I propose Deputy Reynolds as Chairman.

I second that proposal.

First of all, Deputies, I thank you for the confidence you have placed in me to Chair this Special Committee. I hope that we will deal with it as constructively and expeditiously as possible.

I understood this was to be a formal meeting just to consider the modus operandi of the Committee.

Obviously I would like the Bill to be given as much consideration as possible but I agree with Deputy Barry that it might be helpful if we could get some idea of the times that would be suitable for the meetings. There may be a problem in regard to amendments, timing and so on, and we might try to sort those out first.

Also things like quorums. I do not know how these Special Committees work.

The quorum is six.

I would suggest Thursday mornings rather than Wednesday afternoons because there are so many meetings on Wednesday afternoons. If Thursday mornings were generally acceptable it would certainly suit me.

On Thursday mornings we have the Public Accounts Committee.

Four members of this Committee serve on the Public Accounts Committee. Even with an overlap of one member we cannot have the meetings coinciding.

If we make it Wednesday afternoons we will overlap with another Committee.

The Committee on Procedures and Privileges usually meet on Wednesday afternoons.

I gather that on the Fianna Fáil side the Deputies involved might try to remedy the situation. I do not know whether those on the other side——

I would have to see Deputy Fergus O'Brien about the matter.

If the matter was referred to the Whips it might be possible to make some alterations in the composition of the Public Accounts Committee.

I propose that we fix the next meeting for Thursday of next week. In the meantime, the Whips can be spoken to about the problems to see if they can be sorted out.

The Public Accounts Committee meet in this room and it can be difficult to get accommodation.

We could meet in Setanta House.

Would 10.45 a.m. be suitable

I think a prompt 11 a.m. would be the best time.

Next Thursday at 11 a.m. in Setanta House. The duration of the meetings?

Would 11 a.m. to 1 p.m. be suitable?

As 11 a.m. to 1 p.m. has been agreed, what about this afternoon's meeting?

We should do the formal business this afternoon.

A time limit for amendments should be discussed.

When we have disposed of the procedural matters there are one or two things I would like to say in advance of the consideration of the Bill, but we should dispose of the procedural matters first.

Are there any other amendments besides the Minister's amendments?

There are two rather technical matters on which I might have to bring in amendments. I will deal with them as we come to them on the sections. If I do bring them in it will be on Report Stage. I will mention the matter when we come to the sections. Apart from those, I do not envisage any further amendments coming from me at this stage.

We will have some amendments and I will try to get them in as quickly as possible.

Would it be possible for Deputy Barry to indicate what sections his amendments will affect?

The sections relating to things like the charge for the zoo, farmers and so on.

The reason I say that is that it might be possible for us to facilitate the later submission of amendments so that we could deal with the other sections. Once we deal with a section and finish it we cannot put in an amendment.

Our amendments relate to later sections.

Can we take it that they will not refer to the first six sections?

I think the Minister can.

There is a substantial amendment from the Minister on section 6. Certainly, on the first five, I would not think that we would have any amendments on them.

Right.

If we could assume that there would be no amendments before section 6 we could arrange on that basis at least that if amendments were in by the next meeting they would be all right. It might be possible to extend it further after that when we have more precise information.

Are we agreed that the amendments be in by the next meeting.

I would hope to have them in earlier than that.

By Tuesday or Wednesday where possible.

I think there will be an amendment on section 6.

There is one possible further complication and that is when we come to a Ministerial amendment, if it deals with a matter which is also dealt with in later amendments these would in the normal way be taken together. If an amendment being proposed by the Opposition were going to affect one of the later amendments we would have to postpone consideration of the ministrial amendments where they come in. If we had, say, dealt with amendment No. 2 and there were a number of others later they would be taken at the same time and would all be disposed of together. If we come to a Ministerial amendment which is taken with a number of other amendments and if a member of the Opposition wants to put down an amendment relating to any of them he had better say so at the beginning and we can postpone discussion until he has put down the amendment.

