Oireachtas Joint and Select Committees

Wednesday, 6 November 2019

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Finance Bill 2019: Committee Stage (Resumed)

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the Deputies. I will comment on what Deputies Mattie McGrath and Burton have said. They spoke about the benefit of the supplements and the value they have to a number of our citizens. I understand this entirely and I have heard it on many occasions. I am also aware from my constituency of the wellness benefit of these products and the effect they can have on the living standards and well-being of those who use them. If I go back to the consultation we had, while I did get quite a few submissions making the case I have just acknowledged, I also received submissions that took a very different view. The submission I received from the Department of Health is of the view they are not food and that the zero rating status is available for products that have a status conferred on them by the Health Products Regulatory Authority, HPRA, and for a very small number of other product categories. I regret that last year in some of the debate which ensued on this I was not clear enough on what will continue to be excluded and what will continue to be zero rated.

There were very strong views regarding why, from a policy point of view, 23% is the appropriate course of action. In a moment I will explain why the Revenue Commissioners do not have the ability to apply a zero rating. They have been very clear that from a legal point of view we do not have the option available to us to continue at zero. It has been confirmed to us by the European Commission that food supplements are not food. This is the core of the issue. It is just not appropriate for me to subcontract that policy decision to the courts to allow them to determine it. It is a policy decision that is anchored in VAT law. They are not food, therefore they should not get a zero rating, and there are a few very clear exemptions that are carved out.

To go to the technical reasons for this, to put them on the record of the committee, Article 110 of the VAT directive is the basis for the zero rate for food in Irish VAT law. It allows member states that as of 1 January 1991 were applying reduced rates lower than the minimum laid down in Article 99 to continue to apply those reduced rates. Such reduced rates must be in accordance with Union law and must have been adopted for clearly defined social reasons for the benefit of the final consumer. Ireland maintains a zero rate for food under this article, with certain categories, such as confectionery, catering and sweets, excluded because the zero rate of VAT applied to food in the VAT Act at the time. Food supplement products were not separately referenced in the VAT legislation.

That is one of the issues at the heart of this.

Other issues were raised with me, including why I did not go to a rate of 9%. The reason I did not go to 9% was that there were few things at 9% at the moment. There are only two I have been recently involved with, namely, the newspaper industry and VAT on sporting leases. It is my view that the 9% rate should be used as a stimulus measure in future. We should not be in a position where we are loading more and more products in at the 9% rate. There are many reasons for this but one of them is the stimulus point I have touched on.

Even if I had done it at 9%, it is likely that some of the issues that Deputies are raising with me now would still arise. There were strong views that the rate should remain at zero. I call on Deputies to appreciate that this time one year ago we were facing a move to 23%. We are now making a move to 13.5% because I have listened to the varying views on the matter. My colleagues in the Revenue Commissioners are crystal clear that it cannot stay at zero. I have looked to try to find a rate which recognises that these are products with a particular benefit and that a group of our citizens really value.

I am not going to go into individual cases because it would not be appropriate. However, I have been briefed and I am aware of the difficulties that the Revenue Commissioners have had. Where certain ingredients have been included in products the case has been made that they should be at the zero rate. Nevertheless, the view of the Revenue is clear: it is that they should not be at zero and the law now needs to reflect this. I am making this change to a lower rate compared to where we were one year ago as a consequence of the process we have gone through during the past 12 months.

Comments

No comments

Log in or join to post a public comment.