Denis Naughten (Roscommon-Galway, Independent) | Oireachtas source

I move amendment No. 9:

In page 42, to delete lines 12 to 15.

I am joined by my colleagues in the Labour Party, my Independent colleagues and those in Sinn Féin on this issue. This amendment is simple and straightforward. It is to reinstate tax-free shopping that is about to be abolished, especially for visitors to these shores from the United States. This is a valuable sector of trade and business within the overall tourism trade. With the stroke of a pen, the Government is proposing to use a sledgehammer to crack a nut in adopting this vehicle in its amendment to close off this VAT retail export scheme.

The objective behind the amendment is to enable people who visit Ireland from outside the European Union and who are resident outside the European Union to claim VAT back on purchases and bring those purchases back to their country of origin. Historically, the rate has been set at 0% so that people do not pay any VAT whatever.

As we all know, the retail and tourism sectors are on their knees due to the lockdown we have experienced and the restrictions that have been imposed over the past eight months as a result of Covid-19. Next year, not only will they have to deal with the challenge of Covid-19, the knock-on impact, the carry-forward of debt and the lack of cash flow from 2020 into 2021, they will also have to cope with the unique challenges that will be thrown up as a result of Brexit. These challenges are immeasurable at this point.

Effectively, this proposal by Government is turning the screw on the financial viability of quite a number of businesses, many of them along the western seaboard. In my constituency, we have Dubarry of Ireland, based in Ballinasloe, where there are 50 staff. There is a question mark over their jobs as a result of this measure by the Government. Jobs across the midland counties are hard to come by. We have seen the challenges in terms of Bord na Móna. We have a particularly difficult challenge in terms of job retention in the town of Ballinasloe. There are 50 people working for Dubarry and now there is a question mark over some of their jobs as a result of what is proposed.

At present, approximately 50% of the transactions involving US visitors to Ireland are under the threshold of €75. As a result, we are excluding 50% of the purchases by US visitors to this country. No other EU country is increasing its VAT rates as a result of the United Kingdom leaving the Union. In fact, Spain, which has the largest number of UK visitors annually, is reducing its VAT threshold for non-EU visitors from €80 to zero. France, which is closer to the UK than Ireland is and which has a far greater level of frequency of services, is reducing its VAT reclaim threshold from €175 to €100. Spain and France, the two biggest destinations for UK visitors, are reducing their thresholds and, at the same time, we are increasing ours from zero to €75. This will send out a bad message to UK visitors. We want them to come and visit Ireland and yet we are increasing taxes on purchase they make in this jurisdiction while our counterparts in Spain and France are doing the opposite.

The reputational damage that will be done to the Irish tourism sector, particularly in the British market, could take decades to repair. In the interim, it will damage employment prospects across the tourism and retail sectors at a time when they are dealing with the twin financial plagues of Covid-19 and the disruption as a result of Brexit. It is not the time to tinker with these thresholds.

In 2019, people from Great Britain accounted for 35% of all visitors to Ireland and for one fifth of the total expenditure by visitors in this country. Non-EU visitors to Ireland spend more than €3.2 billion annually here. The Taoiseach was questioned on this issue earlier today by my colleague, Deputy Shanahan, who has a particular interest - naturally enough, coming from Waterford - in Waterford Crystal, a company that will be disproportionately affected by this announcement. The Taoiseach said in response to Deputy Shanahan that Revenue has produced an assessment that there needs to be a threshold introduced. I have not seen this assessment. Will the Minister of State indicate where it can be found on the Department's website or on Revenue's website? Has that assessment been published? The Taoiseach went on to say that the Minister for Finance is bringing down the threshold from €175 to €75, which is complete and utter spin. The threshold today is zero and it is going up to €75. The Government was proposing changes that would increase that to €175 and, because my colleagues and I have tabled these amendments, it has backed down to a certain extent. I welcome that it is not €175. However, the threshold, at €75, is still significant. In the context of the Revenue assessment the Taoiseach outlined earlier, what does it say about those two figures, namely, the €175 threshold and the €75 threshold? It seems to me that these figures are just being plucked out of the sky and could easily be brought down to €25, €5 or back to zero. I would really like to know what type of an assessment the Revenue Commissioners have done.

