I move amendment No. 74:
In page 98, paragraph (a), line 41, to delete "1AA" and substitute "17(1AA)".
This is a drafting amendment.
SECTION 82.
Amendment agreed to.
Question proposed: "That section 82, as amended, stand part of the Bill."
Something has been brought to my attention in relation to section 82, which I doubt was the Minister's or his official's intention when drafting it. It relates to hire purchase and the question of capital allowances on hire purchase vehicles. Until now if a person bought a lorry on hire purchase, he was allowed to claim the hire purchase interest over the period. The person owned the asset from day one and it was included in the balance sheet. He claimed it in the capital allowances schedule and got the normal depreciation allowance. The depreciation allowance has been changed over the years, which I welcome.
I understand that as a result of a change in this year's Finance Bill, which I do not believe was intentional, if a person buys equipment for £40,000 to be repaid over 40 months and if he has it for eight months in the first year, he will only be regarded as owning an asset worth £8,000 and would get the depreciation allowance on that. The next year he will get the depreciation allowance on 12 months ownership. That is according to information given to me by a tax adviser. I doubt if that is the intention of the section. Perhaps the Minister and his officials will consider this matter, which was brought to my attention in the past week.
I am informed that it is not directly relevant to this section. We have taken a note of the matter and it will be clarified.
It may be raised by some of the professional bodies. It is a side effect which was not intended and it relates to hire purchase. If a practice document was issued by the Revenue Commissioners, it would get over the problem without the need to table amendments.
We will come back to the Deputy.
Question put and agreed to.
Sections 83 to 88, inclusive, agreed to.
Chairman
Section 89 is the final section and I request that the committee, for procedural purposes, agrees to postpone discussing it until we deal with the remaining amendments. Is that agreed? Agreed.
NEW SECTION.
I move amendment No. 75:
In page 101, before section 90, but in Part III, to insert the following new section:
"90.mdash;Claims for refund of value added tax in respect of inland waterways rescue service equipment shall be allowed by the Revenue Commissioners on the same basis as provided for in respect of services of rescue or assistance at sea under SI 192 of 1985.".
Deputy O'Rourke brought this matter to my attention as a result of representations and she will speak to the amendment.
This amendment refers to VAT refunds on rescue service equipment and involves SI 192 of 1985. I am speaking on behalf of a sub-aqua group in Athlone but I am sure there are other such groups throughout the country which operate in inland waterways and provide a valuable service, on a voluntary basis, in recovering the bodies of people who drowned. The group on whose behalf I am speaking spent £105,000, most of which was raised voluntarily and through funding from the national lottery.
When this provision was put into place in 1985, this kind of work was not ongoing to a large extent. In its modern manifestation, the rescue service is quite new. We are seeking to include the VAT refund on rescue service equipment under this heading.
It has been brought to my attention that, in respect of services of rescue at sea under SI 192 of 1985, claims for VAT are allowed. Deputy O'Rourke is requesting that the same consistency should extend throughout the code. The case she raised is legitimate.
It is a reasonable and consistent case but I am not in a position to comply with it. This matter is covered by European Union VAT legislation. The amendment would have the effect of extending zero rating. She is correct in stating the current VAT regime excludes sea rescue but that is not the case for inland water rescue. We cannot unilaterally change our VAT law except within certain defined parameters. Any changes we may wish to make are subject to clearance from the Commission in the first instance. While I am sympathetic to the proposal because I also received representations from the sub-aqua group in question, I am not in a position to take action.
Will the Minister's officials institute consultations with the Commission, consequent upon his statement?
I have no objection to doing so but, in normal circumstances, the Commission is vehemently opposed to any extension of zero rating. The view is that there are enough anomalies in that rating and the Commission is attempting to reduce the number of zero rated items and commodities. That is a principled argument by the Commission and tends to automatically trigger a negative response.
Is it true that if a sub-aqua based in County Galway had equipment for use in Galway Bay it would be zero rated but would lose that rating if the equipment was moved to Lough Corrib?
Or Lough Rea.
Should the group to which Deputy O'Rourke referred not describe itself as a sea and inland water rescue service?
Athlone could not possibly be described as being near the sea.
It could if it was a seaside resort.
I understand the point of principle to which the Minister referred. A person drowned at sea or in fresh water can only be described as having drowned. I am concerned about this matter because the group in question does very important voluntary work in seeking to find people's loved ones who drowned at sea or in fresh water. Is Europe so blind that it would not take on board a case referred to it by a domestic Government which sees the right of that case? Surely the Minister can penetrate the daftness of Europe?
In deference to the Deputy's commitment and our previous working relationship I will raise the matter formally with the EU.
The Minister may be aware that much of the development relating to the tourism projects involves inland waterways. This problem will, therefore, heighten rather than dissipate. The need for tourism project developments is increasing. If investment is to be made in inland waterways, the corresponding rescue services must be put in place.
