Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

Amendment No. 9 seeks to delete the section of the Bill that provides for a threshold for the retail export scheme. As referenced by Deputy Seán Crowe, the explanatory memorandum to the Bill refers to the original provision that the value of qualifying goods must exceed €175 in order for third-country residents to qualify for the scheme. It also requires UK citizens to show proof that VAT and customs and excise duties have been paid. These measures do not eliminate the use of the VAT retail export scheme for UK residents post Brexit. Instead, by excluding goods below a certain value threshold and requiring proof of declaration of import into the UK for any goods for which a refund is claimed by a UK-based traveller, they provide the legal basis to protect Exchequer revenues and control and minimise the scope of abuse of the scheme. This is necessary given Ireland's proximity to the UK and the volume of traffic between the two countries. Therefore, unfortunately, the Government cannot accept this particular amendment.

However, our amendment No 10 proposes that the limit of €175, as set out in the Bill as published, be reduced to €75. This is done in recognition of the challenges facing the retail sector and to support the sector in these challenging times. It will apply to all third-country travellers who are seeking the refund. This change was influenced to no small extent by the views put forward strongly by Deputies on Second Stage that the figure of €175 was very high and a new limit needed to be introduced. The Minister took on board everything that was said during the debate, both inside the House and outside it. In recognition of the challenges facing the retail sector, he is introducing this amendment to set the threshold at €75, which is a substantial reduction from the original figure. This is the result of the Minister paying close attention to everything that was said by Deputies in the debate to date and taking careful consideration of it.

Amendment No. 11 calls for a report on the operation of the provisions of the section within 12 months of their coming into operation. A lot of people have argued that we should wait to see whether there is abuse rather than anticipating it. We are concerned that there is a risk of abuse and, as such, we are taking a prudent approach by introducing the €75 limit. Deputies Howlin and Nash are making the case, in this amendment, that we should see how the scheme is working and review it after 12 months. I will clarify our position in that regard in a moment.

I wish to make a few points about the operation of the scheme. As I said, it will not prevent visitors from the UK from making purchases here. To put a fair picture on it, the other side of the equation is that the UK has publicly announced that it will not operate the retail export scheme for any traveller from 1 January 2021. This means that Irish travellers to Britain will not be able to reclaim the VAT they pay on purchases in the same way that British travellers can in respect of goods purchased in Ireland. The UK has moved unilaterally to cease operating the scheme, which means Irish people travelling there will not be able to get the benefit of reclaiming the VAT, but people coming here from the UK will be able to do so. We have been more generous on this issue than the UK, which is dropping it completely.

We have mentioned the possible abuse of the scheme. Owing to the close proximity of the UK, the number of transactions involved and the amount of traffic between Ireland and the UK, this is one area we have to look at. By excluding goods with a value of less than €75 from the scheme and requiring proof of declaration of import into the UK for any goods for which a refund is claimed by a UK traveller, the proposed measures will ensure that we avoid any double non-taxation. It is important that we protect the Exchequer. We have heard of double taxation but there is a real possibility of double non-taxation in this situation. If people can claim the VAT back when they return to the UK, they will got the VAT back from the Irish side. Arrangements in the UK, which are separate and already in place, provide that proof of payment of VAT in the UK will apply where the value of the goods exceeds the UK's personal allowances. Proof will only be required for goods valued at more than €440. Already, there is a threshold in the UK at which one does not have to produce any proof of payment of the VAT. People could travel from the UK and claim the VAT back under the Irish scheme before returning to the UK where they are resident and obtain a VAT refund without having to prove that they paid VAT. Unless this measure is in place, they would be able to get a refund in both countries. There is a real risk of both countries losing out and non-taxation occurring in both jurisdictions. That is an issue we would have to look at.

Thresholds in other countries were mentioned. There are significant thresholds in other countries, some of which have been cited. For example, the threshold in France is much higher than the threshold here.

Much of the discussion has centred on the practicalities of supporting and encouraging businesses. The scheme is an opportunity for retailers to increase their business and sales to foreign visitors when they come to Ireland. There is a real opportunity for them to do that, as anyone who follows the logic by which people spend money will understand that. For example, in many of the main supermarkets, people get a tenner off if they spend €50, provided they have a €10 voucher. That is a big incentive. If someone feels like spending €35 in a supermarket, it will cost €35 to do so, whereas anyone who spends €50 will get a tenner off and the cost will be only €40. In the Irish psyche, and in the psyche of all travellers and tourists, an offer of getting something back for buying in a certain shop is an incentive to go to that shop.

