Vol. 399 No. 10
12 Tomás Mac Giolla asked the Minister for Tourism and Transport if his Department have made an assessment of the likely impact of the elimination of duty free facilities, arising from EC harmonisation of tax and excise rates, on sea and air fares and Irish tourism in general; if he has any plans to counter the impact of these developments on tourism; and if he will make a statement on the matter.
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 sea and air passenger transport within the Community is zero rated for VAT purposes. Under the Commission proposals, the reduced rate of VAT of 4 per cent to 9 per cent would apply to such transport.
While agreement has been reached by the Council of Finance Ministers in relation to the broad outline VAT structure 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 our tourist industry of any changes in relation to VAT and duty free sales.
I welcome the Minister's statement. Would he confirm whether he is supporting the retention of the duty free facilities at our sea and air ports? Does he agree that there is a potential increase in air fares of between 20 and 37 per cent and sea ferries would suffer even more dramatically, with not only a loss of income from the duty free facilities but also a loss of passengers?
I have made it quite clear to the EC Commission that I am totally opposed to the suggested changes in duty free sales. I have sought to retain the present position. I should mention to the Deputy that these changes would apply only to duty free sales within the Community; transatlantic traffic, which makes up a significant part of our business, would not be affected. I have made my views known equally strongly in regard to the suggested changes in VAT as they would affect the tourist industry.
