Sinn Féin - On Your Side

Finance Bill imposes punitive VAT on local authority charges – Ó Caoláin

10 February, 2010 - by Caoimhghín Ó Caoláin TD


Speaking on the Finance Bill 2010 Sinn Féin Dáil leader Caoimhghín Ó Caoláin slammed the Government’s imposition of VAT on local authority charges as “punitive” and as an attack on democracy by the EU. Opening his contribution, Deputy Ó Caoláin referred to the George Lee departure:

“The Taoiseach and the Minister for Finance must be very grateful for the news sensation of this past week, the departure of George Lee from the Dáil and Fine Gael. It has taken the public eye off a rotten Finance Bill, yet another chapter in the story of this Government’s disastrous mismanagement of the economy. This is ironic given former Deputy Lee’s proclaimed passion for fixing the economy. If he wanted something radically different from the Fianna Fáil-led Governments of the past 12 and a half years then he made a strange choice in going to Fine Gael. There is little basic policy difference between them and perhaps George decided to go before people started talking about Tweedle-dum and Tweedle-Lee.”

Continuing, Deputy Ó Caoláin said:

“On top of all that the Government has already imposed on the people it now imposes even more in this Finance Bill. One of the most far-reaching and punitive provisions is the removal of the VAT exemption from local authority charges. People are going to face increases of 13.5% in local authority waste charges, parking charges, charges for use of leisure facilities and so on. We learn in the media today that the Department of the Environment has stated in a circular that a whole range of other charges will also be subject to this VAT increase.

“The extension of VAT to public bodies will increase the cost of living for already hard-pressed householders and businesses. The fact that this is an EU directive validates the argument that Sinn Féin made against the introduction of these charges in the beginning. The power to administer them has been taken from local level and now from national level and outsourced to Brussels which is more concerned about the profits of private enterprise than the provision of much needed services. How much more control will the Department be handing over to Brussels in the coming years? We have already learned, to our great cost, that the EU’s one-size-fits-all approach does not work. The ECB’s interest rates and their impact on the property bubble is proof of that.

“This VAT dictat is a monstrous example of how the EU has been allowed to ride roughshod over Irish democracy. The abolition of the VAT exemption for local authorities in this Bill arises from a European Court of Justice ruling which claimed that the exemption was unfair to private operators. What we have here is the driving through of the privatisation agenda. And what a farce it is.

“The supporters of unbridled privatisation and competition for State and local government services claim that it will lead to cheaper prices for the consumer. But the exact opposite is happening - because of this ruling money is going to be taken out of the pocket of the already over-burdened Irish taxpayer. It is an outrage against democracy because it is our right as Irish legislators to exempt Irish local authorities from VAT if we so decide and we should accept no outside dictation.” ENDS

Full text follows

The Taoiseach and the Minister for Finance must be very grateful for the news sensation of this past week, the departure of George Lee from the Dáil and Fine Gael. It has taken the public eye off a rotten Finance Bill, yet another chapter in the story of this Government’s disastrous mismanagement of the economy. This is ironic given former Deputy Lee’s proclaimed passion for fixing the economy. If he wanted something radically different from the Fianna Fáil-led Governments of the past 12 and a half years then he made a strange choice in going to Fine Gael. There is little basic policy difference between them and perhaps George decided to go before people started talking about Tweedle-dum and Tweedle-Lee.

That is a question I will leave the Labour Party to ponder as they eye up their hoped-for Fine Gael partner in Government after the General Election.

In the meantime we who remain in the Dáil representing our constituents have to deal with reality and this Finance Bill is a very harsh reality indeed.
This Bill implements a savage Budget that targeted the weakest in our society to pay for the economic mess created by the wealthiest. It has targeted children with cuts in Child Benefit and Education. It has penalised carers and others dependent on social welfare. It has hit medical card holders and hospital patients and PRSI workers.

The Government is making war on public service workers and on young people. Our youth are bearing the worst of the unemployment crisis and have started to emigrate in droves once again. What is the Government’s solution? Not to retain or create jobs but to cut social welfare supports for the young unemployed. Well over one in four young men between the ages of 18 and 24 are unemployed in this State. And in this dire situation disadvantaged communities are being penalised with cuts to community infrastructure such as drugs projects and to payments for people on Community Employment and Jobs Initiative schemes.

All the Taoiseach and the Tánaiste and the Minister for Finance seem capable of doing is wringing their hands and shrugging their shoulders. That is their reaction to the latest disaster, the loss of 750 jobs in the Halifax chain. Where is the promised new accountability of the financial institutions? Why are employers allowed to throw workers onto the street in this manner? And most importantly, what is the Government going to do to save these jobs, the livelihoods of 750 workers and their dependents?

On top of all that the Government has already imposed on the people it now imposes even more in this Finance Bill. One of the most far-reaching and punitive provisions is the removal of the VAT exemption from local authority charges. People are going to face increases of 13.5% in local authority waste charges, parking charges, charges for use of leisure facilities and so on. We learn in the media today that the Department of the Environment has stated in a circular that a whole range of other charges will also be subject to this VAT increase.

