Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

Yes, there is an issue to which I want to draw the Minister's attention. The legal position is that children's shoes and clothing are zero rated for VAT purposes. The definition is in relation to clothing. It is not exceeding the size appropriate to children of average build up to ten years of age and similarly for footwear. In practice, the administration of that by Revenue is that zero rating applies to the following criteria in relation to children's clothing, namely, sizes up to and including a 32 in. chest or 26 in. waist and children's footwear up to and including a size 5.5. Those sizes were determined in 1984 after consultation with clothing and footwear trade interests at both manufacturing and distribution levels.

There is an EU context in terms of the EU VAT directive and a zero rating can be drawn from the derogation under Article 110 of the EU VAT directive. What I have learnt so far from replies to parliamentary questions is that the position of Revenue and the Department is that the age cannot be increased, but the average sizes can potentially be changed, but only if there is evidence that the average sizes need to be increased.

The issue I wish to highlight is that if one takes footwear, for example, one has a certain price range up to size 5.5 which is the zero rating. Parents who go shopping will know this. A pair of zero-rated runners might be €40 but if one goes to size 6 the cost could be €60 or €70. The application of VAT to runners of size 6 or 6.5 does not explain the price differential. It is clear that either manufacturers, distributors or retailers are taking the opportunity afforded by the jump from zero rating to applying the standard rate to impose a very dramatic increase in the price of footwear and clothing once the zero rating no longer applies. There is a huge difference.

While the average might be at around age ten that a child would need size 6 footwear or in the case of clothing greater than a 26 in. waist or a 32 in. chest, there are many exceptions to that. Many children of that age require larger sizes. What we need to do is explore what flexibility, if any, there is for zero rating. The Minister said the reference to the age is cast iron and cannot be changed, but there may be some flexibility in the average size relative to the age. The rates were set in 1984 and I do not know if it has been reviewed since. It is a very important issue for many families and there is an element of exploitation in that when one goes beyond the size threshold where clothes or footwear are no longer zero rated, there is a significant jump in price across a wide range of clothing and footwear for children, which is not explained by the application of VAT at 23%. Is the Minister of State prepared to look at this and to see what can be done to help families dealing with this issue?