Vol. 395 No. 2
8 Mr. J. Bruton asked the Minister for Tourism and Transport the amount by which he expects the price of air tickets from Ireland to be increased by: (a) the imposition of VAT on passenger transport and freight in accordance with recent EC recommendations and (b) the abolition of duty free shopping in accordance with recent European Commission recommendations.
33 Mr. Gilmore asked the Minister for Tourism and Transport the implications, if any, which the abolition of duty free shops arising from EC tax harmonisation proposals would have on air fares; and if he will make a statement on the matter.
I propose to take Questions Nos. 8 and 33 together.
Proposals for fiscal harmonisation, including the possible imposition of a positive rate of VAT on passenger transport and the possible abolition of duty free sales within the Community, are being examined by the EC Council of Finance Ministers.
Under the Commission proposals, as now modified by the Council of Ministers, two rates of VAT are envisaged — a standard rate in the range of 14 per cent to 20 per cent for general application to goods and services and a reduced rate in the range of 4 per cent to 9 per cent for a limited number of items. At present, international air passenger transport within the Community is zero-rated for VAT purposes, while domestic air passenger transport is exempt. Under the Commission proposals, the reduced rate of VAT would apply to both domestic and international air passenger transport. Air freight transport, both domestic and international, would be charged at the proposed standard rate of 14 per cent to 20 per cent.
While agreement has been reached by the Council of Finance Ministers in relation to the broad outline of VAT structures to apply post-1992, negotiations on the individual elements which would form part of the total package are still at a very preliminary stage. It is apparent, however, that the abolition of duty free sales within the Community is unlikely to occur in the near future, given its relatively low priority in terms of the main issues involved in fiscal harmonisation.
I am, however, very much aware of the concerns of the tourism and transport sectors about these issues. I share these concerns and my Department have written to the EC Commission outlining the serious implications for air transport of any changes in relation to VAT and duty free sales. It would however, be premature to speculate about the level of increase, if any, on air fares which may result from whatever decisions emerge in due course in relation to VAT and duty free sales.
May I ask the Minister how he makes out that simply giving a figure as the increase in the cost of an air ticket as a result of the imposition of VAT at the lower rate would be speculation? I would have thought that would be simply a matter of calculation of which the Minister's Department should be capable. How can they make a case against the proposal if they cannot say what it would cost?
The Deputy will be aware that there were various ways of doing this calculation. I know what is the intent behind his question. For example the Association of European Airlines have come up with one particular calculation; I could do my own. It strikes me as a simple lad that if a VAT rate of 4 per cent is applied to a ticket the cost goes up by 4 per cent. Economists would disagree with me and say that one also has to take into account a fall-off in business if VAT is increased and for that reason a few extra percentages must be added and extra administration must be taken into account it can be built up to any figure the Deputy wishes.
Surely the Minister's responsibility is somewhat more than saying there are a range of calculations that one could make on different assumptions etc. Would the Minister not agree that for the time being at least he is actually responsible for presenting Ireland's case in this matter and that if anybody in Ireland is to have a view, and a definite view — not a range of views — about what this would cost it should be the Minister. That is why I asked him the question — not economists or business people. Will the Minister answer the question? Will he give figures based on the range between 4 per cent and 9 per cent? What does he think would be the increase in the cost of a ticket as a result of, say, a 5 per cent VAT rate? Furthermore, what does he think — and it is his opinion I am interested in—would be the likely cost of a ticket in the long-term if duty-free shopping is restricted? I am not asking the Minister to give me a range of assumptions and refer me to economists. I am asking for his opinion.
I want to dissuade Members of the notion that we can debate this matter now. This is Question Time.
I am asking a question. We cannot even start debating it until we have the facts.
I have a quite definite view of this matter, so much so that I have written to the EC Commission outlining my serious worries about this whole approach. I have no doubt that Ecofin will take that into account. I have made the position of my Department and my own position quite clear. I am concerned about these proposals and I want them looked at extremely carefully.
In regard to the calculations, I have given the Deputy my own view. If the EC are saying it is between 4 per cent and 9 per cent, then I cannot calculate that until I know what exactly it is. That is simple enough for me. If it is 5 per cent, then it is 5 per cent.
No, it is not.
Let us hear the Minister out.
It is not the case, Sir. The Minister said that simple calculation is not adequate because it does not take into account the fall-off in business. I am asking the Minister — and this is what he is paid to do as Minister — to say what is his view as to what would be the cost increase.
You have already put that question a number of times. We cannot afford the luxury of repetition at Question Time. Deputy Gay Mitchell is offering.
The Minister does not know how he is going to calculate it yet. The Minister is not competent.
I am passing on to another question if Deputy Gay Mitchell does not offer.
Will the Minister confirm that the abolition of duty-free facilities on the current year basis would mean a loss of approximately £12 million to Aer Rianta and would put a profit-making company into loss?
It will certainly affect Aer Rianta very substantially. It would perhaps be of that order.
You cannot answer that question either.
Put down a question if you want to know the answer.
I have done, and the Minister is not answering it because he will not make up his mind.
I have to wait until I know whether it is 4 per cent or 9 per cent.
That will be too late.
Does the Deputy know which it is? Does he know the figure?
I do not because I am not paid to. You are and that is why I am asking the question.
You are paid to do your own research.
Please, this should not lead to disorder. Let us have an orderly Question Time.