The extension of VAT to public bodies will increase the cost of living for already hard-pressed householders and businesses. The fact that this is an EU directive validates the argument that Sinn Féin made against the introduction of these charges in the beginning. The power to administer them has been taken from local level and now from national level and outsourced to Brussels which is more concerned about the profits of private enterprise than the provision of much needed services. How much more control will the Department be handing over to Brussels in the coming years? We have already learned, to our great cost, that the EU’s one-size-fits-all approach does not work. The ECB’s interest rates and their impact on the property bubble is proof of that.

This VAT dictat is a monstrous example of how the EU has been allowed to ride roughshod over Irish democracy. The abolition of the VAT exemption for local authorities in this Bill arises from a European Court of Justice ruling which claimed that the exemption was unfair to private operators. What we have here is the driving through of the privatisation agenda. And what a farce it is.

The supporters of unbridled privatisation and competition for State and local government services claim that it will lead to cheaper prices for the consumer. But the exact opposite is happening - because of this ruling money is going to be taken out of the pocket of the already over-burdened Irish taxpayer. It is an outrage against democracy because it is our right as Irish legislators to exempt Irish local authorities from VAT if we so decide and we should accept no outside dictation.

The Minister for Social and Family Affairs Mary Hanafin is reported as having urged local authorities to be sympathetic to social welfare recipients when setting rates of refuse charges. She cited the waiver system operated by many local authorities. But of course the waiver system is totally inadequate.

In 2008 the Ombudsman investigated the waste waiver schemes operated by local authorities and described the system as a shambles. She found that a total of seven local authorities have no waiver system at all in place, on the grounds that the service is provided exclusively by private operators, others only give waivers for refuse not collected by private operators, one county has three different waiver schemes in place, while the average value of the waiver varied from €40 to €357.

Ministers Hanafin, Lenihan and Gormley should recall the words of the Ombudsman in that Report which she said “highlights a significant social policy deficit, with local authorities increasingly driven by commercial considerations, while the needs of the poorest and most vulnerable people in society suffer”.

The Government has not implemented the recommendations of the Ombudsman’s report and now in this Finance Bill it is imposing a further VAT burden on top of local authority charges. We in Sinn Féin totally reject the Government’s cave-in to the EU on this issue.

Budget 2010 was a deflationary budget based on cuts to public expenditure and contracting the economy to make a dent in the deficit. It did not contain sufficient measures to stimulate the economy and nor does this Finance Bill.

The Government’s approach to the economy is not working. Reducing public spending as opposed to implementing a stimulus plan and a jobs strategy has had no effect on the real economy. The live register is growing. Banks are still not lending. Our competitiveness ranking has not been improved. All the Government’s strategy has achieved to date is plaudits from right-wing commentators who enthusiastically promote the application of outdated and disproven economic theory to vulnerable countries. People do not matter to these commentators; they are obsessed with policies which maximise corporate profit.

This Bill should have been about an overhaul of a finance system dependent on unreliable indirect taxation like VAT and stamp duty, a system that previous Fianna Fáil Ministers for Finance have designed and implemented. But the Government’s unwillingness to deal with the tax issue and upset vested interests is very much on show in this Bill. Very little of the extremely detailed analysis by the Commission on Taxation is being introduced.

We do not agree with all the Commission’s findings but it did, for example, examine hundreds of tax reliefs that it found to have no value to the Exchequer. Only a handful of tax reliefs are being abolished in this Bill, and one of those is – wait for it - the bin charges tax relief. This is a relief that helps low income families and only costs a few million per year to administer.

Compare that to the retention of mortgage interest relief for landlords which costs the state €300 million a year. Once more the Government has allowed wealthier people in this State to carry on untouched by a Finance Bill while ordinary people must continue to bear the brunt of the recession.

There are a number of measures in this Bill that will further contract the economy.

The introduction of this carbon tax is a negative, increasing energy costs and adding to an already spiralling cost base. Environmental taxes should be revenue neutral – this tax is designed to bring money in for the government.

This Bill ignores the reality of the economic climate we are living in. It extends the scheme of tax exemption on the income and gains of new start-up companies, but what new companies is it referring to? There is no credit available to start-up companies from banks. Tweaking of the tax system is not useful to these companies when they cannot even come into existence.

It is not the only incidence in which all this Bill has done is ‘tweak’. The artists’ tax exemption has been reduced, but nothing is being changed regarding how decisions are made on who qualifies for the exemption. Over the course of the last year we have seen great literary works like Bertie Ahern’s and Gerry Ryan’s memoirs qualifying for the scheme.

I always found that there was more craft to Deputy Ahern than art, though his skills were many. I noticed at Christmas that his memoirs were available on CD, read by himself. I was tempted to buy one to send to an enemy but I decided I could not inflict it even on my worst enemy. Perhaps there should be a special tax relief for anyone who actually manages to listen to the thing from start to finish.

On a serious note, though, the artists’ exemption was supposed to be for people who were struggling to earn a living doing creative work. It should not be available to very wealthy people as yet another perk.

This Bill is merely tinkering around the edges of a fundamentally flawed finance system. It is reflective of a Government that has no grasp of how serious the economic situation is and is lumbering from one ill-thought out plan to the next.

Connect with Sinn Féin