Vol. 402 No. 4
2 Mr. Quinn asked the Minister for Finance the estimated additional tax take on (a) excise duty, and (b) VAT during the current year resulting from increased oil and petrol prices; and if he will agree to reduce the retail prices of oil and petrol at the pumps by adjusting the total Government tax take to the figure estimated in the January budget; and if he will make a statement on the matter.
26 Mr. Rabbitte asked the Minister for Finance if the Government intends to reduce excise level on petrol by an amount equivalent to the extra VAT accruing to the Exchequer from recent price increases in petrol, especially in view of the potentially damaging impact on the economy of high petrol prices; and if he will make a statement on the matter.
I propose to take Questions Nos. 2 and 26 together.
I would draw the attention of the Deputies to the statement issued by the Revenue Commissioners on 16 October 1990 in response to media comment as to the effect on tax revenues of recent increases in the price of petrol.
This statement indicated that, when account is taken of all relevant factors, the recent price increases will have little or no effect on the overall tax yield from petrol sales. When account is taken of the estimated effect on consumption of the higher prices, the Revenue Commissioners have calculated that, for 1990, VAT receipts from petrol sales will be approximately £2 million higher than would have been the case if prices had remained at pre-August levels but this will be more than offset by losses of excise duty of about £4.5 million. The Revenue Commissioners calculated that, on a full year basis, the estimated additional VAT yield of £15 million would be almost neutralised by the estimated excise loss of £14.5 million. Of course, these calculations assume that present prices hold, which is by no means certain.
As regards other oils the position is that any additional VAT resulting from higher prices is likely to be small, since businesses are entitled to reclaim VAT, and there would be an offset from a reduction in the excise yield to the extent that consumption is affected.
I want to make it abundantly clear, once and for all, that there is no windfall or bonanza to the Exchequer as a result of the higher oil prices of recent months. The plain fact is that, when account is taken of the negative knock-on effects of the increased cost of petrol on the general level of consumer spending, the Exchequer's total revenue will be adversely affected. This evaluation, I shall add, is in line with assessments by international agencies and by other countries, of the repercussions of the Gulf crisis on national budgets and on economic activity generally. In plain language, the higher oil prices have resulted in a significant transfer of purchasing power away from oil-consuming countries which will curb growth prospects and thereby worsen their budgetary positions.
Would the Minister not agree that the net point in my question — which does not seem to have been adequately answered by the Minister in his reply — is that the Government have some discretion in relation to the increase in oil prices brought about by market forces in so far as he could reduce the excise content of the increase which has come about? Is he not prepared to do this? Surely he would agree that it would be beneficial to an economy which is becoming somewhat nervous of the short term economic prospects.
While the Government have a control over the level of taxation they raise on these products, the instrument commonly used up to last year was the Imposition of Excise Duties Act, 1957. The relevant section was struck down in the High Court, which left the Minister of the day without the instrument of a ministerial order to vary the amount levied. The matter is under appeal to the Supreme Court but there is no instrument available to the Minister, subject to legislation. It was the decision of the High Court that it must be underpinned by legislation. Short of bringing in legislation every time the Government might want to order an increase or a decrease, it cannot be done. The price of petrol and oil is reviewed and the decision announced by the Minister for Industry and Commerce and his Department. The most recent comment in that Department, which my officials have confirmed, is that we can expect a decrease in price on 5 November in the region of 6p or 8p a gallon. Prices can move up and down every month and the ministerial order is not available to me.
I really cannot accept the explanation. Would the Minister not agree that the view of independent economists is that the Department of Finance are looking at a windfall of between £10 million and £12 million? Is the Minister's reluctance related to the fact that the Government are currently having difficulty in finalising the Estimates and that extra money from whatever source is needed, irrespective of the inflationary impact on the economy?
I have to reject the Deputy's comment that he cannot accept the explanation. We all have to accept the position in relation to the ministerial orders and the statutory instruments available to me. It is common fact, not supposition or imagination. Let us consider the calculation with which the Deputy appears to disagree. Independent assessments have been carried out all over the world in relation to this matter. It is not something created fictitiously by the Revenue Commissioners. They operate independently. Various figures are being floated in the public arena, ranging from £10 million to £15 million to £40 million and £60 million, depending on which Opposition spokesman one follows.
Did the Minister read the Business Post?
I hope the Deputy read not only my letter to the editor of that publicaton but also the four paragraphs which accepted that their figures were wrong and setting the record straight, in conjunction with a statement by the Revenue Commissioners giving the factual position. The £60 million of Deputy Seán Barrett, the £42 million of Deputies Mitchell and Bruton, the £10 million of Deputy Quinn and the £15 million of Deputy Rabbitte are off-the-wall stuff. Deputies must accept the credibility of the Revenue Commissioners and independent studies in this regard.
Do I understand that the legal advice available to the Minister is that because a section has been struck down by the High Court, which is now under appeal to the Supreme Court, he is advised that he cannot use that section to make the excise order?
Precisely. We expect a decision shortly from the Supreme Court.
