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

Section 12 sets out to reduce the standard rate of VAT from 23% to 21% on a temporary basis from 1 September. The recommendation seeks a report from the Department within five months after the enactment of the Bill. This effectively means a report will be required by the end of the year.

The reduction comes in on 1 September but VAT is mostly paid in a two-monthly cycle in arrears, so the September-October returns would be available only in mid-November 2020, and returns for November and December would not be available until early in the new year. To produce a report by the end of the year would cover only one two-month set of VAT returns which is not a sufficiently long period to get a proper read of the situation. Given that we may be still operating at less than full capacity, it is not clear any report based on such a short period would be of any real value because it would not give a representative view on which to base any future decisions.

Furthermore, as traders are not required to separately identify the VAT yield generated from particular activities or product types in their VAT returns, it is not possible to separately identify the VAT receipts from specific items. Accordingly, producing such as report would demand the use of scarce resources at a time in coming weeks when we are getting engaged for the budget and Finance Bill.

Essentially, we would not have the information before the budget one way or another. Were we to try to have it for the Finance Bill, we would have only one set of VAT returns which would not cover a representative period. It would not be prudent to pass or change legislation on a single cycle of VAT returns which are not a fair representation. In the normal course of events, the papers submitted by my officials to the tax strategy group may be a vehicle to examine and review policy decisions. If the Senator wishes to withdraw the recommendation I will ask the officials to include such an analysis in the VAT tax strategy paper in advance of budget 2022. We will not get it done in advance of the budget this autumn for 2021 but if the Senator withdraws the recommendation we will ask the officials to include it and work on it next year for the subsequent budget.