JOINT COMMITTEE ON FINANCE AND THE PUBLIC SERVICE díospóireacht -
Wednesday, 11 Jan 2006

Scrutiny of EU Proposals.

Chairman

The next item on the agenda is documents referred by the sub-committee on EU scrutiny. A few items submitted were not dealt with in 2005. I will go through them in chronological order.

Document No. 334 is an amended proposal for a Council directive regarding the place of supply of services. It was referred to us for further scrutiny. The draft general budget of the European Union for 2006 has been referred to us for further scrutiny. A Green Paper on the enhancement of the EU framework for investment funds has been referred for information and consideration. A Green Paper on mortgage credit in the EU has been referred for information and consideration. The issue of passenger car related taxes was referred to us on 27 October, as mentioned by the Senator. On 2 September a proposal on improving the portability of supplementary pension rights was referred for further scrutiny. Finally, the White Paper on Financial Services Policy 2005-2010 was referred to us for scrutiny.

Seven or eight items have been referred to us for scrutiny. We can just note the written correspondence we receive or we can decide to invite officials to appear before the committee. Members may have a preference to deal with one or two proposals initially.

Deputy C. Murphy

Some of these were referred to the committee in September and October. Are replies required by specific deadlines?

Chairman

We received a letter dated 10 January from the sub-committee. It has only just come to hand. The first item I mentioned regarding the supply of services has not been concluded and a meeting will be held on 17 January in Brussels. There is a good chance that the Austrian Presidency might adopt it in the first half of the year. On the next item, the budget for 2006 has been agreed by the European Parliament.

Senator O’Toole

Could the Chairman clarify the position?

Chairman

Do members of the committee have a copy of the letter from the sub-committee? It is No. 249. This will not take long. The document is only one page long.

Senator O’Toole

Does it not refer to the supply of services?

Chairman

Yes.

Senator O’Toole

Is that not the most crucial and controversial directive?

Chairman

Yes. I will give the Senator the note. The letter says that this is not yet concluded. Deputy Catherine Murphy asked if it was too late to consider it. The answer is contained in this letter. The question the Senator is now asking has been on the table since we returned in the new year and we received a response last night. That proposal has not been concluded. A meeting will take place on 17 January in Brussels. The Department does not expect it to be agreed at this meeting and may be better placed after the meeting to advise on how it is likely to proceed. There is a good chance that it will be adopted by the Austrian Presidency between January and June 2006. That is the current position and we have not missed the boat in this regard. We need to examine that proposal in respect of the place of supply of services.

Senator O’Toole

I am reading the section entitled "implications for Ireland". Is this the same directive, which has been so controversial in recent months, concerning the impact on the supply of services to Ireland from companies based in other EU countries?

Chairman

I expect so.

Senator O’Toole

I do not know enough about this matter and I need to be careful about what I say. I feel that implications for Ireland are very much downplayed. This looks very much like an argument in favour of it. Workers and companies throughout Ireland are seriously concerned about this proposal.

Deputy N. O’Keeffe

I agree with the Senator on this matter. We should call in ICTU and the Minister of State with responsibility for Europe, Deputy Treacy, because it is relevant to his area, to discuss the matter further. I understand that the unions have met the parties. I attended one such meeting. This brings the country of origin for different services into it, whereby the country itself cannot be the country of origin; it is Europe, rather than the country of origin. It is pretty far-reaching European legislation. People here would be interested in it.

Chairman

While I will not read it all, the information note on the matter states that the European Commission has presented proposals for a directive to change the place of supply rules governing VAT on cross-border services. The proposal would, in general, shift the pace of taxation from the member state where the supplier is established to the member state where the customer is located. It relates to where the taxation is accounted for and in which country the VAT is levied.

Senator O’Toole

The document does not outline its impact on competitiveness or development. I understood those information notes were simply to give us the arguments for and against. This seems like a straightforward Government——

Chairman

A meeting is scheduled for 17 January at which, I am sure, officials from the Department of Finance will represent the Government. We should ask that a report be supplied to the committee immediately after the meeting. We will write to the Department now asking for such a report. We can then invite whomever we wish. A meeting is scheduled for 17 January.

Deputy N. O’Keeffe

At what time will it take place?

Chairman

I do not know. It states that it will take place on 17 January.

Deputy Ó Caoláin

A number of matters in this information note need expansion and explanation. What are the practical implications of a proposal that suggests a change in the VAT treatment of restaurant and catering services, which are now also to be taxed "where they are physically carried out rather than applying the VAT rules of the member state of the supplier as is currently the case"? While it is all very well to present this to us in documentary format, we need to be able to translate that into the real effect and understand the impact it will have. What effect will it have on the consumer here? What is the net effect for the Exchequer? Serious questions must be answered.

