We are discussing amendments Nos. 7 to 14 (inclusive), 16, 17, 18, 19 and 62 together.

We were trying to finish off a discussion on the rounding-off aspect of these amendments. We thought we would stick to that until we finished it and then move back to the question of the single rate at retail level. The Minister made a number of points, some of which I found unconvincing. He even went so far as to say that even to reduce the rate from 5.26 to 5 per cent would, by virtue of changing the rate, create inflationary pressures and make people likely to increase prices. That is a proposition I cannot accept. I can understand the myth working the other way, but that the myth is so deeply ingrained that if you reduce taxation people then increase prices is something that is straining credulity a bit. That was the only argument that I can recall of a positive kind against rounding-off the rate.

The point had been made by me and other speakers that because most of the actual work involved is in calculating invoices rather than in calculating the tax on the turnover to be paid every two months, it would be more important to have the rounded-off rate for the purpose of calculating invoices rather than at the other level. For that reason it seemed that it would be worthwhile reducing it. I think the Minister made some reference to the fact that this would lose revenue. It would, but the amount in question would be about £1.3 million and the Minister had already dismissed £3.5 million rather airily as being virtually nothing in relation to the £1,000 million of turnover. In those circumstances, £1.3 million would not seem to be an irretrievable loss. He did say this money would have to be found elsewhere.

I do not think a budget of £600 million or more is balanced to such a degree of precision that if £1.3 million were not there it would literally involve some other tax being increased. On these grounds it seems to me there is a case for rounding off. It would simplify things for manufacturers and wholesalers and for retailers who have credit accounts and have to send out invoices. The cost is not great and would not make a perceptible impact on the budget. The only other argument against it, that if you reduce the tax it will encourage people to raise prices, seems so unconvincing that I shall not dwell on it. I would again press the Minister to consider the 5 per cent rate.

I summarised the arguments on this yesterday. I do not think I need do it again. There are two sides to it—what the disadvantages of doing this would be on the one hand, and, on the other, what you would gain by doing it in the way of greater convenience. I do not think there is anything I can usefully add to the summary I made last night.

I understood the Minister to say that the amount which it is expected to produce will be approximately the same as that which is at present being produced by way of turnover and wholesale tax. The people handling the turnover and wholesale tax on the traders' side have got a knowledge of this, have adapted their book-keeping and accounting machines to deal with it in a certain way. The Minister now wants to change this but says it will produce the same amount of money. If it is change for the sake of change I think it is wrong. I would not accept the argument that the amount will be convenient and that everybody will understand it after a short time. I would again ask the Minister not to make the change, to, as far as possible, stick to the system we have. If the Minister has made up his mind on this and is going to railroad it through there is not any point in arguing on it for days. We could be on it at the middle of July and get no further.

There are no invoices at retail level. Very, very few people at the retail end, where they have credit, will have to issue invoices with the tax shown, only to registered customers, and if you are delivering to a registered customer I cannot see why he should go to a retailer; he goes to a wholesaler.

I accept that. I do not want to pursue the argument any further, but I want to ask the Minister—he did say earlier on—this may relate to the other part of the amendment—that the effect of the 16.37 per cent rate would be to lift an extra £3.50 million in revenue.

That is to the retail level from the wholesale level.

Yes. Would it be possible to give us the calculations on which this is based? It seems a bit surprising because, on the basis of the kind of retail margins one is used to thinking of, it looks to me as if the figure would turn out to be £7 million or £8 million. I think Deputy Fitzpatrick has a similar impression. The difference between that impression and what the Minister said is so great it would be interesting to see the calculations. I suspect the explanation may be that he has made some calculation and it would be useful for us to see how he arrived at that.

I think I will be able to produce that in a moment. Offhand, I suspect one of the reasons for Deputy FitzGerald's different figure is that he may be calculating the average profit margins rather more highly than they had been represented to me to be in my former capacity as Minister for Industry and Commerce at one stage.

It is, of course, the gross profit margin here.

Yes.

And, where the gross profit margin is concerned retail, I thought it lay in the 20 to 50 per cent region.

I think I remember seeing a figure of 18 per cent somewhere.

I do not want to delay, but it would be useful to have that later. On this question of the 16.37 per cent, that would finish the rounding off aspect.

We cannot take a vote on a separate portion. We will have to deal with it as a whole.

We can vote separately.

We will discuss the other aspects of the amendment rather than just the rounding-off part of it.

For clarification purposes, is it intended we should discuss all the amendments associated with this before a decision is taken? Before a division is called for, is it the intention to have them all cleared so that there will be no question of going back again?

Yes.

If a point is to be made of roundings-off on other than the one we have been talking about—that is, the 11.11 per cent or the 30.26 per cent, or the 16.37 per cent, perhaps we should discuss those roundings-off. If we could discuss the 11.11 per cent and the 30.26 per cent that might be a tidier way of doing it before we go back to the major issue of a single rate at retail level.

Have we not been discussing this?

There have been oblique references. We have not been specific but, at the same time, I think we have fairly well discussed most of the issues. However, I should like the Minister to elaborate on one point. Yesterday evening when I queried the position about two different rates of tax coming out on a line to a cashier the Minister said it would be relatively easy by putting on 11.11 per cent and then having simply the 5.26 per cent added on at the pay-out at the end on shelf prices. Immediately the question arises: does this not do exactly what we feared would happen in view of the fact that a half newpenny is the smallest amount which can be added on so that, in fact, everything will be rounded up to the smallest coin if it is below that amount. Take a box of matches, a half newpenny would be a tremendous increase on a box of matches. As the Minister's predecessor said on the turnover tax, you can collect the tax anyway you like and suggested that there should be a rounding-up as well as a rounding-down.

