(Limerick East) asked the Minister for Finance the proposals of the European Commission on the harmonisation of VAT, excise duty and DIRT tax which were put to the Council of Finance Ministers at which these matters were most recently discussed; and if he will outline the Government's attitude to these proposals.

28.

asked the Minister for Finance the present position in regard to EC proposals for the harmonisation of VAT levels and excise duties; the implications of the new proposals for the Irish economy; and if he will make a statement on the matter.

I propose to take Questions Nos. 18 and 28 together. Deputies will be aware of the revised proposals for approximation of VAT rates, including the proposal for a minimum standard rate of about 15 per cent, which were put forward earlier this year by the EC Commission. More recently, the Commission has made new proposals for approximation of excise rates, also based on a minimum rates approach.

The VAT proposals were discussed at some length at the November ECOFIN Council, but no agreement was reached on rates of tax. It is clear that there is still a wide range of views as to whether minimum rates, or rates within specific bands, should apply. The council will discuss the matter again at a forthcoming meeting, on 18 December. The whole question of excise rates also remains to be settled.

At the meeting, preliminary agreement was reached on a number of structural arrangements necessary for the approximation of VAT and excise duties by 1 January 1993. Full details of the agreement are documented in EC Council document 9850/89 Presse 206 which is available in the Dáil Library.

The main element now confirmed is that, for some period after the completion of the internal market, exports can continue to be zero-rated with tax on imports falling due on receipt by the importer. The precise arrangements to ensure protection of the revenue and the prevention of fraud have still to be elaborated. In this regard, the Council endorsed continuation of the technical work necessary to establish satisfactory controls, while ensuring that administrative burdens and costs for businesses are alleviated.

The Council agreement from the recent meeting provides for abolition of limits on travellers' allowances, but notes that the position in Denmark, Greece and Ireland — where relatively high rates of tax apply — may have to be the subject of specific arrangements.

I took the opportunity at this meeting to again emphasise the huge revenue losses that could arise for Ireland if, in the absence of frontier controls, we had to approximate our VAT and excise rates closely with those in the UK. There was a positive response from the Commission and it was recognised at the meeting that we may need special measures to enable us to integrate effectively into the internal market without compromising our objectives for income tax reform and lower borrowing. I will be following up on this in future meetings so as to protect our economic and financial interests.

There are no proposals on harmonisation in regard to deposit interest retention tax. Last February, proposals were put forward by the European Commission for the introduction of a minimum Community wide withholding tax on interest income; member states would have been free to impose a higher rate on their own residents. The proposals, which Ireland broadly supported, were opposed by a number of member states and are now effectively dead. What has been under discussion more recently, arising out of liberalisation of capital movements, is a package of proposals aimed at improving mutual assistance between member states' tax authorities. No agreement was reached at the November ECOFIN Council on these proposals.

Deputy Noonan (Limerick East) rose.

A brief question, Deputy, time is almost exhausted.

(Limerick East): When the Minister refers to his negotiating position and seeking special arrangements for this country, is he referring to special arrangements to phase in approximation of VAT or excise duty or is he referring to a demand that compensation be paid by the Commission to the Exchequer?

From the very start I have made my position clear. I do not see derogation, which I think is what the Deputy is referring to, as a solution to our problems. I have said, and continue to say, that the Government are totally committed to the achievement of an integrated Single Market by 1992. We do not see derogation as the answer to the problem. I see derogation as a crutch on which to lean for a while, but when we take away the crutch the problem still remains. I am actively pursuing the revenue implications for the Exchequer between now and 1992.

(Limerick East): May I ask one final supplementary?

I must now proceed to other questions.

(Limerick East): A brief supplementary.

I have given the Deputy a lot of latitude today. It must be very brief as I want to proceed quickly to other questions.

(Limerick East): Is it the Minister's position that he will not move unilaterally to reduce excise and VAT rates until decisions have been made by the EC?

I did not say that.

Question No. 19 please.

On a point of order, I feel you should give equal rights in the House; 22 minutes have been used up on Priority Questions. This is not good enough. We have rights here also. It is not Deputy Noonan's problem because his question came up at the end.

The Chair does its best in these circumstances.

Twenty-one or 22 minutes have been used up. This is not good enough. We expect your protection.

Question No. 19 please.