Thursday, 26 June 1975
Dáil Eireann Debate
(b) gas of a kind used for domestic or industrial heating or lighting, whether in gaseous or liquid form, but not including gas of a kind normally used for welding and cutting metals or gas sold as lighter fuel,
(ii) by the substitution, for paragraph (xxiii) of Part I of the Third Schedule, of the following paragraph: “(xxiii) fuel other than fuel of a kind specified in paragraph (xx) of the Second Schedule;”,
(vi) by the substitution, in section 8 (3) (a) (i), of “, (xv) and (xx) of the Second Schedule” for “and (xv) of the Second Schedule” (inserted by the Finance Act, 1973 (No. 19 of 1973)) and by the substitution of “and (xxii) of Part I of the Third Schedule” for “, (xxii) and (xxiii) of Part I of the Third Schedule”,
The resolution removes from the value-added tax by application of the zero rate the following items : clothing (including textile handkerchiefs and footwear); certain clothing and footwear materials and fuels, including electricity but not road fuels. The relief, which will take effect as and from Tuesday next, will have the effect of entirely removing the existing tax, 6.75, from the items affected. As a consequence the prices involved should be reduced as from 1st July for supplies made and paid for on or after that date. The cost to the Exchequer of granting these reliefs is £8.2 million in the current year and £27.2 million in a full year.
I should like to add, in reply to a question raised earlier, that registered sellers may continue to obtain a credit or refund in respect of any tax suffered by them on their purchase of taxable goods.
Mr. Colley: I should like to ask the Minister, in the light of the wellknown difficulties in the clothing and textile industries, whether he considers the removal of value-added tax may, in fact, increase imports of such goods?
Mr. R. Ryan: The Deputy and I  obviously share a concern that any increase in the demand for goods which may be generated by this reduction in price will not leak into imports. However, in the final analysis the decision as to whether or not Irish people buy Irish goods or foreign goods lies with each purchaser, but a tremendous responsibility lies on traders. It is for traders to decide whether or not their interests, and the interests of Ireland, lie with their purchasing goods manufactured by Irish people or purchasing from outside the country. I am sure there are many members, myself included, who have experienced difficulty themselves in endeavouring to buy in retail stores in this city items to which the Deputy refers like garments, textiles and footwear. Sometimes it is difficult to obtain goods manufactured in Ireland.
The principal factor in determining whether or not Irish goods are for sale or bought lies on us and not on any arrangements which governments may make. The Deputy is aware that there are constraints on us now by reason of EEC obligations which restrict the scope which we at one time had in relation to restrictions on imports. However, we have already raised with the EEC the steps which we propose to take to restrict the importation of footwear. There are special reasons why it would be possible to do it in respect of footwear which do not apply to the other items.
Mr. R. Ryan: Such registered retailers may apply for and obtain a credit or refund in respect of any tax suffered by them on the purchases of the goods in question, so they will not be at any loss because they cannot pass it on to the purchaser.
Dr. Gibbons: May I ask (1) what would this mean to the average family? (2) Can it be alleged by the EEC that the £12 employment premium will distort competition? And (3) how does the Minister propose to meet this grave deficit that has arisen in 1975 as a result of the two budgets?
Mr. R. Ryan: It would seem that some Deputies think the Minister for Finance is Santa Claus. He must not tax—because they have just voted against taxation; he must not borrow because they consider it improper to borrow; he must reflate the economy with fresh air.
Mr. R. Ryan: ——how they propose to do that. It is a trick that is not known to any economics expert or practitioner. On the question of how much it would mean for an individual family, it is clearly not possible to state what relief it might give to any family because family expenditures can vary considerably, but the consequence for the consumer price index of these reductions would be about 1 per cent.
