the Minister would agree to have a matter of this kind discussed in the Dáil by some reference which he could make to it and we could agree that our people in the Seanad would then submit agreed amendments.
They would be in the same position. I take it that what we want is to have formulated a proposition or propositions on the lines we have been discussing and to get the opportunity to discuss them.
If we could get the Ceann Comhairle to agree that if, in proposing to eliminate the taxation on certain foodstuffs, we stated what alternative measures of taxation we would advocate in order to compensate, we would not be ruled out of order, then I think the matter would be overcome. If then the proposition we put forward was one acceptable to the Minister he would adopt in some form an amendment to increase taxation which would correspond to what we have suggested.
If the Minister does not want to accept our proposals we are all wasting our time. In effect, we have said to the Minister here that we believe something can be done and the Minister says he does not think it can be done but that if we say how we think it can be done he will look at it. Is there any reason why the Minister himself, who says, and I accept it, that he is as anxious to exempt essential foods as anybody if it can be done, should not look at it and see if he can come up with a proposal.
That does not meet my point. I believe there is a very important educative process involved for any Deputy in getting down and seeing what is the consequence of what he is proposing.
There is one Deputy who does not need that education. Modesty prevents me from saying who.
We would have to accept what the Minister would propose. We could not have it both ways.
I do not think that is a satisfactory answer to the problem but I think what Deputy FitzGerald said could meet it, that is that there would be an amendment put down by the Opposition and if, by agreement, it could be indicated to the Ceann Comhairle that it is understood here that a Deputy in proposing say the abolition of VAT on food would be allowed in the course of his argument to say: "And this is what I suggest should be done."
I do not think you can do that.
This relates to the actual speeches made as distinct from an amendment.
There is nothing unconstitutional about that.
But unless the amendment is put down what is the object?
The object is to state that you are proposing the elimination of tax on food and you are saying the extra taxation could be arrived at in a certain way.
But what do you get by that? That is asking the Minister to buy a pig in a poke.
No. He either accepts it or rejects it. If he accepts it he introduces the amendment.
Surely it could be done far more simply by the Minister and his officials because we would be only asking him to tell us so that we could tell him back where it stood. Let us be reasonable.
I think the challenge is one worth taking up.
Deputy FitzGerald may consider it a challenge. I think it is bread and butter, literally. Bread and margarine.
Do we have a token opposition to it at this stage?
Since the Minister is willing to consider it on Report Stage I do not think it is necessary for us to press it at the moment.
As the amendment stands it says "food", not "essential food".
We might put forward two alternative propositions suggesting either all food or some food.
I do not believe there is any genuine difficulty in exempting some food just as there was no difficulty in having a halfpenny on or off the tax on sugar when that was one of the main sources of revenue.
I think it is a different problem insofar as the shopkeeper is accounting for the tax. In effect exemption can create what to him is a third rate.
I would have thought the difficulty would be that Revenue would feel they would be at the receiving end of the blows and that certain shopkeepers would pretend they had got a great deal more income from these essential foods than from other things. There may be a little in that but I do not think there is a lot.
It is one of the things that has to be considered. Our immediate problem is how to proceed from here.
I would suggest that the amendment be withdrawn at this stage and that the Minister, if he wishes, examine it in collusion with anybody else on the Committee to see whether something else could be drawn up for Report Stage.
As I see it, the amendments, in order to be effective, will have to come from the Minister. If the Minister says that it will be possible to exempt certain items if, after reconsideration, it is found possible to do so, I will be prepared to withdraw my amendment but if he says: "I do not think it is possible to do that but if you people can prove to me that it is possible I will reconsider it", then I shall not withdraw it.
Would it help if we were to hold a further meeting informally for the purpose of discussing the ideas that have emerged during these deliberations. If, then, a satisfactory solution emerged I could move an amendment to that effect on Report Stage but if no such solution emerged it would be open to Deputies in the course of Report Stage to devise, by way of amendments, a method of putting forward the case they are making. It would be for me to reply to those arguments.
Can the Minister see any great difficulty so far as procedure is concerned in that if we put forward proposals and, having been permitted by the Ceann Comhairle to explain our case, the Minister would then agree to introduce on the Report Stage the necessary amendments? Is there any technical difficulty about that?
The whole thing hinges on whether the Minister would agree with the suggestions we would make.
It hinges on that anyway.
It does not matter how much information we get, we will still not have at our disposal the amount of information that is available to the Minister.
If we meet unofficially it should be possible to sort out how far the Minister can meet us in our suggestions.
That is the only way.