What is the position about voting?

The Standing Orders provide that rules as to procedure in the Dáil shall apply to procedure in Special Committees, except that a member may speak more than once on the same question. Divisions shall be taken by the clerk of the Committee calling the names of the members. In the event of there being equality of votes the question shall be decided in the negative. The Chairman shall have only one vote.

I think that disposes of the points I wished to raise.

We then come to item No. 2 on the agenda, consideration of the Bill. I think the Minister wishes to say something.

I think it is agreed that I may mention a few points in advance of the discussion and subsequent consideration of the Bill. Quite a number of amendments have been put down and a number of them arise out of a reinterpretation, if you like, of the EEC Sixth VAT Directive but there are also some reinterpretations possible without amendment. The object is to try to maintain the existing position as far as possible and have the minimum disruption and change in the present system. There are a few items on the basis of which reinterpretation of the EEC Sixth VAT Directive has resulted in certain changes which are not involved in amendments and I want to draw the attention of the Committee to these points.

The first deals with artificial insemination. Under the Bill artificial insemination of farm animals will be regarded as an agricultural service. Accordingly, any person who is engaged solely in providing such artificial insemination services or in providing other services qualifying to be treated as agricultural services under the Bill and who occupies land and owns livestock for the provision of those services will be regarded as, in effect, a farmer for the purposes of VAT. As farmers, AI undertakings will not be obliged to register for VAT and charge VAT on AI fees. Where, however, a person also engages in business activities other than the provision of agricultural services or the sale of livestock, machinery, plant or other equipment which he has used for the purpose of his farming business, or the sale of products which he has produced in the course of farming and the receipts from those other activities exceed £3,000 in any period of 12 months—instead of £1,800 as at present—he will be obliged to register and account for VAT in respect of all his activities.

I understand that informal explanatory discussions have taken place between officers of the Revenue Commissioners and representatives of AI undertakings and that those representatives expressed satisfaction with the position that I have outlined to you.

That means the Minister will not be putting in an amendment to make this change?

That is right. This will not require an amendment.

But the figure of £1,800 is written into the Bill?

That is true but I am anticipating that amendment. I am assuming the passage of an amendment which would raise the £1,800 to £3,000.

That is a very reasonable assumption. But there will have to be an amendment.

Yes, an amendment relating to the £1,800, quite independent of the AI problem. It relates only to the general threshold.

The AI services are not included at the moment?

As things stand at present they would be liable to VAT.

If they are over £3,000.

That is right.

This is to exclude them where it is their sole activity.

Where it is their sole activity?

Or where it is tied in with something else.

And it is less than £3,000.

The next point deals with a similar position—it is a re-interpretation but there is no amendment to this effect. It deals with agricultural and other shows and exhibitions. The position there is that while the present specific VAT exemption for the items mentioned, agricultural shows and exhibitions must be ended as a consequence of the adoption by EEC Member States of the Sixth VAT Directive which makes no provision for such an exemption, in practice this will only mean taxation in particular circumstances and not generally, as I hope to explain.

First, the directive allows Ireland to maintain for a transitional period of at least five years its VAT exemption for the promotion of and admissions to sporting events. Agricultural shows with a sporting element, such as horse jumping competitions, will be regarded as sporting events and on these grounds will enjoy VAT exemption on admission fees which include the viewing of sporting events and on entry fees for such events. Secondly, VAT exemption may continue to be enjoyed by agricultural shows not qualifying to be regarded as sporting events by virtue of the general VAT rules under which persons engaged in VAT taxable activities must register for VAT only where their turnover in those activities exceeds the appropriate threshold for registration. For exemple, a show committee which runs one or two agricultural shows annually and which is not engaged in any other VAT-taxable activities would not be obliged to register for VAT and charge VAT on admission to the shows. As regards any agricultural shows to which the foregoing arrangements cannot apply their receipts from the letting of space to exhibitors and the provision of stabling facilities will continue to be exempt from VAT by virtue of specific provision for this in the VAT law. In cases where shows carry on VAT-taxable activities, when allowance is made for appropriate deduction of input VAT the amount of VAT becoming payable on receipts will generally be small.