Mr. J. Lynch: I wish to put one or two questions but before I do may I comment on the remark made by the Minister that we voted against taxation? We voted against this taxation for the two reasons I already gave but I would remind the Minister that  the last vote we had was the only vehicle for voting against the Minister's package and his failure to handle the whole situation. In a couple of minutes' time the General Resolution will be moved; that will be debated tomorrow and on Tuesday, as I understand it, and will be adjourned sine die. The first opportunity we shall have of voting on these specific measures the Minister proposes will be in the Finance Bill, I take it, which is due some time in the autumn. Therefore, we wanted to take the earliest opportunity to mark our disapproval and, indeed, our condemnation of the activities of the Government and the Minister.
Mr. J. Lynch: He also says in the same memorandum “A subsidy will be paid to producers of town gas”. He used the same words in his statement today “town gas”. It is more general in the Financial Resolution No. 2 where it describes it as “gas of a kind used for domestic or industrial heating or lighting whether in gaseous or liquid form.” Do I take it that includes bottled gas?
Mr. R. Ryan: No. The subsidy applies to town gas. VAT is being removed from bottled gas and piped gas. The items of fuel which will be relieved from VAT are fuels of all kinds used for domestic or industrial heating or lighting, including electricity, for example, coal, coke, turf, firewood, firelighters, heating oils, central heating oils, fuel oils other than those used in internal combustion engines, paraffin oil, piped gas and bottled gas.
Mr. Haughey: Does the subsidy on fares apply exclusively to CIE or is it the intention that it will be extended to other transport operators, and, if not, does this not mean that these private operators will be placed at a very serious disadvantage in relation to CIE?
Mr. R. Ryan: I would not say they will be placed at a serious disadvantage. CIE are providing many transport services which are really social services and are not commercial propositions. It is they who have to carry losses which the private sector would not carry. It is on that account they have to pass on to users of transport the losses which are suffered by them on the many social services which they provide by way of transport facilities in areas of small demand, and, therefore, it is for CIE alone that the subsidy will be provided.
Mr. R. Ryan: No, because the cost of such operations tend to be less than the cost which CIE must charge because CIE are providing many services which are uneconomic. Hitherto it has not been the practice to provide any subsidies for any of those private concerns, but for many years, in fact, decades now, subsidies have been provided for CIE.
Mr. Molloy: Could I ask the Minister to clarify further the statement that retailers who have paid VAT on goods purchased from wholesalers can apply for a rebate on the amount of VAT already paid? Does this apply to any goods upon which VAT has been paid, or is there any limitation on the period within which these goods could have been purchased——
Mr. Molloy: ——and what procedures would the Minister introduce to facilitate the claim for rebate? As the Minister may well appreciate, a shelf in a retail shop could have half of the goods on which VAT has already been paid and new stock coming in after July on which no tax would be payable and it does present a difficulty for retailers unless it is cleared up before July.
Mr. R. Ryan: No. I think very few people would consider that any difficulty is created for them when they apply for a refund of money which they have previously advanced. They have had previous experience of this when value-added tax was removed from food, and registered retailers are obliged to make and, in fact, do make, their bi-monthly returns and, in the process of making these returns, they will make their application for a credit or refund in respect of the tax paid by them on the goods.
Mr. Callanan: The Minister said he could not estimate what the cost of the £12 employment subsidy would  be. Would it not be rather small if the Minister gives £12 and someone on the dole is employed? Is it not the same as social welfare? I could not see it costing a great deal. It is taking it from social welfare, which is a good idea.
Mr. G. Fitzgerald: I assume that the Minister expects that the removal of VAT from clothing will help the home textile industry. The amazing thing is why the Minister did not do this long ago, and I hope it is not a matter now of being too late.
Mr. G. Fitzgerald: At the time a great many people were employed in the textile industry. We did not have mills closing all over the country. The Deputy may not have been aware of that. Are blankets and so on included under clothing?