If we take the system as it works now, somebody who spends €40 on a souvenir can get approximately a quarter of that cost back. Let us say €8 or €9 can be reclaimed in VAT when a company processes the VAT. The company that processes it takes 50% or thereabouts for processing the VAT, so the person will be lucky to get €4 or €5 out of that, which is very little. That is not a major incentive. I will put it this way. Irish retailers have a keen sense of business and of their customers. If a customer comes into a shop and says he or she wants to buy a souvenir and it is €50, it costs the customer €50 under this scheme and he or she will not get any VAT back. If the customer spends €60, it will cost €60. However, if I was a clever retailer - Deputies spoke about craft shops run by families for more than one generation - and I had somebody coming into my shop to buy something for €60, I would tell the customer that if he or she spent over €75, he or she would get €18 back. It would actually only cost the person €57. This is a great incentive for tourists who are spending €50 or €60 to spend €75 because it will actually cost them less than €60 once they get their VAT rebate. It is a bit like the person going into the supermarket. Every Irish person understands that a voucher gets us a tenner off if we spend €50. Who is going to spend €48 if spending an extra €2 will get us a tenner back? There is a great incentive here. This is the exact same principle that I keep saying Irish people and tourists understand. If we encourage people to spend €75, they will get approximately €18 back in a VAT rebate. That is a great incentive to spend €75 they might not have spent otherwise.

That point will not be lost on the retailers of Ireland, the souvenir and craft shops and all the companies that have been mentioned. It will encourage people to spend an extra few bob and it will cost them less as they will get VAT back. That will encourage purchases of over €75 and change the current dynamic where people say many of the purchases are below price. It will encourage trade and most of the purchases will be over €75 in the future. That will result in more business and more profit for local business because it will generate additional sales. We want to encourage business.

I accept that was probably not the reason the Revenue proposed this measure but when I saw the proposal in the Department of Finance, I could see a benefit. As a person who regularly uses the voucher that gives €10 off the next €50 purchase in a supermarket, I said that this sounds like a similar scheme. It is sensible because it will encourage people to spend and that will help the tourism trade in all the different areas that have been mentioned.

There has been quite a debate on this and the idea of trying to achieve consensus and a general approach to this matter is much appreciated and accepted. There has been goodwill and support to ensure this legislation is passed "unanimously", if that is the right word, by the House without calling a vote. We are listening carefully. I am very much taken by the amendment by Deputies Howlin and Nash. It proposes to insert the following:

"Review of operation of section 64

65.No later than 12 months after the coming into operation of section 64, the Minister shall—

(a) review the operation of the amendments effected by that section, and

(b) lay before each House of the Oireachtas a report of his or her conclusions from the review.".

That is a sensible compromise. Having listened to the debate, I encourage Members to accept the State's view that there is a legitimate possibility of people paying tax in neither jurisdiction and both sides losing out, and to recognise that we have a system in place to allow UK travellers in Ireland get VAT back on purchases over €75 notwithstanding that it is not reciprocated. We cannot get anything back there. We are being generous on that basis by allowing the scheme to continue, which is not part of the arrangements in the UK based on public statements today.

Deputies asked whether there was evidence. As the UK is directly involved in this legislation and was cited in the original section 64, it is necessary to have a specific provision in this legislation for UK travellers. The point has been well made that it catches travellers from outside the UK and the EU, such as visitors from America or China. That may be the case but it would make the operation of the scheme more complex to have different rules for people outside the EU, one rule for the UK and maybe a different rule for Chinese or American visitors. I accept that this aspect may need to be examined further in the light of experience that we gather during the 12 months of operation of the scheme but it is only fair at this stage to take the prudent course and introduce the measure. Amendment No. 11 provides for a review of the scheme. On that basis, on behalf of the Government, I will be happy to accept amendment No. 11 as a fair and sensible approach to reviewing the operation of the scheme after 12 months.

Another point made is that some of these provisions could have been included in the Finance Bill. It is more germane to this legislation because it deals with the UK. There is a sentence in the provision that is not specific to the UK but we are trying to introduce a level of consistency in the changes we were making. We included a particular sentence to make this consistent for all countries outside of the EU. I hope Deputies will accept our bona fides on that.

I accept the good case being made that we need to review the scheme and see how it works out. Instead of voting down the provision, let us give this threshold of €75 a chance.

I expect Fáilte Ireland will be very strong in promoting the fact that visitors who spend €75 or more will be able to get VAT back. That will encourage people to spend while they are here and retailers will encourage their customers to spend more when they get them into the shop. I am sure lots of shops will take great advantage of the scheme, which is the equivalent of a voucher in that people get 23% back if they spend over €75.

I would like to see how this scheme will work out in the course of a year. On that basis, the Government amendment on reducing the figure from €175 to €75 needs to kept in this legislation because part of the relevant section is UK-specific. However, I also accept the point made in respect of amendment No. 11 that a review be carried out after 12 months. That is a very fair consideration in the circumstances. I hope the House will agree to accept the Government amendment alongside amendment No. 11 to ensure there is a 12-month review. To be clear, I am not giving a commitment that the amendment will be written into the legislation when we conclude business this evening because we are disposing of all Stages tonight. We will not have an opportunity to come back to this on Report Stage next week as we will complete Committee, Report and Final Stages. It is not an issue we can tease out in the coming days. I hope Members will accept the Government's bona fides in agreeing to amendment No. 11, which is a fair amendment.

See this speech in context