This is a serious matter. I will ask the Revenue Commissioners to discuss the matter with the groups involved to see if a way can be found to provide alleviation. Failing this I will raise the matter with the EU. The moment this is done, however, payment of VAT on kidney machines in local hospitals, etc., enters the frame. The problem cannot be solved in isolation to the consequential potential knock-on effects elsewhere. There is clearly a contradiction that rescue services at sea are VAT-free while those in inland waterways are not. On that narrow basis we will attempt to construct a platform to resolve the problem.
Amendment, by leave, withdrawn.
NEW SECTION.
I move amendment No. 76:
In page 101, before section 90, but in Part III, to insert the following new section:
"90.—The liability to VAT in respect of green fees introduced by the Finance Act, 1995 is hereby repealed.".
This matter was discussed during the debate on last year's Finance Bill. The Minister was open to suggestion in this regard but his attempted action to level the playing pitch has caused him considerable grief. I must declare a vested interest as I am the current captain of the Oireachtas Golfing Society, of which Deputies McCormack and Cullen are members. The Minister is invited to join and attend our outing in August.
Chairman
Are there lady members?
There are no lady members playing at present, but there was one in the past.
The ladies have more sense.
Some years ago, on foot of an EU directive, the then Minister for Finance, Deputy Bertie Ahern, had to introduce an amendment to the VAT Acts to bring VAT on green fees of commercial courses into the VAT net. There was considerable lobbying on behalf of the commercial golf courses who felt it was unfair because private golf courses were not obliged to charge VAT. Arising from that lobbying process, the Minister for Finance introduced an amendment to level the playing pitch. The basis of this was that members' golf courses with green fees in excess of £20,000 per annum would have to register for VAT.
There has been considerable lobbying by members of the Golfing Union of Ireland to Deputies of all parties. The grief of Deputies who play golf has been considerably deeper than that experienced by non-playing Members of the Oireachtas. The amendment seeks to repeal the relevant section of last year's Finance Act.
I am not certain how the Minister can use the VAT Act to get around this problem but golf attracts many tourists. We have sold Ireland as a location for golfing tours and are competing mainly with Scotland. Last year's figures show a colossal improvement in the number of golfers coming to Ireland and we hope eventually to sell Ireland as the place in Europe to play golf. It is of considerable benefit to the economy.
For those reasons and many others to be advanced by Deputy Cullen, I propose acceptance of the amendment. Deputy McDowell does not play golf either so he is not so disposed.
This argument has acquired a regular place in the discussion on the Finance Bill. It is a real issue. This weekend about 560 teams from abroad are in the south-east due to the ingenuity of people in Dunmore East and Tramore. I wonder how the operators can make a profit when one takes into account what they pay the golf courses, the hoteliers and so forth. However, it brings a tremendous amount of activity into the local economies at this time of the year.
Operations have raised this matter with me again because the imposition of VAT is disproportionate in the cost of the overall package. It makes a nonsense of what they are trying to do. Many oak trees grow from little acorns and I have consistently pointed out that I have no objection to this provision being imposed further down the road. However, at present there are too many embryonic golf courses under pressure. The imposition of this cost has come at too early a stage in their development.
I accept the argument about zero VAT rating and so forth but could the Minister not drop the level of VAT across the board to about 5 per cent? That would be a way of balancing the European requirements with meeting some of the concerns of the golf courses. That is what I sought from the Minister previously.
The golf clubs in Financial trouble are the privately owned ones. They were already paying VAT and to balance the market the VAT requirement was introduced on members' golf clubs as well. In the case of ordinary members' clubs, the first £20,000 in green fees is exempt from VAT. Is that right?
If the green fees do not exceed £20,000 the club does not have to register, which is a different matter. It is not that the first £20,000 is exempt.
I will have to clarify that. I thought the first £20,000 in green fees was exempt.
No.
Perhaps that is the way they are applying it in Galway.
Members' clubs are constantly improving their clubhouses and course facilities. Can they reclaim the VAT charged on the excess of £20,000 in green fees for the VAT they pay on expenditure during that year?
I will deal with Deputy McCormack's question before dealing with the general philosophical angst surrounding golf clubs. If a club's turnover is £20,000 or less it is exempt from VAT but if turnover is £21,000 the club pays VAT on the entire £21,000.
That is bad news.
Let us put this in context because I am aware that Deputies are under enormous pressure. The Golfing Union of Ireland has had this item discussed at virtually every meeting and AGM. I have written more letters in response to representations on this issue than on any other issue since I became Minister for Finance.
The Minister must take up golf.
I have no intention of taking up golf. A number of people got involved in the commercial development of golf courses, which we welcome. In some cases they received financial assistance in the form of lottery grants. The golf course in Connemara — I take my holidays there but not on the golf course — received lottery funding and has been a major boon to the consolidation of that area. There is no doubt that golf courses are a proven instrument for tourism infrastructural development. However, since that was a commercial undertaking from day one, VAT was levied on the services charged by the commercial developers.
That was a members' club.
Ballyconneelly?
Ballyconneelly is a members' club. Where commercial clubs are in the business and charge green fees, they are obliged under law to charge VAT. They have raised the issue with the Revenue Commissioners but this is not a revenue generating measure. I know from reports of certain annual general meetings of golf clubs that this is seen as a miserable, spoilsport attempt to tax one of the few environmentally friendly pleasures that people have and it is being presented in that light.