Mr. R. Ryan: It includes ordinary items of clothing and footwear for humans, underwear as well as overwear, irrespective of the material from which it is made. It extends to protective clothing, sportswear and surgical clothing, elastic stockings and surgical boots, certain types of clothing accessories, such as belts, braces, textiles, handkerchiefs, but not paper  handkerchiefs, babies' napkins, sanitary wear, ties, scarves and headbands. The clothing and footwear materials which will qualify are synthetics, fabric, yarn and thread of the kind normally used in the manufacture of clothing, as well as elastic, tape, padding materials used in the manufacture of clothing, leather soles and uppers of the kind supplied for the manufacture and repair of footwear, and also soles, heels and insoles of any material.
Mr. G. Fitzgerald: In view of the fact that it is 19.5 per cent and we have blankets manufactured in the country competing with blankets brought over the Border illegally by travelling people and sold on every roadside, would the Minister not agree it would be desirable to encourage the creation of more jobs in industry by taking off this monstrous VAT charge on blankets?
Mr. R. Ryan: The Minister for Foreign Affairs has very correctly said that we cannot overnight reform the legacy of taxation left by Fianna Fáil. As far as illegal imports are concerned, the Revenue Commissioners have been very active indeed in policing illegal importations and bringing prosecutions.
Mr. R. Ryan: I would point out that value-added tax applies to items whether they are imported or not. I have already answered here in the last few weeks a question as to whether or not value-added tax was collected on items sold on the roadside and I assured the House the Revenue Commissioners endeavour, as best they can, to ensure that all engaged in the sale of goods pay the appropriate taxes.
Mr. G. Fitzgerald: In the light of that explanation would the Minister not now accept my request to include blankets in order to preserve jobs in the textile industry, an industry the Government have neglected for so long?
Mr. G. Fitzgerald: Will the Minister consider removing VAT from blankets or reducing it to a reasonable level for the reasons he has spelled out now as the reasons why he is in fact reducing VAT on textiles?
Mr. R. Ryan: The question at issue is whether or not the House agrees to the removal of the 6.5 per cent value-added tax from clothing, footwear and textile items previously subject to VAT. That is the point at issue. Perhaps Deputies opposite would indicate whether or not they agree with its removal.
Mr. G. Fitzgerald: When the Minister was removing VAT from clothing, why did he not also remove it from all items of clothing manufactured in this country, used and needed by the ordinary people to help, as he said, reduce the cost of living and preserve further jobs? Is he concerned now about ensuring that those industries too will be too far gone when he tries to come to their rescue?
Mr. R. Ryan: I find this very interesting. I will make a further study to find out why Fianna Fáil included blankets with animal clothing, bracelets, buckles, buttons, costume hire, costume jewellery, cufflinks, dolls' clothing, earrings, handbags, measuring tapes, necklaces, needles, paper patterns, rings, rugs, rug wools, sleeping bags, studs, towels, thimbles, umbrellas, watches and zip fasteners.
Mr. J. Lynch: I only asked that question because the Minister read out that list in a rather contemptuous fashion, as if he did not agree that blankets should be included with the other items. If he did not agree, why did he not remove it?
Mr. Dowling: A moment ago the Minister said he did not know the VAT chargeable on blankets. He indicated it was 6.75 per cent, when in fact it was 19.5 per cent. He referred to the items from which he removed VAT as wearing apparel and indicated that this was to reduce the cost of living. Is that so?
Mr. Dowling: The normal working woman who buys a coat for a child at £8 saves 56p. The Minister has removed VAT from mink coats. A woman buying a coat for £800 would save £56. For whom is he reducing the cost of living to the greatest degree?
Mr. R. Ryan: Footwear is relieved of VAT and that should help stimulate the demand. In my financial statement, I referred to another matter which is not relevant to the financial resolution before us, and that is that the Government have made an approach to the European Community for the purpose of restricting the importation of footwear.
Mr. Faulkner: That is not much consolation to the footwear industry. Is it a fact that what the Minister is doing here is reducing the already very low price of footwear coming in here from the low cost countries?
Mr. R. Ryan: I have already spoken about the purchase of Irish goods. It is open to anybody to refuse to purchase foreign goods, and that is exactly what anybody interested in employment in Ireland and the future of this country should do.