Shows that do not have sporting events attached to them—they are probably very few but they must be catered for—are not liable for tax under existing VAT law. Is that correct?

Yes, they have an exemption.

Below a certain level.

I do not think the Minister said below a certain level.

The present VAT law exempts those shows——

No, the present VAT law exempts shows with sporting events.

Under the directive exemption will be maintained for a transitional period of at least five years.

This has been as a result of a reinterpretation of the directive. As the Bill stands, without the amendments, I think it was said in the Explanatory Memorandum that it was intended that agricultural shows and so on would be brought in as a VAT-taxable activity. Am I right in assuming that?

That is correct.

Am I correct in assuming that the sections in the Bill make such shows subject to VAT?

No. It might be interpreted in that way and this is why I am spelling it out now.

The purpose of the Bill as initiated was that artificial insemination, agricultural shows, exhibitions and so on would be brought in as VAT-taxable activities and the sections were framed so that such a construction could be put on them. However, it appears that as a result of a re-interpretation of the basic directive such a construction will not be put on them.

That is correct.

How will the Revenue Commissioners interpret the basic law? Will they interpret it in the light of the directive or will they interpret it in the light of what was said in the legislation?

I am advised it is possible to interpret the directive and the relevant sections in the way I have indicated.

The legislation will be interpreted not in the way we thought originally.

It will be interpreted in the way I have indicated. Of course, it is open to different interpretations, as is the case with any Act.

Is it not possble that at some future date the Revenue Commissioners may interpret the regulation in a different way?

What I have said is on the record. I have said it deliberately to put it on the record and the Revenue Commissioners will be bound by that.

I share the reservations of the Deputy. I take it that shows with sporting fixtures will be excluded and that this will apply also to agricultural shows that have not sporting events included in their activities?

Yes, unless the people running them are engaged in running very many such shows.

Usually agricultural shows take place annually and I take it that pepole who organise these shows will be completely excluded?

That is correct.

I hope that will be put on record so that there will be no misinterpretation by the Revenue Commissioners afterwards.

The Deputy may take it that what I have said will be the interpretation of the Revenue Commissioners.

Will it be necessary for people running such shows to apply for exemption beforehand? In previous years when turnover tax operated they had to do so.

No.

If a person organises and runs more than one or two shows each year, will it be necessary for him to write to the Revenue Commissioners telling them that he is a little dubious about the matter or will they come to him and tell him he is not exempt anymore?

If this question arose at all I would expect it to arise because the Revenue Commissioners had gone to the person and told him that they thought him liable rather than the person going to the Revenue Commissioners in the first place to ask them, although the latter is also possible. I would expect in the normal way that the Revenue Commissioners would assess him but that can arise only where he is engaged in this activity to a very considerable extent and where he was exceeding the threshold. Even where that happens, where allowance is made for the VAT he is entitled to deduct on the inputs his liability would not be very great.

What are the thresholds?

£3,000.

At present the threshold is £1,800 and we propose in an amendment to raise it to £3,000.

What is the position in relation to a fixture that has a sporting element and an agricultural show element and where there are different ways of getting into both fixtures? For example, my experience of the RDS is that a person pays for his ticket to enter the place and he pays more to go into the stand to watch the show jumping. A person pays a different amount of money to watch the sporting event which is part of the overall fixture.

I am assured a person can see some jumping free of charge at the RDS.

That is not the point.

If the entry fee entitles a person not only to entry but also to some viewing of sporting events, then it comes into the category I have described.

I suspected that would be the answer.

May we take it that as a result of a reinterpretation of the EEC directive what we thought the section said will not be enforced as we thought?

I would rather put it that what you thought the section said it did not say. In fact, the Bill did not specify these items as being taxable. I am trying to make it clear that the interpretation by the Revenue Commissioners will be as I have outlined.

