Mark Dearey (Green Party)

I welcome the Minister of State and thank him for bringing this Bill to the House. I understand the amount of work that must be involved in the consolidation of any range of Acts. This legislation is based on the model that was used in the cases of the Stamp Duties Consolidation Act 1999 and the Capital Acquisitions Tax Consolidation Act 2003. This road has been travelled before. I can imagine the scale of work that must have been required to consolidate VAT law, which is constantly being reformed and reviewed at EU level.

I would like to reflect on the nature of VAT and on the proportion of our tax income that is generated from VAT, which is not necessarily the most progressive of taxes. As Senator Bradford said, it does not tick that particular box. It disproportionately affects people on lower incomes, as a higher proportion of their incomes are spent on VAT. Their incomes are taken into account in the case of income tax. We could have a wider debate about the place of VAT and the place of transaction taxes in general. Perhaps the tax system could be remodelled so it no longer relied on transaction. When transaction is the main mode of collection, politicians are tempted to pursue policies that drive transactions. That can lead to the cycle of boom, bubble and burst that we have experienced in the house building sector in particular. It is important we put our tax system on a more sustainable footing. Nonetheless, I welcome the consolidation of the legislation in this area.

I recall my father talking at the table about turnover tax many years ago when I was a child. He was speaking in the context of the introduction of a VAT rate of 35%, which was extraordinarily corrosive for business along the Border. In his speech in the Dáil, the Minister of State attributed, in part, Newry's city status not only to the currency differential which comes and goes but to the different VAT regimes on either side of the Border. There are causes and consequences. If Newry can, in part, thank VAT for its city status, one can imagine what it has done to my town. I do not want to come up with a moniker for it but it has been a very touchy and difficult issue. Even the 0.5% which the Minister for Finance removed last year, although it was not much in monetary terms, was an important signal and a motivational tool for people to stay on this side of the Border to do their shopping. The UK makes its own decisions and it has increased the VAT rate from 15% to 17.5%. That, too, is a help.

VAT is an extremely sensitive issue when it comes to the Border area. We need constantly to calibrate our own decisions against what is happening in the UK and not allow differentials to develop which become dissuasive to our potential markets, including retail markets.

In regard to exemptions and reductions, I have heard arguments for VAT reductions on everything from condoms to windmills. Usually the case made is around the social benefit that might accrue. In the case of environmental goods, it is the off-set against Kyoto penalties, for instance. There is always a case for different sectors to call for reductions. The restaurant sector has been quite strong in this regard in the context of job creation. All those cases need to be listened to carefully. We need to explore, to the fullest extent, the potential we have to use these reduction mechanisms, if they are available to us.

Obviously, we need to be consistent with European VAT directives in application. They exist in certain areas. I would be very keen that we explore such mechanisms in regard to products relating to energy efficiency and energy reductions. There are enormous gains to be made. It is not about sectoral gain or about any one group benefiting. I see a national gain in terms of efficiency, competitiveness, job creation and, ultimately, carbon emissions.

I have probably strayed a long way from the original intent but I wanted to make those points. I thank the Minister of State for bringing this Value-Added Tax Consolidation Bill 2010 before the House.