The experience throughout the country was—my colleagues here, who are traders, will probably disagree—that people found, particularly in supermarkets, that items which were selling 100 a month were rounded-down and items selling a 1,000 a day were rounded-up. The result was there was an increase in the cost of living. This is one of the myths we did not bear with yesterday. Far from being a myth, it is very real to someone who has to put his hand in his pocket at the pay-out. It is all right saying you can level-off till it comes to the outlet—you can then have your 5.26, or whatever it is, possibly reasonably easy on the whole bill but, if each item has, at shelf level, to have the addition put on, surely that means there will be an abnormal increase in small items. What does the Minister suggest can be done about that?

I would say, first of all, that the problem posed by Deputy Tully is one which exists at the moment and it is not one that will be created anew by the value-added tax.

I am sorry to interrupt the Minister, but I do not agree that it exists at the moment because, in the main, all you are dealing with at the moment at retail level is turnover tax and, therefore, it does not exist to the same extent as it will exist under this.

The wholesaler adds 11.11 per cent to the wholesale price——

Yes.

Yes. In the main I think you will find that the items which are the subject of the wholesale tax are not so small that they come into the category mentioned by Deputy Tully, such as the box of matches and that kind of thing. The box of matches problem exists and will continue to exist and it is not a function of the value-added tax. It is rather a function of the size of the smallest coin we have. I would say, from the point of view of the Revenue Commissioners, and purely from the point of view of the Revenue Commissioners in relation to tax, and nothing else, they would not want to insist that goods be sold either with the shelf price including the tax or, excluding it, to be added on at the check-out point. However, the National Prices Commission has, I understand, recommended that all shelf prices should be inclusive of tax and I understand that it may well be that the Prices Bill before the Dáil at the moment may include a provision to that effect. Now that is from a prices point of view as distinct from a purely revenue point of view.

Both kinds of tax?

Yes.

If that is the case, then we are much deeper in the mire.

I understand the object is to make it easier for the customer to make a comparison between the prices of commodities in different shops.

It is a very fair recommendation. Whatever reductions are given by discounts afterwards, the tax must be paid. It is no good deceiving the public that you are not charging tax.

There is the difficulty that, if you impose the tax on each individual item, you get the danger of a rounding-up process whereas, if you add on 5.26 per cent at the cash register at the end, you are adding on precisely the amount of the tax. We are not talking about discount. We are talking about the prices of goods inclusive or exclusive of tax or whether, non-inclusive of tax, adding on 5.26 per cent on the total value of all purchases at the end, which avoids any danger of rounding-up. Adding on the tax to the item there is the danger of a rounding-up of each individual item. There is, I think, a strong case for the former operation for the reason Deputy Tully mentioned.

On the face of it, there seems to be substance in what Deputy FitzGerald says. If the tax is added on to each item separately, in so far as there is a preponderance of small items, you will end up with more tax being charged than would otherwise be charged. However, I do not think that is what we are discussing here. That is a matter of price control and it would be proper for discussion on the Prices Bill which, I understand, may contain a provision on the lines of the NPC recommendation. What we are concerned with here is purely a question of tax.

The Minister knows that RGDATA have come out very strongly against shelf-price taxing. I attended a meeting of that body which was representative of Fine Gael and the Government Party in an hotel in O'Connell Street. They were absolutely opposed to the idea, but they said they had got this advice from the Minister that they should do it. Would the Minister say if that is correct or has he changed the advice since, because RGDATA represent a great number of small traders throughout the country and would be experienced people?

If they got advice from me?

To add on shelf prices.

To show the shelf prices including the tax?

That is correct. By "the Minister" they probably meant the Department.

I cannot recall precisely. My principal recollection is that, whatever may have been said to them from the point of view of convenience of administration, they were told that the Revenue Commissioners and the Department were not insisting that they do it one way rather than another.

They were advised for their convenience to put it on at shelf price. This they felt would be wrong and, without reference to them at all, we came to the conclusion this would leave itself wide open to excessive increases particularly on small items.

As I have said, it would appear that the National Prices Commission also seemed to be of the view that this should be done.

The National Prices Commission were probably thinking of a simple way of doing it. But the National Prices Commission would not have the responsibility of the housewife who would be going in with a small amount of money and who would find she was paying extra if she bought a few items here and a few items there, as so many of them do, and who would be asked to pay a half new penny on something on which the tax should be 1/20th of a penny.

At the same time, the National Prices Commission is there to keep prices down from the point of view of the housewife and they must have considered that, and if they came to that conclusion it is certainly something I would take into account.

They do not appear to have succeeded.

I think their concern was that if the tax was included in the price it was easier for the housewife to see what price she was being charged and therefore could make her own decision where to buy the commodity.

And I would guess—and I am merely guessing—they took into account the fact that there are some shops—certainly not all—which in their over-all pricing do round-up and round-down, that they are not all rounding-up.

But they rounded-up and rounded-down the last time unfortunately, and the general experience of the supermarkets in particular was that they rounded-down the bad seller and rounded-up——

Did that come with decimalisation?

No. It came on both. It came on the turnover——

The elimination of the halfpenny.

Yes.

The Deputy mentioned the case of a box of matches. That is a new penny today. Presently when a trader buys his matches, say, a gross from Maguire and Patterson, he is paying 5 per cent on that. What reason has he, when he gets his invoice——

What reason has he for increasing it?