This is not a revenue generating measure. We are legally protecting ourselves from a challenge which, had we not taken this action, could have left us open to a considerable charge and we would have to generate the money to pay for it. In many cases the traditional golf club was registered for VAT in respect of its bar and related activities but the golf course proper was not registered for VAT. All of its inputs, most of which have a VAT charge, were simply left dormant and they were not able to reclaim the VAT. However, with a dual VAT income they are now in a position to get some relief because they have inputs to offset against it. I have suggested to such clubs that they should properly constitute themselves from a commercial point of view and register for VAT so they can get some relief. Ongoing maintenance and repair work have VAT charges associated with them.
Deputy Cullen suggested that we reduce it to 5 per cent. If we did so it would be very difficult to withstand pressure from groups such as the newspaper industry, which objected last year, restaurants, hotels and the confectionery trade. If all such groups benefited from such a reduction the cost in revenue foregone would be about £300 million.
All in order to play golf.
I could not have put it more succinctly. One of the reasons why more than 500 people are playing golf in the sunny south-east this weekend is that if they played in Scotland they would pay a 17.5 per cent green fees charge. If they were played in France the charge would be 20.6 per cent, in Spain 16 per cent and in Germany 15 per cent. All other things being equal, the VAT rate on green fees is still lower and that is why more and more players will come here.
We had this debate last year and I appreciate the Minister's difficulties. When VAT was introduced on green fees income for commercial golf courses, one of the commercial golf courses in County Kildare, owned by a former secondary school colleague of mine, decided to ban all Oireachtas Members from playing on his course. I was the most obvious Member in the area and I was a Minister at the time. I also played golf and I was banned from playing on this golf course.
The equal status Bill will protect the Deputy.
The owner received headline coverage mainly because he banned me from playing. There were no hard feelings, of course, and he lifted the ban later. The commercial golf courses later appreciated the Minister's action in levelling the playing pitch. I appreciate the dilemma because it was not a revenue generating measure. However, now all members of golf courses are upset and I doubt that this problem will go away.
If a golf club generates £100,000 in green fees as a result of promoting their club and keeping it open, sometimes it will be to the detriment of members.
The Revenue will receive a miserable 12.5 per cent.
Perhaps we should give grants of £10,000 or £12,000 a year to those clubs.
Deputy McCreevy and Deputy Cullen are known never to take more than three shots at any hole and they should claim to be exempt under the pitch and putt rule.
Some £11 million of Structural Funds have been given to golf courses. VAT at 12.5 per cent on this amounts to a lot of money.
The vast bulk of that money has been paid to private clubs.
Not necessarily.
From my local knowledge I think this is so.
I agree with Deputy McCormack. The payoff to the economy has amounted to multiples of this amount. Ireland now has a reputation as a golfing paradise.
Members of various golf clubs feel we are rapaciously raiding an innocent sport and giving nothing in return.
Chairman
Is the amendment being pressed?
Yes.
Chairman
I am putting the question: "That the amendment be made".
Question put.
Chairman
I think the question is lost. Would the Members wishing to have their dissent from this decision recorded in the official report of the proceedings of the committee please raise their hands?
Deputies Cullen, McCreevy, O’Hanlon and O’Rourke dissented.
Amendment declared lost.
NEW SECTION.
I move amendment No. 77:
In page 101, before section 90, but in Part III, to insert the following new section:
"90.-Where the developer is not VAT registered he shall be entitled to a refund of VAT paid to his contractors in respect of all works in and about the construction, maintenance and refurbishment of space for letting to enterprise and light industrial tenants.".
This amendment is an attempt to encourage people to provide advance factory space to industrial tenants. For many years the IDA has effectively stopped building advance factories. Last year we put forward a similar amendment to provide for some concession for individuals who would do this work themselves.
I support this amendment. Deputy McCreevy and I spoke on a similar amendment last year. At that stage the Minister had recently been Minister for Enterprise and Employment and he was interested in this proposal. As a result of that encouragement we decided to submit it again this year. The notion of defunct or never used factories which were built in advance is incorrect. This amendment would be cost effective because it would encourage incoming industries to an area if there could be liaison between the IDA, potential building contractors and the incoming firm. The builder would receive a refund of VAT if he constructed, refurbished and maintained a space for letting to enterprise and light industrial tenants. This would be an inducement to employment. Democratic Left were keen on compelling industries to set up in areas of high unemployment. I had reservations about this because I think it would ghettoise areas. However, the proposal was not contained in the budget. This amendment is reasonable and warrants a response.
While I am sympathetic to the thrust of the amendment, I oppose it because I do not think we should encourage developers not to be registered for VAT. The amendment proposes that where developers are not VAT registered, they shall be entitled to refunds of VAT.
That is a typing error.
Yes. How could a developer be entitled to a refund of VAT if he is not registered?
Amendment, by leave, withdrawn.
Section 90 agreed to.