Martin Conway (Fine Gael)
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As the Minister was delayed in waiting for the vote to take place, I do not intend to delay him beyond what is necessary.

Recently, it has been brought to my attention that the rate of VAT is 21% for lessons in Irish dancing, set dancing and the elements that make up the fabric of our culture. It has also been brought to my attention that the VAT rate for ballet lessons is much lower. I am looking for the recategorisation of Irish dancing at a low or non-existent VAT rate, given that set dancing and Irish dancing account for a significant portion of our tourism product. People from all over the world come to this country in pursuit of set dancing and the elements that make up our culture. In my local area, Ennistymon, there is a massive weekend of set dancing for charity in January. It brings hundreds of people to the village. From County Clare a set dancing magazine is distributed all over the world; it has a circulation of 10,000 and is issued every few weeks. It is a significant product within our cultural offering and has mushroomed, but it could go much further if a more realistic VAT rate was applied.

An ongoing campaign run by people involved in the set dancing industry in County Clare is looking for a recalibration of the VAT rate in line with that charged on other dancing lessons such as ballet. The case is reasonable and I look forward to hearing the thoughts of the Minister on the issue. It is great that he is in the House to respond. The people involved in the campaign will be pleased.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Senator for raising the issue. I am pleased to take the opportunity to speak on the issue of the VAT rate applicable to Irish dancing lessons and dance lessons in general.

The EU VAT directive, with which Irish legislation must comply, provides that the supply of services and goods should be subject to the standard VAT rate which in Ireland is 23%, unless specific provision is made in the EU VAT directive to allow a lower VAT rate to be applied. As there is no such provision in respect of dance lessons, the standard VAT rate applies to Irish dancing lessons and most other dance lessons, since there is no provision in the EU VAT directive that permits a rate lower than the standard rate to apply.

Where an Irish dancing school is registered for VAT, it is entitled to a deduction for VAT incurred on goods and services used for the school. For example, a VAT-registered school is entitled to deduct VAT on electricity, heating, decorating, etc.

With regard to applying a VAT rate lower than the standard VAT rate to Irish dancing, the VAT directive does not allow a reduced VAT rate to apply to dance lessons, including Irish dance lessons. Member states may only apply a reduced VAT rate to those goods and services set out in Annex III of the EU VAT directive which does not include dancing lessons.

With regard to applying the zero rate of VAT to Irish dancing lessons, this is also not possible according to EU VAT law. Article 110 of the VAT directive provides that Ireland can maintain zero rating on those goods and services which were zero rated on and from 1 January 1991, but it cannot introduce any new item at the zero rate. As Irish dancing was not zero rated in or from 1991, it is not possible to introduce a zero rate on dancing lessons now.

As with the application of a zero or reduced VAT rate, the EU VAT directive does not allow for the exemption from VAT of services, other than those specifically provided for in the directive. The directive does not include provision for an exemption from VAT for the supply of Irish dance lessons or dance lessons in general. If dance lessons were exempt from VAT, persons supplying dance lessons would not be entitled to deduct any VAT charged on their inputs.

The EU VAT directive provides that the supply of education to children and young people is exempt from VAT. This is a public interest exemption which is designed to exempt from VAT the provision of education by schools and school education of a similar kind provided by other persons.

VAT exemptions are by their nature narrowly interpreted, and such an interpretation would not allow Irish dancing schools to benefit from VAT exemptions under this heading.

In addition, while paragraph 5(2) of Schedule 1 of the VAT Consolidation Act 2010 provides for an exemption for cultural services provided by recognised cultural bodies, as Irish dance lessons are not provided by a recognised cultural body, they cannot qualify for this general exemption. However, it is possible in some circumstances that VAT is not applied to Irish dancing lessons. This happens where a person supplies Irish dancing lessons and the value of these lessons is less than the VAT registration threshold of €37,500 in a 12-month period. In these circumstances the dancing teacher can remain unregistered for VAT and VAT is not applied to the dance lessons that he or she supplies.

Furthermore, where a person is undertaking Irish dance lessons specifically in order to become a dance teacher, this should constitute vocational training. As vocational training is an exempt activity for VAT purposes, this means that where Irish dance lessons are provided for a student with a view to his or her becoming an Irish dancing teacher through a structured educational course, the dance teacher - that is, the supplier of the lessons - should exempt the lessons from VAT.

With regard to the VAT rate chargeable on admissions, Irish VAT law includes a VAT exemption for the promotion of, and admission to, live theatrical or musical performances where food or drink is not provided during the performances. In this context, admission fees to Irish dance feiseanna should benefit from this VAT exemption.

In addition, with regard to the supply of Irish dancing costumes, these are subject to the zero rate of VAT where they are made for children. Costumes and shoes supplied to adults, however, are liable to VAT at the 23% standard VAT rate. VAT legislation contains details of which sizes are regarded for VAT purposes as children's sizes.

Martin Conway (Fine Gael)
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I thank the Minister for a comprehensive response. It would appear that the people in question are campaigning in the wrong vein in that it is a European issue they may need to examine or, alternatively, they could have Irish dancing reclassified as a cultural activity. The Minister has also outlined a number of exemptions, which has provided clarity for me. There will be an ongoing discussion on this issue, but the points made by the campaigners in question are well made, and I thank the Minister for his response.

Michael Noonan (Limerick City, Fine Gael)
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I draw the Senator's attention to a leaflet issued by the Revenue Commissioners on education, which will be exempt from VAT. The people who spoke to him may be able to work on this. The Revenue Commissioners' leaflet on education sets out that, as a general rule, in order to qualify for the educational VAT exemption, a dance course must satisfy the criteria that it be provided in a classroom setting or a setting that is appropriate to the dance; it must be provided as a structured course with a clear syllabus, either by an individual or a group; it must confer a level of skill or ability which can be evaluated by comparison with the objective standards, generally external assessment; and a relationship must exist as between a student and a teacher or a tutor. That is according to the Revenue Commissioners' leaflet on the particular courses that would be deemed educational courses and would therefore be exempt from VAT. There may be scope there for the Senator's contacts to explore that and to directly contact the Revenue Commissioners, which will make the decision, not the Minister or the Department of Finance.