It is the same amount of money to him.

Of course, but he is being tempted. Every time he collects an extra amount on the box of matches he is a richer man.

Is Deputy Kenneally talking about the wholesaler?

The retailer.

What reason has he for putting a halfpenny on a box of matches?

Because there is no other way in which he can collect it.

He is paying 5 per cent at present. This is not going to increase his tax.

I understand. I used the box of matches as an example—I could have used an apple or something else—because it was a very small item. You could use any other item which does not at present carry turnover tax.

But the incidence is not going to be increased by this.

Of course it is. Items which are not at present taxed will be taxed under this.

For the kind of items the Deputy is talking about, small items sold in shops, no. The kind of items the Deputy has in mind are subject to turnover tax only at the moment.

There is no basis, just because the trader has to pay VAT, for putting a halfpenny on a box of matches.

If he is now selling it at one penny.

I think the Deputy is right there. It is only a substitution of one for the other.

We are talking about the 16.37 per cent rate. We are talking about the problem—at least we were talking about it but we seem to have drifted away from it—posed by the fact that now for the first time the retailer has to add on this 11.11 per cent and 5.26 per cent, and the suggestion is that the 11.11 per cent will be put into the shelf price and then the 5.26 per cent will be added on to everything at the cash desk. Where this discussion started was that, in adding on the 11.11 per cent he would there be tempted to do more rounding-up than rounding-down.

I think the case made for that by Deputy Tully was that this applies to items which are so small that the cost of the tax on the item is less than a halfpenny.

Matches were mentioned. Are they not in that category?

I understand there would be some things in the line of buttons, hairpins and that kind of thing in this class. Matches, in fact, are not subject to the higher rate.

Are they exempt?

They are subject to turnover tax only.

Matches and fuel are at 5 per cent?

Yes.

And previously they were subject to wholesale and turnover tax?

Turnover tax only.

There is no addition there?

No.

Deputy FitzGerald is asking about the 11.11 per cent. The Deputy's suggestion is that the tax would be uniform, that you add on 5.26 per cent provided the 11.11 per cent is also added on?

That is a suggestion of the Minister's, not mine.

To take the case of detergents, which is a typical example of where the 11.11 per cent is already added on at the present time in the inclusive price, that is so, and the idea is to put everything into that category. However, I can see great difficulty in that situation if a wholesaler buys in bulk, then sells to the retailer and the retailer buys to a certain extent in bulk, and then breaks down the item. I can see a situation arising, as arose in the decimal currency period when people were supposed to round-up some commodities and round-down others. They were supposed to do that.

Even the Department of Social Welfare rounded-up their stamp.

I take it this is a question of possible abuse more than anything else.

I think we are discussing the possibility of abuse in rounding-up but that is only part of it. In a sense, we are now discussing the 16.37 per cent and perhaps I will be permitted to widen the discussion a bit to the question of the wisdom or otherwise of having two taxes at retail level.

I am now in a position to give some information I promised. The base on which the VAT at the rate of 16.37 per cent would be charged is approximately £166 million. Very roughly, the retail mark-up on that would be about 20 per cent or £33 million. The 20 per cent is the accepted figure which, at present, distinguishes wholesale price from retail price, on average. Therefore, the additional tax which is obtained through taxing the retail mark-up is the wholesale tax on the retail profit of £33 million. In other words £33 million at 11.11 per cent is £3.7 million. The base has changed slightly since the 3.5 was estimated, it is approximately £3.7 million at present.

I said before that the supermarkets were segregating the tax at the payouts. I can see that it will be more appealing than ever now at 16.37 per cent.

This brings us back to the problem of where there are two items. There would have to be two machines.

The tax machine is ready. The supermarket is ready to ring it up. At 16.37 per cent it is more appealing than ever.

Appealing to whom?

To supermarkets, not to small traders. They will separate it at that level and put the tax apart.

The Deputy means the shelf price would not show any tax at all? Apart from any recommendation of the National Prices Commission, I have a suspicion that, because of the level of wholesale tax and its equivalent in VAT, it would not be practical for a shop to do this because the difference between the price on the shelf and the price you actually pay would be so great that people would not accept it. They would feel the price on the shelf was thoroughly misleading.

They could have done this before with soap powders. Shopkeepers who are registered as wholesalers do not supply their wholesale registration number to suppliers. They accept the goods at the invoice price and work from there and let the manufacturers of the powders pay the tax to the Government.

There are already a number of supermarkets which, even dealing only with turnover tax, are advertising that there is no turnover tax payable. What, in effect, they are doing is that the shelf price includes the tax. That is of some significance. It probably means that, where they would be faced with a much bigger difference than the existing 5 per cent, the difference between the actual price charged to the customer and the price shown on the shelf would be so big that the customer would strenuously object and say he was being grossly misled.

If somebody paid £4 for something marked £3 there would be a lot of dissatisfaction.

We are told the tax base is £166 million. What is the present yield of wholesale tax?

There are two rates of wholesale tax. For the current year the estimated yield from wholesale tax is £35½ ; million.

How could a tax on 11 per cent on £166 million yield £35½ ; million? It should yield about £18½ million.

Adjusting for the higher 20 per cent tax and minor adjustments elsewhere the yield at the 10 per cent rate is about £18 million. There are adjustments.

Doubling the figure is more than adjusting it. Does the answer lie in the yield from the 25 per cent?

The 20 per cent wholesale tax on certain goods.

Not 25 per cent?

