Dáil Éireann - Volume 329 - 21 July, 1981
Financial Resolutions, 1981 (Resumed): - Financial Resolution No. 7: Value-Added Tax.
Minister for Finance (Mr. Bruton) John Bruton
Minister for Finance (Mr. Bruton): I move:
(1) That in this Resolution “the Act of 1978” means the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978).
(2) That the Value-Added Tax Act, 1972 (No. 22 of 1972), be amended—
(a) in section 11—
(i) in subsection (1) (inserted by the Act of 1978), by the substitution in paragraph (a) of “15 per cent.” for “10 per cent.”,
 (ii) in subsection (2) (inserted by the Act of 1978), by the substitution in paragraph (b) of “20 per cent.” for “30 per cent.”, and
(iii) by the insertion after the said paragraph (b) of the following paragraph.
“(c) On the supply of agricultural services consisting of—
(i) field work, reaping, mowing, threshing, baling, harvesting, sowing and planting;
(ii) disinfecting and ensilage of agricultural products;
(iii) destruction of weeds and pests and dusting and spraying of crops and land;
(iv) lopping, tree felling and similar forestry services, and
(v) land drainage and reclamation,
tax shall be chargeable at the rate specified in subsection (1) (a) on 20 per cent. of the total amount on which tax is chargeable and at the rate of zero per cent. on the balance of the said total amount.”.
(b) in section 12A (1) (inserted by the Act of 1978), by the substitution of “1.5 per cent.” for “1 per cent.”.
(3) THAT this Resolution shall have effect as on and from the 1st day of September, 1981.
(4) 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).
The purpose of this resolution is to increase the 10 per cent VAT rate to 15 per cent with effect from 1 September  1981. It also provides for a reduction of 3 per cent in the effective rate of tax applied to agricultural services and for an appropriate adjustment in the agricultural flat rate VAT percentage in order to compensate farmers for the changes in the general rate increase on goods and services used for agricultural purposes. The yield from this proposal is estimated to be £28.2 million in 1981 and in a full year £188.5 million. The justification for this measure, which we have not great pleasure in proposing, is the justification for all the other tax measures in the budget. We were convinced that revenue had to be raised quickly to put this country and its finances on a solid footing. We recognise that this will have an effect on the cost of living but we have taken steps to compensate the weaker sections by, in the first instancee, providing a 5 per cent increase in the rates of old age pension and a 3 per cent increase in other social welfare benefits. In judging its effect on the cost of living this measure must be set beside measures such as the guarantee given by the Government not to allow certain basic foodstuffs to rise in price this year, regardless of whatever increases may occur in the normal course, by means of spending subsidies on those commodities. This measure in effect is an adjustment of the price system. Certain products will go up in price whereas certain basic foodstuffs will not go up or will be reduced from what they would otherwise be, relative to costs. That is a redistribution of the burden of inflation to the benefit of the weaker sections who spend a larger share of their incomes on food and clothes. This measure is only necessary because of the serious budgetary situation we face and it would not otherwise be introduced.
Mr. Colley Mr. Colley
Mr. Colley: What is the CPI effect?
Mr. Bruton Mr. Bruton
Mr. Bruton: The effect on the CPI, including the increase that this brings in the items which are subject to excise duty is 1.98 per cent. If one excludes the effect of the increase in VAT on the items which are subject to excise duty about which we  talked earlier, the net effect is substantially less — it is 0.745 per cent.
Mr. Gene Fitzgerald Mr. Gene Fitzgerald
Mr. Gene Fitzgerald: There is no justification for this penal imposition of a 50 per cent increase in the 10 per cent rate of VAT. It is probably the most penal imposition that this House has ever seen and the present situation does not justify it. It is pure political expediency and it means that the Government have decided to impose a brutal tax. The Minister talks about a 2 per cent increase in the CPI but that is a minor part of the inflationary impact of this imposition. It will also have an enormous impact on employment. The Government and those who vote with it will live to regret the day when this resolution was carried through the House because their constituents will bring it to their notice every day. If one of the parties opposite claims to be the guardian of the working man and woman, may God protect them from parties like that and thank God for the continued existence of Fianna Fáil. Before Deputies laugh too loudly, before those people who have now decided to support this insecure Government laugh too loudly, let me tell them what this 50 per cent affects, what types of goods, services and products. There are very few it does not affect. I said earlier today that for the most part it covers non-luxury or semiluxury items. Are the Government saying that the people are not entitled to avail of these essential commodities? They may not be clothing or essential foodstuffs but they are nonetheless important and essential in most homes, farms and businesses because they are all affected.
Let me mention a few. Fertilisers are included as is machinery, plant and equipment of a kind commonly used by farmers and fishermen. How does the Minister for Agriculture feel about that? Also included are seeds, trees, plants and so on, as are printed books and booklets. Also included are schoolbooks, yes, 50 per cent increase in the VAT on school books. I hope Deputy Kemmy's constituents will cheer him loudly. Also included are newspapers and periodicals. And we heard the cries from those  benches when in opposition, “Take VAT from schoolbooks. Take VAT from newspapers.” Where is the sincerity or honesty now? Also included are materials commonly used in the construction industry. It covers every single item of construction from the gravel, the sand, the block, the brick, whatever may be produced in all our constituencies; they are all covered. There are those who will worry about that also because it will affect the purchase of blocks and bricks for local authority work and I am sure people like Deputy Kemmy would have an interest in that or would pretend to.
