Written Answers. - VAT Liability.
Michael McDowell
Ceist:
41
Mr. M. McDowell
asked the
Minister for Finance
the number of notices that have been issued to VAT payers by the Revenue Commissioners in respect of advance VAT payments due to be made in December 1993, under the terms of the Finance Act, 1993.
Ivan Yates
Ceist:
62
Mr. Yates
asked the
Minister for Finance
the situation in relation to the additional VAT payment that is liable to be paid in December for companies with an annual VAT liability in excess of £300,000; the way in which this has altered from the original budget decision, as outlined in the Finance Bill; if he will introduce any mitigation for companies whose turnover this year is less than last year and for whom this payment would involve financial hardship and cashflow difficulties.
I propose to take Questions Nos. 41 and 62 together.
The Finance Act, 1993, made provision for the special advance VAT payment as one of a series of measures taken to offset the greater part of the substantial cash-flow loss to the Exchequer arising from the abolition, from 1 January last, of VAT at point of entry on intra-Community trade. The special advance payment will be required from the largest VAT remitters and represents an advance on the payment they would normally make in the following January. Full credit for the advance payment will be granted to traders against their normal VAT liability in January. The Finance Act provided that liability for the advance payment would arise for taxpayers whose annual net VAT liability exceeded £120,000. The great majority of VAT-registered taxpayers, numbering some 132,000 in all, were thereby excluded from the requirement to make the special advance payment. The Act also enabled the Minister for Finance to increase the threshold. Last month, a review of the latest statistics enabled me to raise the threshold to £300,000, thereby immediately absolving some 1,000 taxpayers from the obligation to make the advance payment. It was estimated at that stage that the revenue yield from the 1,000 or so top remitters who remained subject to the initiative would be approximately £145 million, as budgeted for originally.
Since then, there has been a judgment of the European Court of Justice in Luxembourg arising from an Italian VAT case which has implications for our special advance payment measure. Essentially, the Court has ruled to be invalid any VAT payment requirements which would impose a liability greater than that actually incurred at the time the payment is made. Thus, to avoid any possible conflict between EC law, as interpreted by the Court, and our provision, I propose to modify the provisions governing the payment required from the traders involved.
Within the next few days, I will be making an order giving tax payers the option of making the advance payment on the notified basis, i.e. equivalent to one-twelfth of their total net VAT due in the twelve months ended 30 June of the relevant year, or on the basis of their liabilities for November, whichever is the lesser. I have no doubt that this decision will, given continuing budgetary constraints, be seen as fair and will alleviate many of the concerns expressed to me by the traders affects. It should be recalled that, not withstanding the advance payment requirement, the business community in general will have had the benefit, for most of the year, of an estimated cash-flow gain of some £200 million arising from the abolition of VAT at the point of entry on intra-Community trade.
I would immediately acknowledge that my proposed action will have consequences for the 1993 budgetary out-turn; it is estimated the revised arrangements will leave a shortfall of some £65 million as compared with the original budget target for the measure. Taking account of this shortfall, I remain satisfied that the EBR for 1993 will be reasonably close to the budgetary estimate of 2.9 per cent of GNP. I also want to make it clear that, given the inherent nature of the measure, the new provisions will not have any budgetary implications for 1994.
Finally, I am advised by the Revenue Commissioners that a total of 1087 notices issued to VAT payers on 4 November, 1993. These taxpayers will be contacted again by the Revenue Commissioners concerning the new arrangements.