Twenty per cent on the selling price, inclusive of tax.

What does that yield? The £35½ million is the yield of both of these two taxes then?

Yes.

Then I did not get the answer to my question. I asked what was the yield of the 20 per cent wholesale tax.

It is about £12 million.

: I am still puzzled. The 11 per cent effective on £166 million should yield £18½ ; million, and the £12 million yield on the 20 per cent tax, gives £30½ million altogether. Where do you get £35½ ; million?

There are other adjustments involved. The figures of £18½ million and £12 million I have given are on 1971/1972 figures. The other figure I gave is the Budget estimate for the current year which is bringing in, I suppose, Deputy O‘ Donovan 's favourite, inflationary tendency.

Could we simply know for either the current year or last year what is the yield from the 10 per cent tax and the 20 per cent tax?

Last year the yield in round figures was £30 million from wholesale tax of which approximately £12 million was from the 20 per cent tax.

So the £5½ million is not due to adjustments, it is due to inflation.

No, there are some other adjustments involved too. There are changes both up and down. They are rather minor but instead of £184 million we think the base would be nearer to £166 million.

So the difference between my impression and the Minister's figure arises either because I failed to advert to the fact that a significant part of the wholesale tax is at the 20 per cent rate and we are discussing only the 10 per cent rate.

You have the independent retailers.

Yes, but I was applying their calculations to the whole of the wholesale tax, assuming there was only one.

As an academic exercise this is all very interesting, but how close are we getting to a conclusion on the amendment?

It is important to establish what exactly the effect of the Minister's proposal will be. The effect of his proposal to have a tax of 16.37 per cent is to increase taxation by about £3.7 million above what it would have been and what it would have been would be something in the region of £30 million, or thereabouts, and we are talking of a 12 per cent increase in the incidence of taxation on these goods. That is what is proposed and that is what we are opposing.

That is not wholly true. To get this into perspective one has to take into account, first of all, that the amount of tax which would be refunded under the value-added tax as against what happens at the moment——

That is a separate issue.

It is not a separate issue. It is a very relevant issue. What happens at the moment would be approximately the same as our £3.7 million. That, I think, is quite relevant. The other factor is that this additional £3.7 million is to be viewed in the perspective of sales overall of approximately £1,000 million. The increase in the cost of goods that we are talking about arising out of the £3.7 million is to be viewed in the context of sales of approximately £1,000 million. Deputy FitzGerald may say these only apply to the £166 million. That is correct, but if we are talking about an increase in taxation, an increase in the cost to the consumer, then we are talking about an increase in costs of approximately £3.7 million as against the amount the consumer is spending, which is approximately £1,000 million.

First of all, I am not impressed by the Minister's lack of sensitivity to such an increase when he is so concerned about the possible inflationary effects of any change whatever in taxation that even a 0.76 per cent downwards worries him. Yet, here he is increasing the tax rate by 7 per cent upwards. I calculate that he is increasing the tax rate on these products by about 12 per cent, or one-eighth, because the present tax yields about £30 million and he is now going to get £3.7 million more.

An increase of one-eighth in taxation on a range of goods, as I calculate it, representing one-sixth of all goods and services sold is not insignificant and certainly, by comparison with the effects of a .26 per cent change in the basic rate, is far more important and I do not think the Minister can simultaneously dismiss this as unimportant and tell us that he cannot have any adjustment, even downwards, of .26 per cent lest it should affect prices. Clearly this will have a significant impact on prices and, secondly, as regards the so-called counter-vailing rebate of tax, am I not right in saying this will come to quite different people? I am not saying that some small fraction of it may not accrue to those traders engaged in the distribution of goods and services, but if they get one-sixth of the benefit, so far as these goods and services are concerned, the net effect on these goods, whatever may happen on other goods and services, may well be to increase the cost of the goods and services quite significantly if, as I say, the burden of taxation is increased by 12 per cent. If the people concerned here get their fair share of the rebates—one-sixth of the total—that will reduce the effect on prices to perhaps 10 per cent. I doubt if the Minister could produce any abstruse economic calculations to show that what he is doing is having no effect other than increasing the prices of goods and services by something like 10 per cent.

Surely not. Ten per cent increase in the cost of goods?

The Minister is here increasing taxation on these goods by ten per cent.

I do not accept the Deputy's figure, but I am glad I have established that.

Sorry. I put that badly and the Minister is quite right to correct me. It is a ten per cent increase in taxation on these goods. That will push up the price of the goods by something between 1 per cent and 2 per cent, if there is none of this mythical effect the Minister is so keen on, but if the Minister insists that any increase in taxation is bound to push up prices by more than the amount of the taxation, then this must apply here because, if you have a level at present which works out about 13 to 14 per cent and you increase that by something like one-tenth, that is an increase in prices of 1.3 or 1.4 per cent.

If the Deputy wants to calculate this as minutely as that he should take into account as well the effect of the increase in liquidity on these traders.

Would the Minister like to suggest what the effect of that will be on costs and prices?

In very precise terms what he says will result in an increase in the cost of goods is correct, but he is omitting a very relevant factor to which I have already adverted.

Yes, indeed. It is a very fair and a very small point. Would the Minister like to quantify it?

The onus is, I think, on the Deputy to quantify the factors which operate against his argument as well as those which operate in favour of it.

We must not have repetition all the time on technical points which are not getting us anywhere towards a solution of these amendments. We could spend from now until Christmas on technical points. Obviously Deputy FitzGerald has not at his disposal the information the Minister has at his disposal and I do not think it is fair to the Committee, which was set up for the purpose of expediting this, to go into these technical points unless the Deputy wants to elicit some particular point.

