Michael McGrath (Cork South Central, Fianna Fail)
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I move amendment No. 66:

In page 72, between lines 9 and 10, to insert the following:"Value-Added Tax in respect of Charities

49. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential introduction of a capped Value-Added Tax compensation scheme for charities.".

The Minister is quite familiar with the impact of VAT on the charities sector. I know that earlier this year the Minister established a special working group comprising the Irish Charities Taxation Reform group, the Minister's Department and the Revenue Commissioners to examine how the impact of VAT on charities could be addressed. The report published at budget time confirmed that the issue can be dealt with at national level by way of a compensation scheme rather than a direct rebate. There are a number of such schemes already operating in different EU member states, including Denmark, which provides compensation with an in-built cap to limit exposure in the Danish exchequer. The practical effect of the Danish scheme is to provide a partial refund of VAT to charities based on independent income collected by way of fund-raising. I fully understand the concern that would exist in the Department to limit the scope of any change because it could ultimately continue to rise and lead, in effect, to a demand-led process, which would be of concern.

The essence of the issue is that various charities are working exceptionally hard, raising money through their volunteer networks in many cases and buying goods and services for end-users. However, they also pay VAT. As this is not in the course of business, as such, the charities are not able to register for VAT and reclaim any they pay. There is an equity issue that must be very carefully examined. I welcome the steps taken so far with the special working group but I would like us to go further with this Bill and have a report on the introduction of a capped VAT compensation scheme for charities prepared.