This country voted for membership of the EEC. We have to abide by their rules or face the consequences, which could mean a judgment against us in a European Court. Only in certain circumstances—and we are satisfied those circumstances now exist—can we make an approach to the EEC to make arrangements to regulate the flow of footwear into this country. This cannot be done unless certain conditions exist. We are satisfied that those conditions do exist and that is why the approach has been made.
Mr. Faulkner: Those conditions have existed for a considerable time and no move was made by the Minister for Industry and Commerce to do anything until we pushed him into it, and it is not done yet. From what I can see in this budget, it will not be done. Is the Minister aware that in my constituency, for example, there are hundreds of footwear workers unemployed? One industry has gone into liquidation. What help is there for these people to get employment?
Mr. J. Lynch: On a point of order and information. When Deputy Faulkner was speaking a few minutes ago, the Chair put it to him that he ought to ask a question? We are in Committee and Members are entitled to make submissions.
Acting Chairman: We are not actually in Committee. We appear to be in Committee, we are close to being in Committee but we are not in Committee. Members are allowed by the Chair to ask questions for elucidation.
Mr. J. Lynch: I can say from experience when I sat in the Minister's seat for some years that on budget resolutions observations were made in the form of short speeches by Members of the Opposition and, indeed, from the Government benches.
Acting Chairman: The Chair is very anxious to allow the House as much latitude as possible in elucidation of various points. I am sure the Minister is equally anxious to oblige them, so long as they stay within those  wide limits. I am here to protect the House and the Minister.
Mr. Faulkner: Might I point out to the Minister that only about a fortnight or three weeks ago we discussed a Private Members' Motion on the footwear industry. At that time, he did not appear to be able to do anything. What has happened in the meantime which created the situation where we can approach the EEC with some confidence?
Mr. R. Ryan: No, before the Deputy even thought of it. The Minister has been anxiously pursuing with the Commission the possibility of taking steps to protect the Irish market from improper imports. It is not an easy matter, and the evidence has to be obtained and presented and, as a result of further developments, a further approach has been made. As a consequence, it is open to us now to make the appropriate arrangements to regulate the importation of footwear in the interests of employment.
Mr. O'Malley: Is the Minister aware that in this House on the debate to which Deputy Faulkner referred, both the Minister for Industry and Commerce and his Parliamentary Secretary stated categorically that unless we declared a balance of payments crisis under Articles 108 and 109 there was nothing we could do to limit imports other than the surveillance measures introduced a fortnight ago? If that were true then, how is it untrue now, or is it the intention of the Government to declare a balance of payments crisis in addition to the various other crises declared today?
Acting Chairman: The Chair does not want to curtail the debate. Questions  are allowed for elucidation on the actual Financial Resolution. The Chair is not certain that the elucidation being sought at the moment strictly arises on this Resolution.
Mr. J. Lynch: May I respectfully suggest that we have two Resolutions here. We have a lot of matter in the budget and the only chance we will have of getting replies to questions from the Minister on other aspects of the budget outside the scope of these Resolutions is here and now.
Acting Chairman: The Chair takes note of that and would not like to curtail any form of elucidation or anything that would help Deputies. The Minister has dealt with that. Perhaps Deputy Burke wants elucidation on something else.
Mr. R. Ryan: I have been asked a question about what the Minister for Industry and Commerce said when he was speaking on this matter in this House in the past couple of weeks. Without having the Official Report before me I am not in a position to say whether he did or did not say a particular thing. As I have already said in reply to Deputy Faulkner, the process of collecting the necessary information on which to base a further approach to the Commission of necessity took some time. The information being now available which justifies an approach to the Commission under Article 135, the approach has been made and, on foot of that, action is now being taken.
Mr. Faulkner: Six months ago we pressed the Minister to deal with this matter on a Private Members' motion. In supplementary questions and answers since then we pressed him to move. He raced out to Brussels two days before the Private Members'  motion was discussed. We discussed it again very recently. He told us there was a very narrow confine to what he could do. As Deputy O'Malley said, according to the Minister, one of the few ways in which he could take action was under Articles 104 and 108 of the Treaty of Accession. This meant that the country could claim it had a balance of payments problem. Deputy O'Malley and I want to know whether there is a balance of payments problem now and if that is the reason why it is possible to go to Brussels and do something about it.