I want the Minister to tell me what his estimate is of the beneficial effects on the prices of these goods of this improved liquidity. He has all the calculations at his fingertips.

I do not have all the calculations at my fingertips because it is rather difficult to calculate the precise effect. I could give it straight to the Committee, if the Committee wishes. I can show the effect of liquidity on traders, retailers, wholesalers and manufacturers, as compared with their present position and as compared with the one-month accounting period, and now the two-month period, but I cannot give the actual quantification of that on the basis Deputy FitzGerald is talking about. What I say is that it is a relevant factor in considering whether or not what is being done in regard to the 16.37 per cent rate is or is not likely to lead to an increase in the cost of goods.

It is relevant, but I think if we had any order of magnitude we would find how small its relevance is. It seems to me it would be very much smaller than the kind of prices we are talking about here. It is, as the Minister says, not an easy calculation. He has the data there. Would he be prepared to give it to us?

It would depend on your overdraft and other things.

I do not think you can get it.

If no one can give it then it is no use wasting time on it.

We cannot dismiss it. If Deputy FitzGerald feels it is something which, because it cannot be calculated, does not exist——

It is so small we cannot calculate it.

No, that is not the reason.

Between the one month and the two months it is just a matter of how long you will have the use of the tax. It is at best one-twelfth of a year. It probably does add to the liquidity and reduce borrowing from the bank to maintain normal credit.

The interest on that amount is so small that as a percentage of the firm's total turnover and reduction in its costs, it would be a negligible fraction of one per cent. Therefore to put it against the 1.3 or 1.4 per cent increase and to suggest that is going to mitigate it significantly is unrealistic.

I wonder how Deputy FitzGerald can say that when I recall the case he made in the Dáil in regard to the problem that would arise for people by virtue of the lack of liquidity with which they would be faced on foot of value-added tax. Now it appears that by increasing this by one month it is infinitesimal and should be written off.

Are we getting away again——

I can pursue that red herring.

It is more than a red herring. No red herring ever travelled as fast as this one seems to be travelling. We appear to have gone completely away from what we are trying to get at. I am quite sure the Irish Drug Association have given the Minister their documentation on this matter of the two prices, and they have a table here which is interesting. They refer to baby cream, which has a tax of 5.26 per cent; baby powder, 16.37 per cent; baby foods, 5.26 per cent; baby bottles and teats, 16.37 per cent; nappy liners, 5.26 per cent; nappy pins, 16.37 per cent; Magnesia, 5.26 per cent; and baby toilet utensils, 16.37 per cent. Here is an example of the two prices running together. They go into quite a lot of other detail which I do not intend to go into, particularly in regard to medicines, where the same sort of thing seems to occur. This is an example of what we are trying to get at. We are anxious to be helpful in this; we are not simply talking for the purpose of dragging this on for hours. We would like to see a Bill introduced which will give the best possible satisfaction to whose who will have to work it, and that includes the customer. Therefore, I should like to hear further from the Minister as to how he suggests the two ranges are going to be worked if we are going to have the odd figures of the two decimal points. There are two ranges at the pay-out point which will have to come together in some way. It is not a figure that can be calculated easily as the present one can be. I should like to have a further comment from the Minister on this because this is the whole kernel of our amendment.

I think Deputy Tully will agree that the case he has chosen, chemists' shops, more or less—while I admit the problem is much more acute there than anywhere else—do represent a small minority of the whole spectrum of what we are dealing with. Secondly I think Deputy Tully is right in saying it is largely the kernel of what we are trying to discuss, i.e. the question of the difficulty of calculating, say, 5.26 as against 5 per cent. I am suggesting to Deputy Tully that what will happen, say, in a chemist's shop, as we said last night in another context, is that, by and large, the range of goods they have are repeating month after month; they are the same kind of items they are dealing with. Therefore they become quite familiar with the prices, with the mark-up on them and whatever the tax is. With a ready reckoner in front of you, the difference between calculating the tax at 5.26 or 5 per cent is very little. If you want to know what is the tax on 80p you look it up and there it is. I would suggest that in a very short time, even in the chemists' shops, which is an extreme example, the people will become very familiar with this without any great difficulty.

Even though I agree that the items which I have been quoting and which are sold in chemists' shops would be a minority of what would normally be bought, it could apply in various other shops, different types of goods but over a smaller range. Would the Minister not agree that, notwithstanding the use of a ready reckoner and no matter how used people are to this, the working man's wife who goes in with a limited amount of money to buy goods, finds there is a change in the price; instead of the price being £1.21p it is £1.27p, and she has to find out what is 5.26 of that to know whether she is being "gypped" or not, or whether it is 16.37 of that. At the start she may not know which tax range it is in. Does the Minister not agree that, if it does not result in people having to pay more than they should or in being overcharged, it will leave them with a suspicion that they are, in fact, being overcharged?

What I am suggesting is that, subject to very minor exceptions, there should not be any change in price at all.

The Minister is aware of a matter which was brought to his notice recently. We were just talking about baby foods. They were being sold in the supermarkets at a certain price and being sold at a different price in the chemist's shop. It was possible to compare one with the other because there was a simple tax, but the chemists objected and the result was that the price was jacked-up. People were able to realise why this happened because they knew what the tax rate was. Somebody could not say: "There was a change of taxation. We had to do it." The real reason had to come out.

