Victor Boyhan (Independent)
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I welcome the Minister of State, Deputy D'Arcy, to the House yet again. The issue I raise is the change to the zero rate of VAT for vitamins and minerals. I acknowledge that the Minister for Finance clearly articulated the view that these are matters for the Revenue Commissioners in the first instance, rather than his Department or the Department of Health. I appeal to the Minister of State to have this matter reviewed on a number of grounds, one of which relates to health. It does not make sense to charge a VAT rate of 13.5% on fast food, such as burgers, chips and other greasy foods, particularly in the context of the national health strategy, when the Revenue is prepared to impose a VAT rate of 23% on health supplements from next month onwards. I noted the Taoiseach's statement in the Lower House - I checked the record today - that he was not in a position to confirm the higher rate would apply to iron supplements or folic acid but he would revert to the House on the matter.

I spoke to a number of general practitioners when researching this issue. My GP prescribes vitamin B12, folic acid and fish oils to patients. There are issues in this regard. I am not suggesting this for the benefit of those who are popping vitamins every day of the week. That is not right. However, GPs tell me they are prescribing these vitamins and mineral supplements - let us not call them drugs - on which Revenue will charge VAT. One must ask what the Government can do about it. I presume there it may be possible to address the matter in a finance Bill or other legislation. Maybe we should distinguish between cases where vitamins are prescribed and those where they are not prescribed. I would generally like these vitamins to be zero rated for VAT, as has been the case since 1972. I ask the Minister of State to consider with his colleagues whether we can set up a consultation process to engage on this matter with stakeholders.

As someone who lives near Gorey, the Minister of State will know how important our provincial towns area. Supplement and health shops, in particular in rural communities, rely on this legitimate and legal business. We need to support them against the major multiples in the cities. This decision raises many issues for rural communities and rural traders. More important, there is substantial employment associated with the supplements industry and we need to be careful how we impact on that.

Michael D'Arcy (Wexford, Fine Gael)
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To address the Senator's direct request to me, the Department is reviewing this matter. That commitment was given by the Minister for Finance on Committee Stage of the Finance Bill in October last.

On a point of clarification, basic vitamins, minerals and fish oils are zero rated. The standard rate of VAT applies to food supplements. However, there is a Revenue concession which allows the zero rate to be applied to certain types of food supplements, such as vitamins, minerals and fish oils. The practice of zero rating vitamins, minerals and fish oil food supplements has been applied since the introduction of VAT in November 1972 when the marketplace for food supplements was small. The concession meant that vitamins, minerals and fish supplements were treated the same as food for VAT purposes. However, since the 1970s there has been significant growth in the number and complexity of food supplement products on the market, most of which are not covered by the zero rate concession, such as supplements containing botanicals and bioactive substances. While these new products apply at the standard rate of VAT, the growing variety of products in the market led to diverging views between Revenue and industry over which food supplement should be at the zero rate versus the 23% rate. Revenue issued eBriefs in 2011 and 2013 in an effort to clarify that only basic vitamins, minerals and fish oil would qualify for the zero rate. However, disagreement on the applicable VAT rate and queries on specific products continued.

The operation of the current concession has become problematic because of efforts by some businesses in the industry to exploit the concession to extend zero rating beyond the scope permitted by Revenue. Some businesses have challenged Revenue guidance and decisions on the VAT rating of products giving rise to serious concerns about compliance within the industry and unfair competition between compliant and non-compliant businesses.

The issue was raised during debates on the Finance Bill 2018. Deputies and Senators looked for clarity for industry on the VAT treatment of food supplements and sought the retention of the zero rate for certain categories of food supplements. On Committee Stage, the Minister agreed that he would ask his officials to address the matter in the context of the tax strategy group and also stated he would not interfere in any decision made by Revenue on the matter in the interim. Revenue published new guidance on 27 December 2018 concerning the rate of VAT that applies to food supplements, announcing its intention to apply the 23% VAT rate to most food supplements with effect from 1 March of this year.

It should be noted, however, that human oral medicines, including certain folic acid and other vitamin and mineral products licensed by the Health Products Regulatory Authority, will continue to apply at the zero rate of VAT. It is possible to retain these products at the zero rate because they qualify as oral medicines, which are charged to VAT at the zero rate in Ireland under an historical derogation to EU VAT law. Infant foods will also continue to be zero rated.

I understand the concerns of industry in this matter. For this reason, independent of Revenue's decisions on interpretation, the Minister agreed to put in place a process that will conclude in the 2019 tax strategy group paper to examine the policy choices around the VAT treatment of food supplements.

As I stated in the Lower House yesterday, the Revenue is independent of these Houses and the Minister has said he will not intervene with Revenue. That is long-standing practice.

Victor Boyhan (Independent)
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I thank the Minister of State for his detailed reply and welcome the decision to have the tax strategy group produce a paper on the matter.

The recurring theme is that we need to look at alternatives. I recognise the independence of Revenue but when we are charging 13.5% on fast foods and, at the same time, removing the zero rate from food supplements and vitamins, something is amiss and needs to be addressed.

I thank the Minister of State for coming to the House.

Michael D'Arcy (Wexford, Fine Gael)
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There are thousands of products to be analysed to determine whether zero rating, a 23% rate or potentially a different rate should apply. This will depend on the advice of the tax strategy group. From speaking with the Minister for Finance, Deputy Donohoe, I know that a fair hearing will be given to this. I know there are peculiar anomalies with food. As the Senator mentioned, products sold by unhealthy fast food outlets are at the lower VAT rate of 13.5%, while potentially healthy products that may be prescribed and may be really beneficial to people's health could be at the 23% rate. That will be a matter for the tax strategy group. As I said in the Lower House yesterday, I will certainly give this a fair hearing, as will the Minister.