Michael Noonan (Limerick City, Fine Gael)

The briefing note I have to hand states that while these items could in theory be reduced to a 12% rate, that could only be done if all the items remaining on the 13.5% rate were reduced to the 12% rate, as under the European Union VAT directive, a member state may only have two reduced rates and Ireland's now will be 9% and 13.5%. Furthermore, such a reduction from 13.5% to 12% of all items that will remain on the 13.5% rate would be very expensive and would cost €230 million. It is a combination of not being able to go below 12% for certain items in the directive and then only being allowed two lower VAT rates. Consequently, reducing the VAT rate for the hospitality industry to 9% creates one lower VAT rate, while the 13.5% rate, as distinct from the rate of 21%, constitutes the other lower VAT rate. The problem is that to maintain the commitment to only two lower VAT rates, one would be obliged to eliminate the 13.5% rate and put everything on a rate of 12%.

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