Of course that meeting would not be reported.
I am all in favour of having such a meeting.
It is a reasonable way of dealing with it.
Amendment, by leave, withdrawn.
Amendment No. 37, by leave, withdrawn.
Amendment No. 38, by leave, withdrawn.
Can we decide when that meeting will be held.
As soon as I get the request for the information sought by the Deputies.
The Minister would be in a better position than us to say what information is available with regard to prices. If I were to enumerate say, 20 items it might be found that 15 of those had no relevance and, consequently, somebody would be put to a lot of unnecessary trouble.
I will do the best I can.
Would it not be possible for the Minister to tabulate against each item on the list provided by Deputy Collins?
I could do that but the Deputies may want information other than in regard to the items specified.
Whatever we do in regard to food it seems to me that water should be zero-rated as it is in Britain. I wonder whether the failure to zero-rate it here was an omission.
Water provided by local authorities will be exempt under No. 3 of the First Schedule.
Should it not be zero-rated rather than exempted?
Who buys water?
Industries buy it.
In a comparatively small country like Britain which has a huge population there are likely to be sales of water.
Surely every industry must buy water.
They buy it from local authorities.
Amendment No. 39, by leave, withdrawn.
I move amendment No. 40.
In page 42, to add to the Schedule a new paragraph as follows:
"() services, medicines for human use, and medical equipment and appliances, provided by a health board,".
Amendments Nos. 41, 42, 43 and 59 may be related and can be taken with No. 40.
It is not necessary for me to give any details about the suggested amendments. Has there been provision made in the Minister's amendments to have included the items referred to here?
No. What is provided for in the Bill is the continuation of the existing situation.
Is it not inequitable that animal medicines are exempt while human medicines are not?
This is a very old problem. There is a question of whether animal medicines are regarded as the overheads of a business.
They form part of the overheads of many people.
Animal medicines would come in under VAT but because of the arrangements made in respect of farmers they will be compensated for the additional tax paid.
Therefore, humans will continue to have to pay tax on their medicines.
No more than at present.
I would like to see the legislation being changed in this respect.
The Minister should not stick rigidly to the present position. Obviously, a change in this respect is desirable.
An equally good case could be made in regard to other areas but we get back to the old question of whether we ought to change tax deliberately here.
I would imagine that the amount of tax collected on medicines would be relatively small. Surely medicine supplied by health boards should be exempt. I suppose it is a question of whether the Minister accepts this.
I am afraid I do not accept it.
Amendment, by leave, withdrawn.
Amendments Nos. 42 and 43, by leave, withdrawn.
I move amendment No. 44:
In page 42, to add to the Schedule a new paragraph as follows:
"() radio receiving sets provided for a blind person by a health board, voluntary organisation, or Government Department, and television receiving sets provided for a deaf person by a health board, voluntary organisation, or Government Department,".
I did indicate in the House that I was proposing to take power under an amendment which is now section 20 (3) of the Bill to repay tax in deserving cases. I think I mentioned radios for the blind.
You did.
I would certainly consider that television sets could be included and also guide dogs. In fact I think I mentioned them. In effect, I think what the Deputy wants is covered already. The radios are specifically covered but the others would be covered in an order.
That is satisfactory, if that is included on the record.
Amendment, by leave, withdrawn.
Amendment No. 45, by leave, withdrawn.
Amendments Nos. 46, 47 and 56 are related and 48 may be related.
I move amendment No. 46:
In page 42, to add to the Schedule a new paragraph as follows:
"() books, booklets, brochures, pamphlets and leaflets; children's picture books and painting books; maps, charts and topographical plans, (excluding plans or drawings for industrial, engineering, commercial or similar purposes) and covers, cases and other articles supplied with the above items and not separately accounted for."
This is one which I think I must press very strongly. It is one general area where, apart from food, it is obviously undesirable to have taxation. The present arrangements have produced intolerable problems which continue despite concessions made in regard to books imported and the value-added tax to be paid. Just as in Britain where the whole area of books and newspapers and so on have been exempted from taxation, so we should also exempt them. I have no doubt about that. This is something which, I think, would be a priority in the event of a change of government and I feel this Government should show its sensitivity on this also. Any form of taxation in this area is inherently undesirable and it is time it was changed.
It is one thing that really annoys me whenever I go to buy an expensive book particularly. Having to dish out extra money really gets under my skin. I was astounded when tax was first imposed on books, especially serious books. However, it is primarily a matter for the Minister.
Whatever about the technicalities involved I think that in the absence of exemption for essential foods it would not be justifiable to exempt these.
