Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Deputy for moving the amendment, and I thank Deputies Mattie McGrath and Pearse Doherty for their contributions. Charitable organisations are, for the most part, outside the scope of VAT. This means they do not charge VAT on any goods or services they supply and they are not entitled to claim back VAT incurred on inputs related to their charitable business. In 2015, I agreed to the establishment of a working group, comprising representatives from the Department of Finance, the Revenue Commissioners and the Irish Charities Taxation Reform, ICTR, group, to examine options available to reduce the VAT burden of charities. The working group's report was provided to me at the end of 2015, in my deliberations ahead of the budget 2016. While the report acknowledges the burden imposed on charities by the inability to reclaim VAT on their inputs, I decided not to introduce any new tax relief in the area, given that I remain to be convinced that the use of a tax expenditure is the best approach in this case.

There are some 8,500 registered charities in this country and many are already in receipt of significant Government subvention through the Health Service Executive, HSE, Departments, the national lottery and others. The provision of funding in this way has the advantage of transparency and economic efficiency in that the Government can direct funding to those charities operating where the need is greatest and which can deliver the services most efficiently. Charities also benefit from favourable and costly concessions across all tax heads. However, as I mentioned in my recent budget day speech, I have asked my officials to engage again with the working group on charities with a view to reviewing the options available to provide compensation to charities as regards the burden of VAT, while being mindful of fiscal constraints. I understand my officials have already met with Charities Institute Ireland in this regard.

I have some supplementary information also. The Danish VAT compensation scheme is not the only model the group will consider, and I am reserving my position on this until I receive the report from the group that I have re-established. As I stated previously, there are some 8,500 registered charities operating in Ireland and the vast majority are worthy of our support. They range hugely in size and scope from international emergency and humanitarian relief agencies to local community groups. We need to ensure that Government continues to direct funding to those most deserving of our support.

The review group has already met and has agreed to look at how the Danish system might apply to Ireland, as well as looking again at alternatives such as providing VAT refund orders for particular activities or particular goods and services or even for specific sectors, as is the custom and practice in the United Kingdom. Other considerations of the group involve finding a means of granting VAT relief to charities that would not result in undue administrative burdens on the charities or the Revenue Commissioners.

In line with the commitments made on budget day, the work has advanced speedily and we will continue to drive it to a conclusion, and we will keep Deputies informed. In view of that, I ask Deputy McGrath to withdraw his amendment. I will bring forward a report on the issue and make it available to him on completion.

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