Mr. R. Ryan: As the Chair has pointed out to us, we have ranged far beyond the scope of the Financial Resolution before us. Once again I will say to the House that we are making the approach under Article 135. We now have the evidence which we are satisfied is sufficient to enable us to proceed in this way.
Mr. R. Ryan: Mere suspicion, mere anxiety, is not adequate evidence either in civil proceedings or legal proceedings or for the purpose of an application to the EEC. We have the evidence which shows that there has been a rise in the share which imports have on the home market. We also have the evidence of the closure of firms. We now have all the evidence necessary to proceed to regulate imports of footwear.
Mr. R. Ryan: We are supposed to be deciding whether we will remove VAT from several items including footwear for the purpose of generating demand. That is the issue which is now at stake, and not the issue which has been debated at great length.
Mr. R.P. Burke: With a sweep of the hand the Minister says we are removing VAT from various items for the purpose of cutting down prices and generating employment. The Minister deliberately excluded road fuels. One industry, together with the building industry and the footwear trade, which is having problems, is the motor trade. Last year the Minister introduced savage increases in the tax on road fuels. Would the Minister not consider that he should have given some relief to the already over-burdened section of the community, the motorists and the motor trade generally, to stimulate purchases and employment? He had that opportunity today but, as he did in relation to many other sections of the economy, he failed miserably. Would he not like to answer this question since he is sitting beside the Minister for Foreign Affairs who represents an area where one company had a massive sit-in, the Reg Armstrong organisation?
Mr. Cunningham: In regard to the textile industry and the footwear industry could I ask if the considerations or the constraints which the Minister  for Industry and Commerce mentioned have been surmounted? Is the removal of VAT from shoes and articles of clothing the only distance he has been permitted to go? Surely the imposition of duty on these articles would be a further step. Surely the removal of VAT from the sale of imported shoes and boots does not give home manufacturers any advantage. In other words, the concession of the removal of VAT will mean more purchases and a lowering of the cost of living, but that does not go to the root of the problem. Has the Minister sought the removal of any constraints other than VAT? If VAT was one of the constraints he mentioned, has the Minister for Industry and Commerce gone further? With what result? Do the Government propose later to introduce anti-dumping measures and duty measures on imports? Otherwise they are not differentiating between imported goods and home-produced goods, all of which will be free from VAT.
Mr. Cunningham: This Resolution provides for the removal of VAT. The Minister may not wish to answer all the questions I asked. Will VAT, which we are now dealing with in this Resolution, disappear from imported shoes, shirts and so on?
Mr. R. Ryan: Seventy per cent of clothing in the country is Irish made and if the Deputy and his colleagues who are criticising us would encourage people to buy Irish, nothing else need come into the country. We have the  capacity to supply the whole Irish market in all these commodities. In many cases the difficulty these firms are experiencing at the moment is attributable not merely to imports but to a slackening of demand on the home market for all goods. Removal of VAT should help to stimulate demand and, therefore, have a beneficial effect on the sale opportunities of Irish manufacturers. Where the Government have evidence of dumping they will not hesitate to act to prevent that dumping but Deputies opposite who encouraged the Irish people to vote for membership of the EEC should not now in Opposition pretend that there are no contraints. There are constraints and we are still in a position so far as clothing and textiles are concerned, of exporting more than we are importing. We are producing and selling more textiles and clothing on the Irish market than we are importing. We have a net advantage in these items. The situation in footwear is different and that is why it is open to us to take the action we are taking in that regard.
Mr. Colley: In view of the danger that the removal of VAT from clothing, textiles and footwear may stimulate imports, would the Minister say whether consideration was given to the categorisation of footwear or clothing or textiles to determine those categories in which there was a predominantly imported element for the purposes of assessing the categories from which VAT should be removed and those from which it should not?
