Michael Harty (Clare, Independent) | Oireachtas source

I thank the Minister. I understand the EU VAT directive precludes charities from claiming a direct refund but, as the Minister is aware, the Irish charities tax reform group has been part of a working group which has examined how to reduce the tax burden on the charity sector. This group has identified that a VAT compensation scheme operated outside of the VAT system would be workable.

The Danish system of VAT conversation would be the model most suited to Ireland. Denmark sets aside a fixed pool of funding from which charities can reclaim VAT. The claim is in proportion to the funds raised by public donation, and if a charity has raised 50% of its funds by donation it can apply to reclaim 50% of its VAT. Charities' claims are pooled and the individual charities receive a pro rataproportion of their claim. The size of the refund would depend on the size of the pool which the Government would set aside. The pool set aside by the Government is fixed so there is certainty in the cost to the Exchequer. Charities gain by reclaiming a proportion of VAT paid and society gains by having increased services.

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