Also included is all office equipment and food and drink for human consumption. I remember, when my predecessor in the Department of Finance introduced impositions on table waters here one and a half years or more ago, the screams that arose from the Opposition benches. They are now taxing the ordinary mineral, table water, ice cream, sweets and the lollipops children eat. They are all covered by this imposition and are the people across saying they are not essential? Of course they are to any child in any community and let us hope they will long be available to them. Also included are medicines for use other than oral medicines. I could continue. Our leader has referred already to the imposition on cars. I have a particular interest in them because of the city that I and others on that side represent in which there is the Ford Motor Company employing some 1,100 people.
I entirely respect the honesty and ability of the Revenue Commissioners. I have no reason whatsoever to doubt any of the figures they present for a budget, not like some people over there when they were on this side of the House. But one thing that not even they can estimate — when there are four penal impositions on motorists — with their wisdom and ability is the number of cars that will be sold in the remainder of this year. I believe, and the Minister said himself, that the car industry had become buoyant, so it had, a great boon to our city, to Cork. But if it begins to decline that Minister, that Government must take responsibility and I fear today's impositions  will do that. Tyres and most other car accessories are also included. In other words, the motorist is not finished with the costs enumerated by us but additionally has to meet the increased cost of accessories and so on.
I believe this is the greatest, most penal imposition ever imposed by a Minister for Finance. He said it will yield £188 million, almost £200 million in a full year. Perhaps we will be able to tease out that figure in greater detail later, obviously not this evening, when perhaps — if the Government are still in existence — the Finance Bill comes before the House. It seems to me to be a very hefty figure because of the downturn in activity it will occasion. All services are affected by this imposition. I could continue but I am conscious that the hour is late, that our deadline is close and that there are other speakers on this side of the House who want to contribute to this resolution.
Dr. Woods Dr. Woods
Dr. Woods: I should like to point out that it was very fortunate that the previous Minister for Finance, Deputy Gene Fitzgerald, removed VAT from equipment for the handicapped. This is particularly important now since this measure would have imposed a tremendous burden on the handicapped in this year were it not for his action. Of course the 10 per cent rate still applies to a wide range of medical apparatus which will affect the whole population, just as it will medicines, as Deputy Gene Fitzgerald has said, including dental, medical, surgical instruments, artificial teeth, splints, fracture equipment, wadding, gauze, bandages, all these commodities used because some 60 per cent of the total area covered by VAT is affected by this 10 per cent rate. Therefore it will have a devastating impact on the health services generally. However, I am glad to bring the attention of the House to the fact that the Minister's predecessor at least exempted the handicapped from this very severe imposition.
Mr. Colley Mr. Colley
Mr. Colley: This resolution represents, much more than any of the others before us, the most serious imposition being  made under this budget. I say that because, as the Minister himself indicated, we get some measure of its impact from the full year figure which he gave for next year of £188 million. Obviously it will hit very many items.
As I said in relation to an earlier matter, it is not just the imposition of the increased value-added tax, the 50 per cent increase in VAT, it is the mark-up on top of that and the overall effect on prices, inflation, on wage claims, on the cost of building and all other types of contracts which will work their way through in a way which I am afraid will cause a price explosion in our economy. The situation is bad enough at present but this is deliberate Government action with their eyes open which will result within, I would say at the outset, 12 months in an enormous price explosion for which the responsibility rests solely on the members of the Government and those who vote for these resolutions.
Mr. Sherlock Mr. Sherlock
Mr. Sherlock: When considering the question of imposing value-added tax it is rather surprising that the Minister did not realise that its imposition will mean that workers will pay tax now on every pound they earn. The worker needs every pound he earns. At this time when, as I pointed out when speaking the other evening, the situation obtains in which a tax on profits is a mere 7 per cent per £100, workers' tax is £17 per £100 of earnings, it shows quite clearly that insufficient consideration was given to alternative means of raising the finance needed.
Let me say this also that the Members in the Opposition benches do not convince me one bit by the manner in which they are now speaking, nor do they vindicate themselves, that they, when in office, considered this matter, because they also did the same to working people. They are now saying that this is an imposition on working class people, but if there was a shift of power tomorrow there would not be any change. As well as imposing this indirect taxation, which will be a terrible burden on the people, there is the cut in public expenditure of £170 million. I understand health services will be affected by this. I would like the Minister  to tell us that there are funds available for drugs, which is of benefit to those who have not full eligibility.
An Leas-Cheann Comhairle Jim Tunney
An Leas-Cheann Comhairle: I am sorry to interrupt the Deputy. The House has already decided that business would conclude at 10.30 p.m. Accordingly, the Chair is now required to put the question.
Mr. Sherlock Mr. Sherlock
Mr. Sherlock: I wish to abide by the ruling of the Chair but the long-winded speeches, which went on from 3.30 this afternoon, cutting across anybody else who wanted to make a contribution in those debates, is uncalled for.
Mr. Gene Fitzgerald Mr. Gene Fitzgerald
 Mr. Gene Fitzgerald: The Deputy is trying to justify his weak position.
Mr. Haughey Mr. Haughey
Mr. Haughey: I presume you will put the two remaining resolutions, Sir. We wish to vote on both of them.
An Leas-Cheann Comhairle Jim Tunney
An Leas-Cheann Comhairle: The Chair understands that the correct procedure is that we put Resolution No. 7 now and subsequently Resolution No. 8 must be moved, put and have another vote on it if necessary.
The Dáil divided: Tá, 81; Níl, 79.
Tellers: Tá, Deputies L'Estrange and Mervyn Taylor; Níl, Deputies Moore and Briscoe.
Question declared carried.
Dáil Éireann 329 Financial Resolutions, 1981 (Resumed): Financial Resolution No. 7: Value-Added Tax.