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

I move amendment No. 26:

In page 108, between lines 30 and 31, to insert the following: “Report on VAT on food supplements

55. The Minister shall, within 3 months of the passing of this Act, prepare and lay before the Oireachtas a report on the treatment of food supplements in terms of VAT and whether they can be zero rated.”.

We went through this issue in some detail on Second and Committee Stages. The Government has made the decision that food supplements will be subject to VAT at the rate of 13.5%. My understanding, which is worth putting on the record, is that the key reason for the Government saying that it cannot zero rate food supplements is that, under the transposition of the EU VAT directive, the legislative provision for food and drink that was in place on 1 January 1991 made no provision for food supplement products. The Government's view is that, therefore, it cannot legally zero rate them now. There is going to be a court challenge on this issue, and we will see how that plays out in the coming months, but a number of points need to be clarified. Do we now have a clear definition of what a food supplement is or are we going to have ongoing disputes between operators in the sector and Revenue as to what constitutes food and what constitutes food supplements? The position of Revenue and the Government is that food supplements are not food. That is the bottom line. I do not want a situation where this is a rolling debate, with new products being introduced in the market and the sector saying they are food while Revenue says they are food supplements. Do we have absolute clarity as to what constitutes a food supplement and what constitutes food? From now on, they will have a different treatment in law in terms of the application of VAT.

Now that we will hopefully have clarity on the VAT treatment of food supplements, do we have an assurance that no retrospective issues will be raised and that outlets that have been selling food supplements will not be subject to revised assessments by Revenue of their VAT liabilities for previous years on the back of this legislation? This is an important point and people want that reassurance.

The bottom line is that consumers will be paying more for these products from now on because of this change in the taxation code. There will be a court challenge and we will see what the outcome of that will be, but I am concerned that this will be a rolling debate, given that new products will constantly be introduced. I do not see a categoric definition of what a food supplement is. Perhaps that will remain a matter of interpretation by Revenue as the issue evolves over time.

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