Taxes & the EEC

Customs Harmonisation

Ireland joined the Customs Cooperation Council based in Brussels in 1952. The Council included a  valuation committee and nomenclature committee with a view to uniformity in the application of customs rules. The Finance Act 1952 reflected the Conventions.

After considerable work over the following decade, Ireland introduced a new customs tariff on 1 January 1963 following the Convention’s nomenclature.

Over a dozen customs conventions dealing with various aspects of customs, were promoted by the United Nations. They were designed to promote harmonious procedures. In Ireland, almost all duties were replaced by duties charged under the updated Imposition of Duties Order. Ireland joined the TIR convention in relation to transit under TIR carnet in 1967.

UK/ Ireland FTA

United Kingdom and Ireland established a Free-Trade Area pursuant to agreements made in December 1965. This followed the failed attempt by both states to accede to the European Economic Community treaties.

Ireland and the UK implemented the Anglo Irish free-trade area agreement providing tariff concessions for certain goods and changes to the customs tariff. The agreement provided for the removal of customs duties from all goods over a nine-year period. By the time it was fully in force, both Ireland and the United Kingdom were in a transition period having both acceded to the European Economic community.

GATT

Ireland acceded to the General Agreement on Trade and Tariffs in December 1967. Following the Kennedy Round of multilateral negotiations in 1964, there were significant reductions agreed on the general levels of tariffs across the board. See the separate section on the World Trade Organisation background. One significant effect of joining was that unilateral preferences for states were no longer permitted other than in the context of a free-trade area or customs union.

Joining the EEC & Customs

On 1 January 1973 Ireland United, Kingdom and Denmark became the seventh, eight and ninth members of the European economic community. The core of the EEC was a customs union which had fully come into force in the late 1960s between all members. A single customs code applied to goods entering the EEC. This meant that goods could move freely without  customs duty within the EEC. However other frontier controls still remained at the borders.

On 1 January 1973 a new Imposition of Duties order, almost 100 pages long, came into force. It effectively put into effect the EEC common customs tariff. Over a transitional period to 1 July 1977  all customs duties would be eliminated between Ireland and EEC states.

The EEC statistical and classification system was adopted. There were significant changes in the rates. By 1st January 1974 Irish customs duties were aligned with the common Customs tariff in respect of trade outside the EEC. This included the adoption of the EEC’s generalised system of tariff preferences.

On 1 July 1977 the EEC was joined by seven EFTA countries in a customs agreement was no customs duties for most industrial goods. Ireland completed membership of the customs union as the transitional period ended on the same day. This led to the removal of all customs duty with very limited exceptions on trade within the European economic community.

EEC  VAT & Excise

Value-added tax replaced wholesale tax and sales tax on 1 January 1973 in accordance with EEC requirements. The EEC had already introduced several directives setting out the parameters and requirements of value-added tax. It was a domestic tax but many of the key requirements are specified at EEC level. Customs duties and the percentage of VAT were to form part of the EEC’s own revenues.

In December 1975 an Imposition of Duties Order converted fiscal customs duties into excises from 1 January 1976 as required by the Treaty of Accession to the EEC. The classic excise taxes on spirits, beer, tobacco, hydrocarbons and vehicles.

Customs formalities still existed to collect indirect tax including VAT, excise duties monetary compensation amounts, statistics and a range of regulatory matters.

1993 the Single Market

Following the Single European act in 1986 the single market was completed on 1 January 1993 with removal of all internal non-tariff barriers.

Vehicle Registration Tax was introduced in place of customs duties on vehicles. This requires registration of cars entering the State and payment of the tax. If replaced the system of excise duties which had applied. There were five rates of tax depending on the nature of the vehicle. It was based on a percentage of the original open market value.

The new EU wide regulation provides for the new customs community code. Delegated instruments made thereunder implemented it in detail. Revenue administers the code  on behalf of the European Union.

The valuation procedure was based on the relevant GATT Agreement on valuation. The common customs tariff covers over 16,000 items utilising the harmonised system of nomenclature. See generally the section on customs.

CAP & Green Pound

The Common Agricultural Policy contained an elaborate system of mechanisms for  price control that involved charges and subsidies at the border. The customs code applied to agricultural levies as if they were customs duties. The effect was to maintain the EEC wide prices.

The Common Agricultural Policy required an artificial rate of exchange known as the green pound. Monetary compensation amounts or levies became payable to adjust the price to offset currency movements.

The green pound refers to monetary compensation amounts under the Common Agricultural Policy. They were designed to reflect changes in currency values between EEC states. Ireland’s and the United Kingdom’s currencies were tied at par until 1979. However in 1974, the Irish and UK green pound rates diverged. Ireland devalued its green rate being a net food exporter seeking higher prices and United Kingdom being a net food importer seeking lower prices. Irish exporters paid monetary compensation amounts on exports to the United Kingdom and receive the monetary compensation amounts subsidy from importers of the goods in United Kingdom.

After 1979 the Irish pound ceased to be tied in value to Sterling and floated  freely. The green rate and the market rate of the Irish pound was fixed to the ECU as were  other EMS currencies. The green and market rates coincided until 1983 and there were no monetary compensation amounts. In March 1983 the Irish pound was devalued and negative monetary compensation amounts were introduced. This required Irish exports to bear a monetary compensation amount tax while imports to Ireland received a monetary compensation amounts subsidy.

Although the original effect was to neutralise distortions in CAP prices the effect was to cause distortion of trade within the EEC. The net subsidy to Irish exporters of cattle to Northern Ireland led to significant smuggling from the North to the South in the 1970s. In the 1980s, as sterling appreciated, smuggling flowed the other way. Carousel operations were set up with cattle being imported and exported and then re-imported and exported to collect MCA subsidies.