Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 25

In page 134, between lines 1 and 2, to insert the following:“VAT treatment in respect of children’s footwear and clothes

45. The Minister shall, within three months of the passing of this Act, prepare and lay before the Oireachtas a report on efforts by the Department of Finance to secure flexibility at EU level in relation to VAT on children’s clothes and footwear.”.

I will not labour this point, but I want to raise it in the context of the moves at European level to change EU VAT law which may open a window during which this issue may be revisited. In summary, I am raising the issue of the application of VAT to children's footwear and clothes. The current legal position is that children's footwear and clothes are exempt up to a certain age, beyond which VAT at the standard rate of 23% is applied. The exemption applies to average footwear and clothes sizes for a typical ten year old. We discussed this matter on Committee Stage. The average measurements for clothes are given as up to a chest size of 32 inches and a waste size of 26 inches and, for footwear, up to and including size 5.5 or 38 in European measurements.

There are two problems. Not every child is of average size and children are aged 11, 12, 13, 14 and 15 years when they are also teenagers. In retail outlets there is a completely different pricing mechanism for sizes that attract the VAT exemption. This is most obvious in the case of footwear. A pair of football boots or trainers up to size 5.5 might cost €40, but above that size they might cost €70 or €80. The application of VAT does not explain the difference in full, but it is being exploited by the introduction of a completely different pricing regime.

I am aware of the rules and we do not need to rehash them, but, as things stand, I believe the Minister of State's hands are tied because he cannot introduce any new VAT exemption beyond what was designated when Article 110 of the VAT directive took effect on 1 January 1991. I acknowledge that Revenue has done some work in looking at average clothes and footwear sizes for a typical ten year old. It has not found any evidence that the current measurements are out of line, but there is not much evidence to back them up either. There does not seem to be a lot of information available, which I can understand.

We are aware of European Commission proposals to give member states more flexibility when it comes to VAT. The press release states the European Union's common VAT rules which were agreed to by all member states in 1992 are out of date and too restrictive. I could not agree more. I am asking the Minister of State to give a commitment that the Government will raise this issue in the context of the changes at European level, with a view to achieving greater flexibility in order that we can bring about some changes.

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