Martin Mansergh (Tipperary South, Fianna Fail)

I would like to say a few words in response to the short debate. I admit to Senator Alex White that this is the first time I have come across this procedure but I am sure we all come across new things from time to time.

The revenue raised by VAT was referred to by Senator Bradford. It is now one third of our revenue. In the halcyon days of three or four years ago, it might have been closer to one fifth than one third but that is the situation that exists now given the contraction of the tax base, which obviously must be addressed.

The progressiveness or otherwise of VAT was also referred to by Senator Bradford. There is the perception that VAT affects most adversely those who are less well off because they pay the same amount of tax while having a lower income. However, many goods and services availed of by low income households are VAT-free or have a zero rate of VAT - a great proportion of their expenditure is on food - and that counterbalances somewhat the argument about the incidence of the tax on the less well off. That also includes children's clothes and shoes and oral medicine. A reduced VAT rate applies to home heating and labour intensive purposes.

Reference was made to the Border situation and there is no doubt there has been fluctuation back and forth. As I am sure Senator Dearey is aware, the VAT rate across the Border is due to rise by 2.5% on 4 January which will narrow the gap, although it does not get rid of exchange rate differences.

It needs to be observed also that petrol and diesel prices are roughly on a par in nominal terms, which means that, in practice, prices are 12% to 15% higher on the northern side of the Border. That, in principle, causes people to travel across the Border in a southern direction.

Another Senator referred to proposed VAT exemptions on condoms and windmills and we have all been lobbied about VAT exemptions on hurley sticks and medical equipment. If one increases the exemptions, apart from any EU dimension on the subject, one is in danger of making the administration of it more complicated. That is especially the case with medical equipment purchased by charities as opposed to other groups.

We get lobbied by groups to raise taxes as well as to lower them. For example, in the run-up to every budget there is an active health lobby and an environmental lobby. As Members will note from this morning's newspapers, the horseracing industry is seeking a doubling of the betting tax to 2%. One of the most successful environmental taxes was the tax levied on plastic bags which was introduced very shortly before the last general election but one.

I thank everyone for their support and reiterate our gratitude to those who have drawn up the legislation.