Dáil debates
Tuesday, 22 January 2013
Topical Issue Debate
VAT Rates
5:55 pm
Ciarán Lynch (Cork South Central, Labour)
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I thank the Ceann Comhairle for affording me an opportunity to raise this issue. I ask the Minister for Finance to consider the return of value added tax incurred by voluntary organisations and charitable groups in the purchase of defibrillators. The presence of the Minister of State at the Department of Health, Deputy Alex White, leads me to assume that this issue straddles the Departments of Finance and Health.
The case for making defibrillators widely available has been widely established, including by the Department of Health. According to the Irish Heart Foundation, sudden cardiac death or SCD kills more than 5,000 people in Ireland each year. While the majority of these deaths occur in middle age or later in life, it should be noted that 100 young people aged 35 years and under lose their lives to sudden cardiac death each year. In other words, every week at least one person under the age of 35 years dies without warning.
Studies of sudden cardiac death have shown that the time between sudden cardiac arrest and defibrillation is the most critical factor for survival. Medical research shows there is an 80% chance of survival if a defibrillator reaches the victim within two minutes. The same research also demonstrates that the survival rate reduces by approximately 10% for every minute that passes before defibrillation. Although the survival rate of out-of-hospital cardiac arrest is approximately 7% in Ireland, it should be noted that 123 people were saved as a direct result of the use of defibrillators in the 12 months prior to October 2012. These individuals are still alive as a direct result of having access to defibrillators immediately after experiencing a heart attack.
A study carried out by the Department of Health in 2004 recommended that appropriate devices should be widely available, especially in sporting venues such as gyms and clubs. This aspect is of particular concern to me and the reason I raise this issue. When a voluntary organisation such as a sports club decides to raise funds to purchase a defibrillator, it must pay VAT amounting to 23% of the cost. Not only do clubs not receive any Government support towards purchasing such equipment and training members to use it but they are required to pay an additional 23% VAT for the privilege of having this equipment on site. While I accept that VAT regulations do not allow the Government to waive the VAT requirement, it is perfectly feasible for the Government to refund VAT moneys collected from voluntary groups and sporting organisations in the performance of what is a civic duty.
In Cork city, it is standard practice for any club hosting a schoolboy soccer game to have a defibrillator on site. Efforts to adhere to such codes of practice should be rewarded with a refund of the VAT incurred in purchasing a defibrillator. If the Government were to adopt this approach, it could well be copied all over Europe. However, for the purposes of this debate, the initiative I am proposing would definitely save lives. I look forward to the Minister of State's response.
Alex White (Dublin South, Labour)
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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.
6:05 pm
Ciarán Lynch (Cork South Central, Labour)
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I will be brief. I thank the Minister of State for responding to this issue. He hit the nail on the head, in that there is an anomaly in the taxation system. An individual can get a tax rebate of 23% on the purchase of a defibrillator whereas a sporting organisation or club of volunteers cannot. This anomaly needs to be adjusted.
If there is a European VAT issue in general, there is no better time to examine this matter than as part of our European Presidency. I call on the Minister for Finance to address it. This anomaly does not just affect the Republic of Ireland. Rather, it is a problem across the world. I am sure that, if negotiations on this issue occurred at EU level, we would receive a positive response.
Defibrillators are a proven life-saving measure. Last year, 132 young lives were saved because clubs voluntarily adopted the good practice of providing these machines. Indeed, Members can be assured by the presence of one inside Leinster House as well as on other premises.
The Minister of State referred to the situation in the 1980s. We have moved on a great deal since then, particularly so in terms of this issue. Sudden death syndrome, which arises from heart attacks, is a recognised difficulty. A means of dealing with such emergencies at club, voluntary and sporting events has been identified, that is, having these machines to hand, just as is the case in this building.
Via the Minister of State, I ask that the Department of Health re-examine this issue and, in so doing, engage with the Department of Finance to explain the anomaly in the system and to ensure that the issue is addressed during our European Presidency.
Alex White (Dublin South, Labour)
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The Deputy makes a strong case. At the outset and in his rejoinder, he outlined the undoubted value of defibrillators. He made the case well and compellingly. There is no argument about the inherent value in and importance and necessity of the provision of defibrillators.
The Deputy referred to the VAT treatment of defibrillators as an anomaly. It is reasonable to describe it as such, but the situation is rooted in tax law. We are not an outlier in this regard in the European context. Unless a member state had a zero or reduced rate of VAT in place for defibrillators or similar products or services on 1 January 1991, the standard rate of VAT applies. This is a rule of general application. The standard rate applies to defibrillators in the UK, France, Germany, Portugal, Austria, Denmark and Hungary, just to name some.
This situation is embedded in VAT law, but I accept the Deputy's case in respect of defibrillators generally. If anything can reasonably be done in the context of existing taxation laws to address the issue, I am sure that the Minister for Finance would be willing to consider it.