Another section states that services supplied electronically from Ireland to consumers in other member states will benefit from the generally lower VAT rates applying in these member states. What effect will this have on the Exchequer? Has the Department of Finance carried out an assessment of the financial impact such changes would have on VAT returns? What are the implications, if any, for cross-Border trade in Ireland? I live on the Border. What will be the impact on the island of Ireland given that two different economies operate on the island? What will be the implications for business in the Border counties? All these matters need to be properly explored. I have no difficulty in putting up my hand and saying that I do not have access to the expertise necessary to carry out a fully and proper evaluation of what is entailed in these measures. It would be appropriate to get that expert analysis and assessment and to have the relevant officials make a presentation to the committee so that we can be better informed and thereby make better judgments.

Chairman

Our next meeting on 18 January will deal with endowment mortgages. I would see no issue with scheduling that topic for the following meeting because it will be very current after the meeting next week. We should write and invite the officials to attend at the meeting after the one on 18 January.

Deputy Ó Caoláin

Can we be specific on some of the concerns expressed? We should ask what information they can offer, rather than having them come here and going off again. Let them hear what we have already said.

Chairman

In our letter of invitation, we will specifically refer to the transcripts of today's meeting and this will outline what has been said.

Deputy Ó Caoláin

That is fine.

Senator O’Toole

I would like to refer to a specific example of what I have in mind, from a business point of view. If a transport business in the North establishes a company in the South for the purposes of buying fuel, what would be the VAT implications for the company and the jurisdictions in question? Like Deputy Ó Caoláin, I do not understand the relevant, real and practical issues in this regard. Deputy Ned O'Keeffe asked whether this will lead in some way to the displacement of workers.

Deputy C. Murphy

It seems that this is an item on the agenda in its own right. There is backlog of documents to be dealt with.

Chairman

Yes.

Deputy C. Murphy

I wonder whether this is the best way to scrutinise important EU issues. We know that timing is important when one is making an input into something. A document before the committee, dated 20 July 2005, states that a consultation process was to take place over the following months. Several months have passed since the document, which was referred to the committee in September, was published. I appreciate that the issue of "EU directives" forms a nice and neat item on the agenda, but I wonder about the effectiveness of the committee's approach. Perhaps we should consider the directives in a sequential manner, as we can make an impact on a particular issue. I do not believe the vast majority of EU directives will be of serious concern to us, but it is likely to be of serious concern to us. I think it should be timed. I could be wrong about this — I have not been a member of the committee for very long. I think timing is extremely important. We should not put EU scrutiny on the agenda just three times a year. We should be looking at the specific proposals.

Chairman

I remind the Deputy that the committee considers its correspondence, including referrals from the EU scrutiny sub-committee, at every meeting. The sub-committee that deals with EU scrutiny refers many matters to the various Oireachtas committees. Every time this committee considered its most recent correspondence from the sub-committee during the autumn, it postponed its scrutiny of the relevant matters. Various EU directives were referred to the committee throughout the autumn months, but the committee, for its own reasons, decided on each occasion to postpone its consideration of the relevant topics, with the result that many EU directives need to be assessed at this stage. When matters are referred to the committee each month, it is possible for the members to decide to call the relevant officials to address them at a subsequent meeting if they feel it is necessary. As Deputy Murphy suggested, some directives can be noted and the committee can move on. In other cases, however, detailed discussions with officials are needed. Can we reach agreement on this matter? Two directives have caught my eye. I refer firstly to the directive on passenger car-related taxes.

Senator O’Toole

Was the committee given information on that directive?

Chairman

Yes, we were given information on COM (2005) 261.

Senator O’Toole

I cannot find the information in question.

Chairman

The staff of the joint committee circulated information on the directive in November.

Senator O’Toole

I did not realise that it was circulated before today. I am sorry.

Chairman

It was circulated on 8 November 2005.

Senator O’Toole

That is fine.

Chairman

If members are unable to locate that information, the clerk of the committee will provide them with additional copies of it. Do members agree that officials should be invited to the committee's next meeting after the meeting of 17 January?

Senator O’Toole

Yes.

Chairman

We will agree on that. I will refer to the directives mentioned in the letter that was distributed this morning. COM (2005) 547 relates to the EU budget for 2006, which has been agreed at this stage. I suggest that the committee should note the correspondence and move on because it will not be able to make any further input into the budgetary process. The next matter to be considered is the Green Paper on the Enhancement of the EU Framework for Investment Funds. I note that the deadline that was set for reactions was 15 November 2005. The deadline for comments on the Green Paper on Mortgage Credit in the EU was 30 November 2005. While the deadlines for submissions have passed, negotiations will be ongoing at official and governmental levels for some time to come. It will be possible to make an input during the negotiation process. I think the members of the committee should consider further and give specific attention to the proposed EU directive on passenger car-related taxes because the public will be interested in it. COM (2005) 507 has been proposed to try to improve the portability of supplementary pension rights. COM (2005) 629 relates to financial services policy measures being introduced from 2005. Perhaps we should deal with the first directive before moving on to the directive dealing with car passenger car-related taxes.