There is one other matter that I might raise in the same category as the ones I have mentioned and Deputy Barry referred to it when we were talking about amendments, namely, the question of admissions to zoological gardens. Admissions to zoological gardens are specifically exempt from VAT under existing Irish law. The benefit of that exemption has only been given to the Dublin Zoological Gardens of the Royal Zoological Society of Ireland since they are the only such gardens in the State.

As the Sixth VAT Directive does not permit continuance of that specific exemption it was envisaged when the Value-Added Tax (Amendment) Bill, 1977 was being prepared that admissions to the Dublin Zoological Gardens would become liable to VAT at 10 per cent, the service rate.

Having carefully re-examined the matter, I am satisfied that it is possible to continue to treat as exempt from VAT admissions to the Dublin Zoological Gardens of the Royal Zoological Society of Ireland since I consider that such treatment is not incompatible with the EEC Sixth VAT Directive. In the circumstances of the Royal Zoological Society of Ireland, the operation of their zoological gardens will not be treated for VAT purposes as being " in the course or furtherence of any business " and, therefore, the society will not be required to charge VAT on admission to the gardens. I should point out that the trading operation of the Royal Zoologcial Society of Ireland such as the restaurants and souvenir shops are subject to VAT in the normal way and will continue to be.

I am glad about that. What is the situation with regard to Westport House? Admissions to such houses are exempt. Westport House has a zoological garden attached to it.

That is purely publicity.

They could be subject in the normal way at present to VAT and it is not proposed to change that.

Is the admission to the house subject to VAT?

I thought they were exempt.

I have never been there. Is the admission to the house separate from the admission to the zoo?

As far as I know you pay separate admission.

That is my impression. It is regarded as a business, not as a non-profit-making venture and so it could be subject to VAT in the nor-may way. It is not proposed to change that.

Would the Minister clarify one point on the basis of what he said? The news is very welcome about the Dublin Zoological Gardens, but he is saying the directive does not apply to the Dubin Zoological Gardens. I thought the directive was to apply regardless of all the individual admissions set. Is this a unilateral derogation from a directive or might it be challenged with the commissioners by somebody?

The Deputy is correct in saying that a directive is a directive, but it is not a matter of choice for individual admissions as to whether it can be applied. A directive is a legal document like an Act of Parliament and is open to interpretation. What I have said in this regard is on the basis of our examination of the directive and the interpretation of it. Having examined it carefully we have no reason to believe that the interpretation of it that I have outlined in relation to the Dublin zoo will be challenged.

Or overturned? That is the point of my question.

We have no reason to believe that will happen.

I presume the Minister has legal advice on this.

My comment was similar to Deputy Barry's. I very much welcome this statement of the Minister in relation to the zoological gardens. Most of the Deputies are concerned about that. What is the position on the Continent in other EEC countries? Does this interpretation apply generally?

Yes, I understand it does in some of them on the Continent. One that we know about, Amsterdam zoo, is being treated in the way we propose to treat Dublin zoo.

They are not regarded as being in the business for profit. Therefore, will that be an interpretation of the Revenue Commissioners in other businesses if a company write into their articles that they are not in business for profit? Would the Revenue Commissioners look upon this in the same way as they do Dublin zoo?

I suggest to the Deputy that if the company wrote that into their articles it would be a matter of fact as to whether they were engaged in the business for profit. If the Revenue Commissioners concluded that the company were in the business for profit and the company said they were not, there is machinery to determine the question.

Shall we proceed to section 1?

I thought we were going to proceed to adjourn.

It is a certain point and we should stick to any issues we have agreed upon.

I agree, and Deputy Barry did suggest this and we did agree. I am happy to go along with that arrangement.

We will sit again at 11 a.m. on Thursday, 19 October, 1978 in Kildare House.

The Committee adjourned at 5 p.m. until 11 a.m. on Thursday, 19th October, 1978.