Mr. R. Ryan: Either. The restrictions may apply in different ways but they are there. The EEC is a net exporter to the rest of the world and it is not in the interests of the EEC or of this country to have restrictions applied by third countries to our exports. The Government are taking  action in the case of footwear as it is possible by reason of circumstances that have arisen to take action in that area. Do the Deputies opposite agree that the best action that can be taken in this area is for Irish people to buy Irish?
Mr. Faulkner: Of course, we have said that on numerous occasions. Would the Minister agree that action could have been taken months ago on the same basis as he is speaking of now? We were told then it was not possible to take that action. It is quite some time since we had a higher import of footwear than exports.
Acting Chairman: That does not arise on the Financial Resolution. There will be ample opportunity for the Deputy later when he can speak with absolute relevance and at greater length and make this point if he wishes. I appeal to Deputies, now that they have made the points they wished to make, to remember that there is no good in flogging a dead horse.
Mr. Colley: Perhaps the length of my question was such that the Minister did not quite get the point. I asked was consideration given to categorisation. His reply referred to the inability of the Government to discriminate. The question is: was consideration given?
Mr. R. Ryan: The principal objective was to reduce the cost of living and that objective will be achieved as a result of the reduction in the consumer price index which will flow from the removal of VAT from the items contained in Financial Resolution No. 2. As regards categorisation, there are very serious practical difficulties in refining it in a way which would admit items of Irish manufacture only and exclude all others.
Mr. C. Murphy: The Minister said that the removal of VAT from certain items and the subsidies introduced would bring about a reduction in the cost of living. Bearing in mind that a subsidy is being provided as well as a reduction in VAT in the case of town gas, did the Minister take into consideration a possible subsidy on bottled gas which is used for domestic purposes? If so, why was this not favourably considered as this would be a definite way of reducing the cost of living for a huge section of the community?
Mr. C. Murphy: That is not the answer to the question I asked. The Minister did state that VAT is coming off bottled gas and gas bills—I take it. There will also be a subsidy of 12½ per cent for town gas. Was consideration given to providing a subsidy on bottled gas?
Mr. R. Ryan: In selecting items for subsidy and for removal of VAT we were concerned to ensure that any subsidies given or any VAT relief given would be passed on to the consumer. Obviously, when we were concerned to reduce the consumer price index there would be little point in giving widespread relief which would not be passed on to the consumer. Obviously, electricity and piped gas are items which can very easily be policed and we can ensure that a reduction given in these areas will be passed on to the consumer. That is the special reason why they got the treatment they did get. In respect of bottled gas, the relief has been given by the removal of VAT. The same applies to electricity, as regards removal of VAT. That is the relief given.
Mr. C. Murphy: While I welcome the relief in the removal of VAT from bottled gas, does the Minister  not realise that he had a wonderful opportunity to reduce the cost of living for many thousands of people by giving a subsidy on gas? Why did he not avail of this? His argument is very thin.
Could I ask the Minister between now and the next day to consider extending the subsidy to islanders who depend on bottled gas both for cooking and light? I do not have to argue in favour of that. It is obvious.
The Minister circulated a document called a Table Explanatory of the Revised Current Budget which indicates that payments to the Road Fund are to be reduced from those stated in the Financial Statement of 15th January. What will the effect of the reduction be? Which local authorities will suffer a reduction in allocation? Road estimates meetings have been held and road allocations have been issued by the Department of Local Government to the local authorities. Work is planned.  Will this mean a further cut back in the level of road work undertaken by local authorities who this year are put to the pin of their collar even to maintain the existing permanent labour road work force?
Mr. Molloy: I would suggest that they do because the effect of Resolution No. 2 is related to the overall budgetary position and the Minister has had to revise the overall budgetary position which necessitates, according to these figures, a substantial reduction in payments to the Road Fund which will affect the work carried out by local authorities and, principally, the level of employment in local authorities. Will the Minister explain this?
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