Senator O’Toole

I am happy with that. I would like to give another example of an issue relating to the portability of pension rights. An information note has been distributed to the members of the committee. The most common problem encountered by those of us who have to deal with issues of this nature relates to those who worked in the public service in the North before moving to the South, or vice versa. It can be difficult to co-ordinate the pension rights of such people. If it could be done properly, it would be very welcome. I note that this aspect of the matter is not even addressed in the information note. Does the directive have implications for public servants as well as workers in the private sector? I presume that it does. I have raised this issue to remind the committee that it needs more information to allow it to deal with issues of this nature. We do not have such information at present.

Chairman

Okay. It is clear that an information note has been distributed. The committee can ask the Department to furnish it with a more detailed written information note about the directive. I propose to invite officials to address the committee on the place of supply of services directive. The directive relating to the EU budget is history at this stage. The committee will invite officials to speak to it about the passenger car-related taxes directive. It should ask the Department to send it a specific information note on the current position in respect of four other directives.

Deputy Ó Caoláin

Can the Chairman refer specifically to the current and live directives to which he is referring?

Chairman

Yes. I will refer to the letter that was circulated earlier. COM (2005) 334 relates to the place of supply of services and VAT. The committee will ask some officials to speak about the directive.

COM (2005) 547 deals with the budget of the European Communities for 2006. As the budget has been finalised, the committee cannot do anything about it at this stage. I am working from the letter I have mentioned, which is a good summary of where we are at. It is history at this stage.

COM (2005) 314 relates to the Green Paper on the Enhancement of the EU Framework for Investment Funds. I suggest that the committee should seek an up-to-date briefing note from the Department on the directive.

COM (2005) 327 concerns the Green Paper on Mortgage Credit in the EU. I suggest that the committee should ask for a specific briefing note from the Department in that regard.

COM (2005) 261 is the directive on passenger car-related taxes. The committee will invite the relevant officials to speak to it about the directive.

COM (2005) 507 relates to the portability of supplementary pension rights. The committee will be given an information note on the directive.

COM (2005) 629 deals with the White Paper on Financial Services Policy 2005-2010. The committee's staff have asked the Department of Finance to give members an information note on that.

It is proposed to invite officials to address the committee about two directives. The directive relating to the EU budget is now history. We are asking for information notes in respect of four other directives. The notes may be sufficient in some cases, or they may prompt members to ask officials to attend a meeting of the committee.

Senator O’Toole

I understand that the committee has been given information notes about some of the directives. I am concerned that the notes in question do not refer to the issues about which I am concerned. I have mentioned my concerns about the directive dealing with the portability of pension rights. I do not understand from the note whether the directive will assist public service workers. I am explaining why I am concerned. The information note states that public sector schemes generally allow only transfers within the public sector network. I do not know whether that relates to the European public sector, or the public sector in the country where the person is working. The note also mentions that the directive requires that a capital sum be transferred when a person transfers outside the public sector network. What does that mean in the case of a public servant in Belfast who transfers to the Civil Service in Dublin?

Chairman

I do not know.

Senator O’Toole

I do not understand these things. I would like to get some further information.

Chairman

Would the Senator like the committee to invite officials to address the Department about the issue?

Senator O’Toole

I do not want to waste the officials' time. If they can provide such information in the form of an extended information note, I will be happy with that.

Chairman

Yes.

Senator O’Toole

I would like to know how it works.

Chairman

The committee will ask for detailed notes on four of the directives.

Senator O’Toole

Yes.

Chairman

If we are not happy with the detailed notes, we can call in the officials.

Senator O’Toole

I thank the Chairman.

Chairman

We will move on. I have summarised the current position in respect of EU scrutiny. Two discussions are being arranged for future meetings. We will review the detailed notes. Is there any other business?

Deputy N. O’Keeffe

Last year, the committee discussed the financial deregulation that took place in the Southern Hemisphere — in New Zealand and Australia — in the context of the ongoing deregulation of the financial system in Ireland. We were supposed to organise a meeting to examine financial services in Australia and New Zealand. Research was carried out by the committee into organising the event but an obstacle arose in that something was to take place there that would have upset our visit. I would like the committee to resurrect the plan and to reorganise the meeting. The issue is coming very much to the fore with the prospect of controversy in the Irish banking system. The type of competition in question is in place in Australia and New Zealand and we should take the opportunity to learn from the experience in those countries.

Chairman

We will include that with travel proposals on the agenda for the next meeting.

Deputy N. O’Keeffe

Can the Chairman organise to have some research carried out for the next meeting and to have a draft proposal prepared?

Chairman

We will have done as much as possible. There are two other travel proposals already on the agenda.

Deputy N. O’Keeffe

They relate to minor matters.

Chairman

It all takes time. It will be on the agenda.

Deputy N. O’Keeffe

I can examine the matter myself.

Chairman

Our next meeting will include a meeting with the financial regulator and Mr. Joe Meade, the Financial Services Ombudsman, to discuss the review of endowment mortgages.

The joint committee adjourned at 12.20 p.m. until 11 a.m. on Wednesday, 18 January 2006.