If anyone wants to compare the price of baby powder in a chemist's shop with the price in the supermarket, it is quite simple. All he has to do is to find what it costs in one shop and what it costs in the other.

It is not as simple as that.

He does not have to calculate the tax.

We could argue on this for ever and a day and come to no conclusion. There is the normal approach to this which should have been adopted in relation to the wholesale tax. I was always opposed to the idea of adding two and a half on to anything. Public houses and people who sell ice cream and soft drinks have never adopted this practice at all. The commodity was just sold at the price. I would suggest that the Minister make the retail pricing of articles obligatory to fit into the normal mark-up.

I do not quite follow.

Built-in.

The price shown on the shelf should be the price?

There should be no calculation of tax by adding on.

Before Deputy Gallagher arrived I mentioned that I understand this is a recommendation of the National Prices Commission and it may be incorporated in the Prices Bill. However, it is pointed out here that there are objections to that. I do not want to go back over this because I suggest that, strictly speaking, that discussion will be relevant to the Prices Bill.

It is a tidier way of doing it, but I am afraid the customer would not get as good value.

There would be less trouble and better comparisons.

Could I ask two questions which would help me to an understanding of this. First of all, earlier it was mentioned that the present wholesale tax is 20 per cent, plus 5 per cent turnover tax. Why then in the Bill is it 30 per cent?

The 20 per cent is an effective 25 per cent.

There is no increase in the rate?

No.

Why is it that the 30 per cent rate can be charged in a way that does not affect the retailer and the 16 per cent rate involves the retailer? If the retailer is exempted in one case why not in another? Is it solely because these are motor cars and things like that?

Yes, it is much easier to control it.

How much easier? I thought originally a VAT had to be at all stages. I now discover that wholesale tax can be charged at the wholesale stage and not at the retail stage? If this can be done for some articles why not for others? Clearly there is no EEC difficulty about this.

There are provisions later on in the Bill in regard to the higher rate which make it very stringent as to the categories which can operate on the basis mentioned by the Deputy, that is, to charge the higher rate and then to allow only the 5.26 per cent to pass on after that. For instance, in the case of motor cars you have to be a manufacturer or assembler. The fact that you are a registered trader does not entitle you to it. It is easily controlled. If we could not do this it would be wide open to abuse. If we were to spread this same type of operation over the whole range of goods for wholesale purposes, it would be impossible to control.

Why?

Let us take the case of motor cars to illustrate the point. There are really two purposes in this 30.26 per cent rate. First of all, it preserves in this area the same effect as a 20 per cent wholesale tax at present at the assembly stage and 5 per cent turnover tax. There is approximately a yield of £12 million from that in the current year. If, on the changeover to VAT, you allow for credit, this £12 million will just disappear unless you charge 30.26 per cent at the retail stage. It has been felt that that rate is too high to control effectively at the retail stage, it is not suitable for a retail tax. Therefore, the wholesale tax approach has been preserved where 25 per cent is trapped at the assembly stage and does not qualify for credit at any further stage. That allows motor cars to be sold subject to a tax rate of 5.26 per cent at the retail stage. If a registered dealer, who is not an assembler or manufacturer, were allowed to acquire these goods on the system of trapping the 25 per cent tax——

What the Minister is saying is that if retailers could get one third of the price of the car again and hold it over a period it would be very difficult to control it at that level.

Yes.

It is one thing to say you must have it at wholesale stage if you are to stop evasion at retail. That does not tell you why you cannot extend the same practice to other goods. Even if it does not seem to be necessary for that reason it may be desirable for other reasons. I do not understand why in the case of gramophone records, which are sold in newsagents and so on, it is possible, without danger of abuse, for them to be charged at wholesale level, with only the 5 per cent payable at retail level, and why you cannot do it for cigarettes sold in the same shop. Motor cars are peculiar, they are assembled and sold through special outlets, but gramophone records are sold through exactly the same outlets as books, papers and magazines.

This 30 per cent will be trapped at some manufacturing level.

I appreciate that but we are told the danger of abuse. It is all right for gramophone records but you cannot have it for household cutlery. Why? It would be much more convenient if any tax other than the 5 per cent were applied at the wholesale level only. We will have to be convinced that there is something that distinguishes a gramophone record from a book sold in the same shop.

We would have to increase the 11.11 per cent to about 17 per cent.

I accept that. I am not trying to deprive the Minister of any of his money.

A suggestion would be that they are attempting to ensure that the high rate will be collected in the case of gramophone records whether they are sold or not. Quite a lot of them may never be sold.

That explains why it is done in this way for these articles. Why can it not be done in the same way for other articles?

The others are sold.

There is one aspect to which I did not advert but which I think should be brought to the attention of the Committee. The effect of treating goods such as motor cars will be that it is not a true value-added tax in the sense that a certain amount of tax is trapped at one stage and is not allowed as a credit at a subsequent stage. That is acceptable to the EEC in relation to certain goods which are regarded as luxury goods.

It is particularly acceptable in relation to motor cars. The British propose to do much the same. They propose to have a 10 per cent special tax on motor cars which will not qualify for credit. In our case, when the higher rate of wholesale tax was brought in—the 20 per cent rate—it did include small categories of goods in addition to motor cars. These were, for example, television sets, radio sets, gramophones and records. Whether they are luxury or not is something that was decided in 1969 and it has been continued in the VAT but with the exclusion of caravans, mobile homes and goods of that type.

