Dáil Éireann díospóireacht -
Tuesday, 23 Jan 1996

Vol. 460 No. 3

Financial Resolution No. 6 - Value-Added Tax.

Mr. R. Bruton

I move Financial Resolution No. 6;

(1) THAT in this Resolution—

"the Principal Act" means the Value-Added Tax Act, 1972 (No. 22 of 1972);

"the Act of 1993" means the Finance Act, 1993 (No. 13 of 1993).

(2) THAT the rate of value-added tax on livestock, live greyhounds and the hire of horses be increased from 2.5 per cent. to 2.8 per cent. of the taxable amount or value of such goods and services, and that, accordingly, the Principal Act be amended in subsection (1) (inserted by the Finance Act, 1992 (No. 9 of 1992) of section 11 by the substitution, in paragraph (f), of "2.8 per cent." for "2.5 per cent." (inserted by the Act of 1993).

(3) THAT the rate of flat-rate addition to prices of agricultural produce or agricultural services supplied by unregistered farmers be increased from 2.5 per cent. to 2.8 per cent., and that, accordingly, section 12A (inserted by the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978)) of the Principal Act be amended by the substitution in subsection (1) of "2.8 per cent." for "2.5 per cent." (inserted by the Act of 1993).

(4) THAT this Resolution shall have effect as on and from the 1st day of March, 1996.

(5) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This resolution deals with farmers' flat rate refund scheme and provides for an increase from 2.5 per cent to 2.8 per cent in the farmers' flat rate refund scheme together with a similar change in the VAT rate on livestock. These changes will have effect on and from 1 March 1996. The reason for these changes in that most farmers are not registered for value-added tax and under this provision they can get refunds for the value-added tax they have paid in respect of inputs that are subject to VAT — the main inputs being fuel, vehicles, machinery and certain services. The value of VAT refunds to farmers will be £6.3 million in 1996 and £9 million in a full year.

Mr. B. Ahern

I intend to be brief. Financial Resolution No. 6 on value-added tax is the standard provision that has been used for a number of years and can work one way or the other for farmers. In this instance it is a plus for farmers. Let me repeat that the reference to value-added tax for farmers was the only reference to farmers in the entire Budget Statement and if this had not been a necessary provision, this reference to farmers would not have been included.

The stamp duty on ATM cards has not been amended since I introduced it in 1992. In 1988 the then Minister for Finance, Deputy MacSharry, brought in a resolution on stamp duty on ATM cards that was subsequently withdrawn. Considering the amount of money involved, will it not open up a great deal of argument? As the Minister who brought in the Payment of Wages Act, 1991, to try to assist the economy to move to a cashless society, I am not sure if this measure will be of much benefit. I recall the argument that such a move caused in 1998 — I am sure the Minister's officials will confirm the great storm among students and others caused by the proposed increase in stamp duty.

We intend to vote on Financial Resolution No. 5 but have no objection to Financial Resolution No. 6.

Mr. R. Bruton

There were other issues relating to farmers dealt with in the budget, specifically the provision on farm leases. Of course, farmers will benefit significantly from the capital acquisition tax provisions which provide additional relief — an increase to 75 per cent from 50 per cent — where a farm or business is being handed on to the next generation.

Farmers will benefit significantly from the increase in the refund of VAT. The Deputy knows from experience that the refund scheme is based on an assessment by the Revenue of the inputs used by farmers relative to the output produced which shows clearly that farmers' increasing mechanisation in recent times and other changes have this brought about.

The Deputy makes the point that the increased stamp duty on ATM cards could militate against cashless transactions. However, in mitigation of that, it is important to bear in mind that it will be a single charge and will not apply to the number of transactions. For that reason I think it will not discourage the use of cash free methods of payment.

Mr. T. Kitt

The increase in stamp duty on ATM cards will yield £1.7 million in 1996. Surely this is a regressive step in the light of the move from cash transactions which the Government and Members are trying to encourage for security reasons? I find it difficult to understand how the Government can stand over this measure which is sending the wrong message to the public. We should be encouraging the public to use the ATM system. The increase in the once off charge will send the wrong message, to students in particular. There is evidence of crime where cash is involved. Will the Minister defend this regressive step which is not in line with what the business community has been saying about the use of ATM cards?

Mr. E. O'Keeffe

This budget is a non-event for the farming community and no matter what cosmetics the Minister for Enterprise and Employment uses to colour it, his party has totally disowned the farming community; there is not a single worthwhile relief for farmers in their daily operations at farm level. We are well aware of the major problems facing the beef industry but nothing has been done to alleviate that problem. There will be a real crisis in the short-term if the Minister does not come to the rescue. It is not good to walk out of meetings in Brussels because that gets up the backs of the Commissioners and they are not interested.

The farming community has been the backbone of the Fine Gael Party and they feel they have been let down by that party. I appeal to the Minister and his colleagues to remedy this. It is about time something was done. The Minister did not touch on capital allowances in the income tax area. The VAT increase of 0.3 per cent is an insult and it was obvious today that some of the Minister's farming colleagues were disgruntled. I could see it in their faces that they were upset. The Minister for Agriculture, Food and Forestry was a lonely man on the Government benches. He was totally isolated by members of Cabinet. This is what the Minister is doing to Irish agriculture. I appeal to the Government to do more than the measures contained in the budget.

Mr. R. Bruton

I note Deputy Kitt's comments on the ATM charge. However, as the Leader of the Opposition pointed out, this charge was introduced by a Fianna Fáil Administration in 1992. It is not a new charge. It is important to bear in mind the huge increase in the number of transactions through the ATM system — from 44 million in 1991 to 74 million in 1994.

As Deputy Kitt is aware, the banks charge up to 20p for each transaction and they are generating significant sums of revenue from the ATM system. Against that background, the Exchequer maintaining a contribution from these financial transactions is in line with existing practice, such as a 7p charge on each cheque and charges on credit cards. It is modest in comparison to those charges.

Deputy O'Keeffe returned to the farming issue. However, the solid fiscal approach adopted by the Government in the budget will be welcomed by the farming community.

Mr. E. O'Keeffe

Who is the Minister codding?

Mr. R. Bruton

Farmers depend on low interest rates for their investments and the budget will maintain fiscal stability and encourage continued low interest rates.

Mr. E. O'Keeffe

Another Bill will be required next year.

Mr. R. Bruton

Farmers' incomes have increased substantially. In recent years, the income tax yield in respect of farmers has increased from £48 million in 1992 to £70 million in 1995. Significant earnings are being made in the farming community at present and they are enjoying the fruits of the solid economic progress made in the last year and earlier. Against that background, the farming community will welcome the VAT change which gives them a significant rebate in respect of VAT payments. It will be an incentive for them to continue to invest. This is evident from their confidence in investments.

Mr. E. O'Keeffe

Ask any beef farmer what he thinks.

Question put and declared carried.