On 5 November, I asked the Minister for Finance the number of reclaims that are made and the value of these. In his reply, the Minister stated that there were no specific or separate reporting requirements so the figures requested were not available. If the figures are not available to me, as a Member of Dáil Éireann, when I ask the Minister for Finance for them, where is the assessment coming from that the Revenue Commissioners have come up with? The Revenue Commissioners will always look at a belt-and-braces approach to any particular loophole. The concern is that if a resident from outside the EU gets relief from VAT, now that the UK will become a third country from 1 January, British visitors here will exploit the system if there is no minimum threshold put in place. In a parliamentary reply, the Minister stated:

If the scheme applies to visitors from Britain post-Brexit and if the UK were to operate a similar scheme for EU visitors, Irish consumers would be able to buy goods VAT free in Britain and visitors from Britain would be able to buy goods VAT free in Ireland. This could give rise to a considerable displacement of consumer purchases ...

However, the Minister went on to state: "The UK has announced its intention to exclude EU visitors from [the] Retail Export Scheme." There is one of the Minister's ifs gone straight away.

The UK is introducing a system that will include EU visitors from the retail export scheme. This means that Irish residents who continue to purchase goods in this country will not be able to exploit any loophole in it. We are increasing our threshold by €75. The same exclusion will apply in France, where the authorities are reducing their threshold by €75. The same rule will apply in Spain in respect of UK visitors. Spain is reducing its threshold by €80. It seems that we are going in the opposite direction to our EU counterparts. The Minister went on to state, "It was always my intention to adopt reciprocal measures in Ireland to the greatest extent possible if the UK adopted such restrictions". We could argue for the proposed measure if it was specific to British residents but that is not the case. The Minister is saying that he wants to introduce a reciprocal arrangement in Ireland with regard to Britain.

If the Minister wants to reciprocate the UK's measures, why are we excluding every other country outside the EU, in particular the traditionally lucrative US market? What is the reason for lumping the US in with this if we are talking about reciprocating the UK's arrangements? This measure does not seem to be specific to the UK.

The Minister stated that the volume of retail export scheme claims likely to arise would present significant scope for abuse. When I asked for the figures via parliamentary questions, none were available. How are the Revenue Commissioners arriving at figures for the scale of abuse? There is no basis for that assertion.

I have drafted my amendment in a particular manner. The Minister's amendment to VAT law introduces a requirement for proof of importation into the UK, and associated proof of payment, where applicable, of relevant UK VAT and duties on those purchases, of goods that qualify for a VAT refund under the scheme. The Minister is introducing two conditions. First, he is increasing the VAT refund threshold for all visitors to Ireland from outside the EU, including those from the US, from €0 to €75. Second, he is introducing a specific provision whereby visitors from the UK must show evidence that they have paid VAT and duties in the UK if they are to claim a rebate in Ireland. We all know that if people had to go through the process of paying duties, levies and VAT in the UK and submitting documentation to reclaim VAT in Ireland, the majority would not do so. This provision alone will curb any potential exploitation of the difference in VAT rates for non-EU visitors if their country of origin is the UK.

There is no need to introduce a new threshold of €75. It sends out the wrong message internationally, including to visitors from the UK. I do not doubt that, be it done blatantly or in an underhand manner, tourism promotion agencies in Spain and France will quietly whisper to tour operators and people who are considering visiting the EU that they should come to Spain, which has a 0% VAT threshold for refunds, or to France, which has reduced its threshold by €75, rather than Ireland, which has increased its threshold in advance of the UK leaving the EU to penalise British visitors. I hope that the Minister will withdraw this aspect of the proposal and accept that the current regime should remain in place. I hope that he will not force a vote on this issue.

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