Arthur Morgan (Louth, Sinn Fein)
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Question 340: To ask the Minister for Finance if restrictions in VAT law would prevent any reduction in rates for certain products for environmental reasons; and if so, the restrictions of same. [35182/05]

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 law with which Irish VAT law must comply. The VAT rate that applies to a particular good or service is determined by a number of criteria.

Member states have the option of retaining the zero VAT rates which were in force on 1 January 1991, but no new zero VAT rates can be introduced. As a transitional arrangement, member states have the option of maintaining, at a reduced rate of not less than 12%, any items not listed in Annexe H of the Sixth VAT Directive, provided such items were at a reduced rate on 1 January 1991. These goods and services are considered to be "parked". Otherwise, member states may only apply the reduced VAT rate to those goods and services which are listed under Annexe H of the EU Sixth VAT Directive.

Under the Sixth VAT Directive member states may set the standard VAT rate not lower than 15%. There is political agreement that the standard rate of VAT applying in each member state does not exceed 25%. Ireland's standard rate of VAT is 21%. Goods and services at the reduced rate may be moved to the standard rate, but only those listed in Annexe H may be reverted from the standard rate to the reduced rate. All goods or services are VAT rated according to these rules.