If it were extended further—to take a simple example—suppose a pub buys a television set, which it will be entitled to do, and to get a certain amount of credit, there will be 25 per cent at the assembly stage on which the pub can get no credit. To that extent, there will be double taxation under this proposed system. In other words, the pub will pay full tax on its turnover and, in addition, it will suffer tax at the rate of 25 per cent on the assembly cost of the television set. That is acceptable in the sense that these are regarded as relatively luxury goods. If you extended that to the drinking glasses that are used in the pub you would again have 11.11 per cent on the glasses trapped at that stage for which no credit could be given. If you extended that to chairs and tables and the other goods used to run a licensed business you would end up with a substantial element of double taxation which would not be a true VAT at all. This is why, while for certain luxury goods this special treatment is acceptable, it would not be acceptable over a wide area.

I see you recover the tax on these occasions, and that is a disadvantage, but taking the economy as a whole, it does not make any difference, because, if the Minister increases taxation by £3.7 million in order to recover everything he is paying back, there is no advantage.

It is not in order to do that. It is fortuitous coincidence.

16.37 is not a fortuitous rate to arrive at.

Of course the 16.37 is the combination of the existing wholesale tax at 11.11 per cent and the turnover tax at 5.20 per cent.

It brings in £3.7 million more.

The Deputy is talking about the application of that rate to the retail trade instead of the wholesale trade. I was not talking about a fortuitous 16.37. I was talking about the fact that it is to be applied at the retail stage, if one is to have a value-added tax at all. The amount that arises is £3.7 million. The amount that will be refunded happens fortuitously to work out at approximately the same figure.

So what happens is that by adding together the two actual rates that are now current you get a figure which, applied at the retail stage, amounts to £3.7 million, which happens to be the amount you are handing back and it happens to produce a nil effect so far as the economy is concerned and there is no change in the tax level.

That is not true. Let the Deputy try to work out how you will produce this effect if you start from scratch.

I am summarising what the Minister's argument appears to be. The point is it is no good telling us it would be a terrible tragedy for people if they did not recover the tax but, at the same time, whatever amount he recovers, the same amount is taken back by increasing the taxation, admittedly on other articles. The Minister cannot now turn around and do what he previously tried to do, equate the two. He cannot now turn around and say to me that they are different people. I said that to him but he would not accept it before. I do not think that is an argument. What is this definition of luxury items? Can we not say that luxury items are all those items which we choose to tax at a rate beyond the standard basic rate of tax? What definition is there in the EEC Directive or what limitations are there in it?

The Deputy is getting away from the point. I understood he was suggesting that the 16.37 rate should be operated on the basis of trapping it, as is done on the higher rate.

What I would suggest, if I got that far, and I thought the thing was going to work, would be to suggest that you have something like a 5 per cent tax at the retail level and a tax of, say, for the sake of argument, 20 per cent on all goods that currently have applied to them the 16 and 30 per cent limits and trap them. Now you can adjust the 20 per cent up or down to ensure there is no net increase in the burden of taxation. What objection, I wonder, would there be to such a procedure? I am throwing this out as a figure. I think it is not far away from the figure that you would want to give that result. The effect of that suggestion would be—I do not want to anticipate here but just to indicate the way my mind is working—if combined, with a complete exemption of food, a derating of food. One would, on such a system, get the same amount of tax as at present with a single rate of tax at retail level, no taxation on food and no significant change, I think, in the burden of taxation on different groups of the community.

The Deputy is offering another fairly major point.

The Minister asked me a question and I am trying to explain.

Could we concentrate on the point the Deputy raised, which was that the 16.37—or, for argument's sake, call it a 20 per cent rate, abolishing the two higher rates—that the 20 per cent rate would be trapped and only 5 per cent or 5.26 per cent would be charged thereafter at retail level. I suggest that, for the moment, we should concentrate on what would be the effect of that. To do this would involve the cascade effect. It would involve double taxation. It would involve it on a very wide range of commodities and, after all, what we are proposing to do is on the luxury range; it is relatively quite a small segment of the economy. To do it on the rest——

Not on the rest. It is done on 5 per cent at the moment and this proposal would involve doing it on 20 per cent of all sales. At the moment, roughly speaking, 5 per cent of all sales will bear the 30 per cent rate and something like 16½ per cent will bear the 16 per cent rate. I think, therefore, what my proposal would involve would be extending this cascade effect from just under 5 per cent to 20 per cent. I am not disagreeing with the Minister. I am merely being precise.

The effect, therefore, would be that, as regards 20 per cent of all sales, there would be this double taxation effect.

Which we have at the moment on 100 per cent sales and the Minister proposes to retain it on 5 per cent and I propose to retain it on 95 per cent but limit it on 80 per cent of sales.

It seems to me it would be quite objectionable from the point of view of traders who would benefit far less on the value-added tax than they will benefit under the Bill as it stands. Furthermore, I am advised that the EEC would certainly object to this because, in effect, what you are doing is abolishing the value-added tax.

I was under the impression that we had put down amendments and we were discussing those amendments here. We have been discussing in the last half hour something for which there is no amendment before the Committee.

It is my amendment No. 7. We are discussing the effect of eliminating the 16.7 per cent rate and this raises questions as to how money would be raised to replace it and I want to explore this and sort out the feasibility of eliminating this rate and combining it with——

The Deputy is making a new suggestion now.

I am replying to the Minister's objection.

Personally, any more than anybody else here, I do not want to be here indefinitely. We want to get the best value we can and we had the right to put down specific amendments and we have put those amendments down. It would be very unfair to everybody, including ourselves, if we continued to debate amendments which are not down on our Order Paper. I can see no reference at all to this 20 per cent that Deputy FitzGerald has been talking about for the last half hour.

