Alex White (Dublin South, Labour) | Oireachtas source

I am pleased, on behalf of the Minister for Finance, to have the opportunity to speak on the question of the VAT treatment of defibrillators purchased by voluntary and charitable groups.

While I appreciate and am conscious of the health concerns that form the basis of the Deputy's argument, he may be aware that in matters relating to the VAT rating of goods and services, the Government is constrained by the requirements of European Union VAT law, with which Irish VAT law must comply. Defibrillators, other than implantable defibrillators, are liable to VAT at the standard rate, which is 23% in Ireland. Parts or accessories are also liable to VAT at the standard rate. There is no provision in VAT law that would make it possible to apply a reduced or zero rate to the supply of such products. Under the EU VAT directive, member states may retain the zero rate on goods and services which were in place on 1 January 1991 but cannot extend it to new goods and services. As such, a zero rate cannot be applied to defibrillators.

In addition, member states may only apply a reduced VAT rate to those goods and services which are listed under Annex III of the VAT directive. While Annex III includes the supply of medical equipment for the exclusive personal use of a disabled person, it does not include defibrillators for general use by voluntary and charitable groups. In this regard, a reduced rate cannot be applied to the supply of defibrillators.

Exemptions from VAT are also governed by the EU VAT directive, which does not make provision for an exemption from VAT on the supply of defibrillators. For this reason, the only rate of VAT that can apply to the supply of defibrillators is the standard VAT rate of 23%.

While the VAT rate on the supply of defibrillators cannot be removed, the Deputy is seeking that compensation for this VAT be made to charitable and voluntary groups in the form of a refund of VAT. Ireland operates a small number of VAT refunds where VAT is refunded in set circumstances, some of which apply to medical devices. The VAT (Refund of Tax) (No. 15) Order 1981 provides that individuals can obtain repayment of VAT expended on certain goods and appliances which assist persons with a disability to overcome that disability. There may be circumstances where a defibrillator purchased by or on behalf of an individual may qualify for a VAT refund. However, a defibrillator purchased for general use by a charity or voluntary body would not qualify for a refund under this order. In addition, since 1987 there is provision within the Irish VAT code for the refund of VAT incurred on the purchase of new medical instrument or appliance by a person who donates the medical equipment or appliance to a hospital. However, the refund order only applies to medical instruments or appliances costing more than €25,390 and would only apply where the donation was to a hospital and not to a voluntary and charitable body.

As I indicated, Irish VAT law is governed by European Union VAT law. The EU VAT directive does not specifically provide for the introduction of schemes for VAT refund. While providing a compensation method does not affect VAT being charged according to the directive, this is not clear cut as it is generally counter to the provision that VAT should be paid by the final consumer of goods and services. It is for this reason that Ireland has not introduced any new VAT refund orders since the 1980s. The existing refund orders are all historical, dating back to the 1970s and 1980s, and any changes to VAT refunds since then have been either by EU requirement or by making minor changes to existing refund orders.

While voluntary and charitable groups are not compensated for the VAT incurred on defibrillators, Exchequer funding is separately made available to such organisations. In addition, the Irish tax code also provides an exemption from various taxes for charities and certain sporting and voluntary bodies, including an exemption from VAT on supplies.

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