Mary Ann O'Brien (Independent)

I will take three minutes, with four minutes for Senator O'Donnell and one minute for Senator Mac Conghail.

I wish the Minister, Deputy Noonan, a good afternoon. The new Government is doing a lot to assist charities in fund-raising by addressing issues with regard to taxation on charitable donations. I understand the Department of Finance has a working group which is collaborating with the sector to simplify taxation regulation and ensure the benefits go to the charities. It is also considering a reduction in the threshold of qualification for tax relief, which is advisable in the current economic climate. Reducing the threshold would also benefit a great number of charities.

There is, however, a continuing impediment to the work of charities in that the sector cannot reclaim its VAT in the same way as businesses can. As someone associated with both business and the charities sector, I am very aware of this issue. The sector pays VAT on essential expenditure and on initiatives and events to raise funds independently. This includes everything from information leaflets to equipment and facilities in buildings. This severely restricts the level of work that can be undertaken by charities and also has an impact on independent fund-raising. The Society of St. Vincent de Paul, for example, which I understand raises more than 80% of its funds independently and therefore does not rely on the State for the bulk of its work, pays approximately €4 million to the State that it cannot reclaim.

I m aware there are complications in EU law on this issue but the European Commission has stated that a VAT compensation scheme offers a solution. As far back as December 2006, the then Minister for Finance stated in reply to a Dáil question: "[T]here is nothing to prevent national Governments paying charities a subsidy to compensate them for the irrecoverable VAT". The Government of Denmark, a country similar in its size and charity sector structure to Ireland, has introduced such a compensation scheme. I am proposing that the Minister set up a working group to examine VAT issues affecting charities, similar to the current working group which I understand is dealing effectively and positively with the general tax issue. The process in Denmark was resolved over a two-year period of discussion. I hope that in the lifetime of the current Government the issue of VAT for charities will be resolved to the satisfaction of both the sector and the Department of Finance through a process of discussion and agreement, as I have outlined.

We know what we spend on overseas aid, but what about domestic charities across the spectrum of arts, sports, education and health? What is the total spend by the Government on domestic Irish charities? Would the Minister be kind enough to let us know how many registered charities in Ireland receive over 50% of their annual budgets in State funding?