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

I have listened carefully to what everybody has said. The Minister for Foreign Affairs, Deputy Coveney, when he spoke on Second Stage of the Bill, said:

...there is a commitment from the Minister for Finance, Deputy Donohoe, to carry out that review. I reassure Senators that the Government will undertake that review over the next 12 months to see how that is impacting on the retail sector, trading and so on.

He gave that commitment on the floor of the House. Therefore, this review will happen.

I make a few general observations for Senators and others who may be watching. Last year, the Houses of the Oireachtas passed the legislation with a €175 threshold. The retail export scheme was amended by the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 to allow Ireland to impose the maximum restriction possible in the operation of the retail export scheme for UK travellers. The threshold was set at €175 over a year ago when the previous Oireachtas passed the first Brexit Bill. At that stage, it was decided that the maximum figure allowable under EU legislation, €175, would be the threshold.

Senators will recall that this measure was intended to be implemented if the UK adopted reciprocal arrangements after, in effect, excluding Irish travellers from the retail export scheme. Over a year ago, the Oireachtas passed legislation with a €175 threshold on the basis that the UK would reciprocate. Now, as we all know, the withdrawal date has changed. The policy objective at the time was to avoid the loss of tax revenues that would arise if there was a large-scale diversion of consumer spending to avoid VAT. It was understood at that stage when the Oireachtas passed the €175 threshold in legislation that the UK would be reciprocating. It is law, passed by the Oireachtas. I am just reminding people of that in case it was not known. This ground was covered last year. However, as that withdrawal Act lapsed with the timing of the UK's withdrawal, we are now here with a new Brexit Bill. We are back here covering similar ground a year or so later.

Given that there was no commitment that the UK would reciprocate, the Minister has taken the decision, having considered representations from Members of the Oireachtas and business interests, to seek a lower figure. The €175 threshold was set because it was the EU maximum and on the basis that the UK was going to do it. It is important to recognise that the €175 threshold, as passed last year by both Houses of the Oireachtas, would have had the impact that is being discussed here at a much higher level of €175, not €75, in respect of all third countries outside the EU. If there had been a reciprocal arrangement by the UK, it would have been different. The Oireachtas passed legislation last year to apply a €175 threshold for Americans, Chinese, people from the Far East and all people outside the EU. That passed and now it has lapsed.

Following subsequent Brexit negotiations, the Minister understood that there would be no reciprocal arrangement from the EU and decided to lower the figure to €75 having listened to everybody here, even though we are not getting reciprocation of the €75 figure from the UK. In fact, the UK has recently announced that it will not have any scheme whatever. It is one-way traffic. We will introduce a scheme here allowing UK travellers coming here to reclaim the VAT when they spend over €75 in a transaction. We previously passed legislation with a threshold of €175. Since then, the British have said they would not reciprocate on the €175. We brought the threshold down to €75 because we knew leaving it at €175 would have had a severe impact on all the businesses mentioned in this debate.

The UK has recently indicated that it would not have any scheme whatever. UK visitors coming to Ireland will be able to get the VAT back for purchases over €75, but Irish people travelling to the UK will have no reciprocal arrangement. From that point of view, we are being very reasonable by supporting inward tourism into Ireland which is not happening on the other side. What the British do over there is their affair.I was asked what arrangements they are making but all we can do is pass legislation for Ireland. A lot of this legislation is seeking to make sure the Northern Ireland protocol is implemented. Not every VAT rate and tax rate aligns between various different countries but they have double taxation agreements on income tax, corporation tax and those type of issues. This is a particular issue with a VAT rate.

I want Members to remember that we are coming from a situation where we had a threshold of €175 already and we are now keeping it at €75 to assist tourists coming into Ireland from outside the EU, which will include the UK from next month onwards, notwithstanding the fact that they are not reciprocating at all to our people travelling over there. That is their decision. The Minister said he will undertake the review in 12 months and that is a guarantee on the record from when he spoke here two days ago.

