Finian McGrath (Dublin North Central, Independent)
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Question 190: To ask the Minister for Finance the exact VAT charges on ESB and gas bills; if consumers are paying VAT on other charges on the same bill; and if he will give a statement on the whole issue of VAT on ESB and gas bills. [27418/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The position is that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. Under Article 28(2)(e) of the sixth VAT directive the supply of electricity and gas is subject to the reduced VAT rate which in Ireland is 13.5%. This article allows member states which at 1 January 1991 applied a reduced rate to supplies of goods and services other than those specified in Annex H of the sixth VAT directive to continue to apply a reduced rate to such supplies.

In the case of the supply of electricity a standing charge and a public service obligation, PSO, levy are also applied and both of these charges are subject to VAT at the 13.5% rate. For gas, a supply charge applies which is also subject to VAT at the 13.5% rate. I should explain that the PSO levy is based on the costs incurred by the ESB in meeting its obligations to produce, or buy electricity that is being generated from peat and other environmentally sustainable forms of energy. Up to March 2003, this levy was included in the standing charge on the bill but, since that date, the PSO levy has been shown separately on electricity bills. The method through which VAT must be calculated is set out under section 10 of the Value Added Tax Act 1972 (as amended). In this regard, VAT must be charged on the total consideration for the supply of goods or services, including all taxes, commissions, costs and charges but not including value-added tax chargeable in respect of the supply itself.

In respect of charges for other goods or services included on electricity or gas bills, a VAT rate appropriate to those additional goods or services will be included in the bill. For example, an electricity or gas bill might include a repayment on the purchase of a domestic appliance which would be liable to the standard VAT rate of 21%. However, this would not affect the rate of VAT applied to the supply of gas or electricity which is 13.5%.