I have put down an amendment and the Minister has raised objections to that amendment. In seeking to meet these objections and to find how, on Report Stage, I could frame an amendment to meet these objections, I have to explore this with the Minister.

I suggest this is new procedure. Perhaps it is in order, but I should like a ruling on it. I have never come across this procedure before.

I have not ever worked on a Committee Stage before without having had the problem of finding an amendment of mine in some way defective and requiring to be modified on Report Stage and in the process of establishing how that needs to be done, one explores with the Minister the Minister's objections to one's amendment and that procedure has been operated in regard to every Bill in which I have been involved so far in either the Seanad or the Dáil.

I do not think that is the way it works. In fact the discussion in the Dáil will take the form that, if a person wants to put down an amendment on Report, he must mention it in the Committee Stage on the section and, if it is defeated on the Committee Stage, it cannot, of course, be raised on the Report Stage, so the Deputy's point is not correct.

The point is I cannot frame an amendment on Report Stage unless I understand the Minister's objections to my amendment on the Committee Stage so that I can meet them on the Report Stage. I can imagine no better or more constructive use of the Committee Stage of a Bill.

Discussing something which is not before us at all is all wrong.

May I suggest that we have made a mistake in including amendment No. 7 with 8, 14, 16, 19——

We may have made a mistake but, if so, it is in including amendment No. 8 and the others with amendment No. 7, and not the other way around.

We should be on No. 7.

That is what I want. I am quite happy.

This question was raised earlier and the reason why these were taken together was because they all deal with rates of tax and No. 7 overlaps all the others mentioned. That is why they are all being taken together. I take it Deputy FitzGerald is in order in that he has an amendment down there to section 11—Amendment 12 (a) "to delete 16.37 per cent and insert 13 per cent"—and I presume it is on that he is trying to elicit some information.

We are not discussing Amendment 12(a).

We are—with the others.

No. We are not discussing 12 (a). With respect to you, Sir, I would suggest that if it is in order for Deputy FitzGerald—and if he is entitled to do it I have no objection—to suggest an alternative amendment which we may consider for the Report Stage of this Bill, then every time an amendment of mine comes up and is turned down by the Minister, I am entitled to as many alternatives to that amendment as I can think of, and I can ask what will happen that when it comes in on Report Stage, and we can be here until Christmas twelve months and make no further progress. I am not trying to be awkward about this or to shoot down Deputy FitzGerald but I just want to suggest that we are not dealing with amendments in a constructive way. I am as anxious as Deputy FitzGerald or anybody else to have a good Bill coming out, but I do not think that simply talking round and round, and according as something comes into our heads, trotting it out here, will bring us to a conclusion.

It is not done normally. I have never seen it done and I think I have probably as much experience of Committee Stages of Bills as anybody around this table. I have already stated what is the normal approach: you put down an amendment; if it is defeated you cannot put it down on Report Stage. If you want to put down an amendment on Report Stage or on Committee Stage, you must mention it at some previous Stage of the Bill, and then you have the right to put it down.

With respect, Deputy O‘ Donovan 's formulation of procedure suffers from one defect: he never mentioned discussing an amendment. That is what we are doing. Between putting it down and having it defeated, in between those two points, there is discussion. That discussion is designed to elicit objections to the amendment, so that you can either decide to withdraw it, to let it stand despite the objections, or reformulate it for Report Stage. What I am trying to do is to discover the Minister's objections and to discover if those objections are of such a character that they can be met by reformulating an amendment on Report Stage. I have always operated in that way, constructively, on any Bill in which I have been involved. I cannot imagine how else you could ever get to Report Stage.

If somebody can point out to me where there is any reference to a 20 per cent tax on this——

There is not.

Deputy FitzGerald has been discussing the merits of a 20 per cent tax with the Minister for the last half hour.

We are discussing the consequence of eliminating the 16.37 per cent on amendment No. 7.

I am aware of what is being discussed. I have a number of amendments which I should like to get an opportunity of discussing, but I cannot do it if Deputy FitzGerald wants to discuss the ones he considers he might put down on Report Stage.

I would suggest that, by and large, the members of the Committee would wish the discussion on these amendments to be reasonably flexible and not too rigid. I do not think Deputy Tully would object to that.

No, I would not.

I think that, in effect, what Deputy Tully is objecting to is the fact that Deputy FitzGerald's argument for what he is doing is reasonable enough but that it is being carried too far, so far that, as he said himself, if the stage is reached that every member of the Committee on the discussion of an amendment can say: "Well, what about this and what about that?"—things that are not down at all in the amendment—in order to formulate amendments he might want to put forward on Report Stage, this is going to carry the discussion far beyond the limits of normal flexibility. As I understand Deputy Tully's submission, that is what he is saying, and personally I would agree with him.

The Deputy who wants to do this should do it at home in his study. He should take the matter away with him and think it over.

Can we get back to the amendment?

If we could get away from talking about me we might make more progress. I am not down as an amendment anyway.

Could we take cognisance of what has been said on all sides and get on with the work of discussing the rates of tax? Amendments Nos. 8, 9, 11 and 12 form an alternative proposal to No. 7; Nos. 10, 14, 16, 17 and 62 are consequential on amendment No. 8. Nos. 13 and 18 are consequential on No. 11; No. 19 is consequential on No. 12 and No. 12 (a) is an alternative to No. 12. These are all being discussed, and the reason there is so much latitude is that these are the backbone of the whole matter.