I want to respond to the points that have been made on the suggestion of pausing it and reviewing it in 12 months. If we pause it there is nothing to review in 12 months because it did not happen. We will have no more knowledge in 12 months than we have today if we do not bring in a scheme and even if we bring a scheme at €1, that is a figure that is so close to zero as to make no impact at all. That is the purpose of the €1 amendment, namely to have no impact. It is to technically have it there but at €1 there will be no impact. The amendment on the review is contingent on the Oireachtas introducing something by which there will be something to review at the end of 12 months. If we do not introduce anything, there is no need to review because there is nothing to review. That is why there is a difficulty with putting that amendment into the legislation if it is passed at the figure that is in the legislation that has come from Dáil Éireann with €75 in it. That will be reviewed and there will be information on that.

There is no exact information on this at the moment. Nobody can predict the numbers that will come to Ireland next year and nobody can predict the number of people who will spend under €75. We can all guess and extrapolate but we can only know when we see what happens and when we have evidence after there is a threshold in place. If there is no threshold in place, there is nothing to review in any event. The pausing is essentially not proceeding. I reiterate that when the Minister for Foreign Affairs was speaking here, he was clear that there will be a review of this when it is introduced. I know there are fears that once it gets in it might never be amended but it is such a significant issue at this stage and it is up to Members to keep that issue alive when it comes to the finance Bill next year, having seen this in operation between now and then.

Maybe Members will not appreciate this but I want to outline what we are talking about for the people listening in. We are saying one has to spend €75 to get a VAT refund if one is from outside the EU. What if one spends less than €75? What is the loss to the tourist? We are being told this will have severe implications. What is the loss to the tourist who spends €74.99 and does not spend €75? The VAT element of that is €18. I want everyone to understand that. The companies that process the claim normally get about 50% or more of that €18. The amount that a person who spends €74.99 is losing is a maximum of €9. The people who process it get the other €9 and the total VAT involved is €18. I understand that it is important but I also want the people to know the context of what we are talking about if a tourist comes from the UK or the United States. I am not making light of it but I am saying that this debate is about that tourist not being able to get €9 in VAT back, having maybe spent a couple of thousand euro to get here and to stay here. Those are the stark figures of what we are talking about. It is a €9 loss to the tourist out of his or her total spend when he or she comes to Ireland.

That will not put a tourist off coming here. If a tourist is coming from any country to Ireland, there are flight, travel, food, accommodation, spending and entertainment costs but he or she will not be able to get that €9 back if he or she spends under €75. If one spends over €75, one will have no trouble getting it back. I do not know how many people will change their travel arrangements, not come here and drastically reduce their spending on the basis that if one spends under €75 in a shop to bring something back home to export one will lose €9 on it. I ask Members to put that €9 in context. That is what this debate is about and not a penny more comes into it. Once one is over the €75 threshold, he or she is getting the €18 plus VAT back, minus the processing fees.

The Minister feels that with the Oireachtas having already passed the €175 threshold last year and with it having looked at its effect, it came back to it this year with the €75 threshold. Now we are in a different situation. We are giving it to the UK visitors and they are not giving it back. There is nothing we can do about that but the Irish people should know that we are being the generous people by giving this incentive to the UK tourist to come here. By the way, they chose not to reciprocate and there is nothing we can do. They are leaving the EU and that is their call. I want the people to know the full ramifications of this because we understood last year that they would reciprocate but they chose not to do so.

In his statement, the Minister made it clear that he will undertake a review and doing so is implicit on there being something to review. There is the threshold in the legislation and that is to be reviewed. If we do not have a threshold there is nothing to review. The Minister is keen to ensure this matter will be fully reviewed. I have given Members a little bit of extra history about it already being passed and a little bit about the amount of money we are talking about in terms of a tourist's total spend when he or she comes to Ireland. What is at issue here is possibly only €9, if one spends under €75. If one spends over €75, one loses nothing at all under this scheme. Members understand that the Government has made a clear decision on this and I would hope we would use the new incentive for British tourists coming into Ireland if they spend over €75. They will have a new incentive and get tax back that they were never able to get before and that will be of benefit.