That is very well put.
Can we throw in the books with the other proposition?
First things first.
Would the Minister be able to produce figures on the cost of this as well as in regard to the cost of the food tax elimination?
Yes, we can do that.
Let me say that this tax on the cost of books et cetera makes a mockery of free education for a poor family. Last week I met somebody with nine children and each child was required to buy £10 worth of books, which was £90 in one season between this and Christmas.
Amendment, by leave, withdrawn.
Amendments Nos. 47 and 48, by leave, withdrawn.
Amendments Nos. 49 and 60 form a composite proposal and amendment No. 50 may be related.
I move amendment No. 49:
In page 42, to add to the Schedule a new paragraph as follows:
"() peat, peat moss and briquettes."
This is something which we felt is in general use and we see no reason why it should not have been excluded. In the case of peat, peat moss and briquettes, because native fuel is involved, we feel this automatically should have got attention. In regard to the items in amendment No. 50 these items at present are causing a great deal of annoyance because of increasing costs. Incidentally, may I say, in passing, that the Minister or some of his colleagues might get something done about coal which is being imported from Poland at a cheap rate and being sold as British coal at about three times the price it should be. Would the Minister have any comment in regard to amendments Nos. 49 and 50, particularly No. 49?
The treatment proposed for these items under value-added tax is the same as the treatment they get at present. Therefore we are back to the old principle.
Amendment, by leave, withdrawn.
Amendment No. 50, by leave, withdrawn.
Amendments Nos. 51, 52 and 57 represent a composite proposal and amendment No. 53 may be related.
I move amendment No. 51:
In page 42, to add to the Schedule a new paragraph as follows:
"() newspapers, journals and periodicals."
The newspaper amendment could almost have been considered jointly with books and, I did, in fact, make reference to it in dealing with books. The same principle applies here and that is the undesirability of taxing printed matter in any shape or form. The special problems of newspapers in the country are well known especially since television was introduced and especially as far as provincial papers are concerned. The matters considered in amendment No. 53, these points about advertisements, are also related to the desirability of benefiting newspapers and are, in fact, similar to the provisions which exist in the proposed British Bill of the same kind, the British VAT Bill.
I believe newspapers, especially provincial newspapers, should get special treatment because so many of them are at present finding it almost impossible to carry on. We now have the situation in which newspapers have to turn almost completely to advertising in an effort to exist and even at that the state of taxation on them is making it impossible for them to exist.
They should get every assistance from the State, short of a subsidy, which might have a bad psychological effect and endanger freedom of expression.
Some of them accuse their competitors of getting a subsidy.
I would not propose a subsidy but they certainly should not be taxed in any way.
Under value-added tax newspapers will benefit substantially by reason of the reduction. In effect, they are being taken out of wholesale tax and as regards any further reduction, as I said before, I could not justify taking off tax in the case of newspapers and leaving tax on essential foods.
For once I am entirely with the Minister. The proprietors of the daily papers—I am not talking of the provincial papers now—have done extremely well out of all these changes in taxation.
Amendment, by leave, withdrawn.
Amendments Nos. 52, 53 and 54, by leave, withdrawn.
Amendment No. 54a not moved.
Second Schedule agree to.
THIRD SCHEDULE.
Amendments Nos. 55, 56 and 57 not moved.
I move amendment No. 57a:
In page 43, paragraph (x) (o), line 27, after “other material” to insert “including asbestos”.
To clarify the point as to whether asbestos would be included I put down the amendment to test this out. I am not convinced that the amendment improves the situation; it may even narrow things down somewhat but I thought it should be put down to clarify that it is the Minister's view that asbestos will be included under the phraseology of "other material".
That is the view, that it would be chargeable at 5.26.
Amendment, by leave, withdrawn.
Amendment No. 58, not moved.
Amendment No. 59, by leave, withdrawn.
Amendments Nos. 60, 61, and 62 not moved.
I should like to put No. 62 because it is different.
It is consequential——
It was discussed with one of the others.
It is consequential and I am sorry but the Deputy cannot discuss it.
I cannot discuss it but I can put a vote on it.
No, it has been decided.
Is it consequential on or discussed with?
It is consequential on No. 8.
Then I can do nothing about it.
Question: "That the Third Schedule be the Third Schedule to the Bill" put and agreed to.
Third, Fourth and Fifth Schedules agreed to.
Title agreed to.
The suggested report of the Committee is as follows:
A special Committee has considered the Bill and has made amendments thereto. The Bill, as amended, is reported to the Dáil.
Report agreed to.