Brendan Griffin (Kerry South, Fine Gael)
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Question 88: To ask the Minister for Finance his views on a matter (details supplied) regarding VAT; and if he will make a statement on the matter. [41263/11]

Michael Noonan (Limerick City, Fine Gael)
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Passenger transport services are exempt from VAT. This means that VAT is not charged on the passenger service and the passenger transport provider cannot claim input deductibility on any VAT incurred on costs related to their business, including any VAT paid on fuel costs. As such, the supply of fuel is subject to VAT at the standard rate of 23%. The exemption from VAT on passenger transport services is the subject of a derogation from the normal VAT rules, where passenger transport is normally subject to VAT at either the standard or reduced rates. Under the EU VAT Directive it is not possible to allow persons who supply exempt services to claim VAT input deductibility, this would equate to zero-rated treatment and zero rated treatment can only apply to those goods and services that were subject to the zero rate on 1 January 1991. In this regard it is not possible to allow passenger transport providers to claim the VAT incurred on their fuel costs. It is only for historic reasons that Ireland can apply the current exemption from VAT.