Paddy McHugh (Galway East, Independent)
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Question 216: To ask the Minister for Finance if he will reduce the minimum threshold for donations to charities from €250 to €100; and if he will make a statement on the matter. [7299/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Reducing the minimum threshold at which donations qualify for tax relief under the terms of the donations scheme from €250 to €100, as the Deputy has proposed, would significantly increase the current cost of the scheme to the Exchequer. A recent study by Irish Charities Tax Research Limited indicated that the introduction of such a measure would approximately double the cost of the scheme. The relief is already very generous. There is no upper limit on the amount which can be donated generally and relief is granted at the donor's marginal rate of income tax. Donations can be cumulative, so that a donation of €5 per week over the course of a year would qualify.

As the Deputy will be aware, the donations scheme was one of the tax reliefs examined as part of last year's overall review of tax reliefs and exemptions. The review concluded that the €250 minimum threshold is serving its purpose and should be retained at its current level, subject to ongoing review. I agree with this conclusion. The Deputy may wish to note that the full text of the review can be found on the Department of Finances website at www.finance.gov.ie/documents/publications/other/ revtaxreliefsvol3.pdf.

Paddy McHugh (Galway East, Independent)
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Question 217: To ask the Minister for Finance if he will introduce a VAT refund mechanism for the benefit of the Irish charities sector; and if he will make a statement on the matter. [7300/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I should explain that charities and non-profit organisations are exempt from VAT under the sixth VAT directive with which Irish law must comply. As such, they do not charge VAT on their services and cannot recover VAT on goods and services which they purchase. Essentially only VAT registered businesses which charge VAT are able to recover VAT. Refund orders, of the kind put forward by the Deputy, have in the past been used in a limited way to provide refunds of VAT on certain aids and appliances for the disabled and on medical equipment donated voluntarily to hospitals. These orders are focused and are designed to target particular sectors. However, it is not possible to introduce new schemes which would allow for VAT refunds to exempt bodies or non-taxable persons.

I would add that the tax code currently provides exemption for charities from income tax, corporation tax, capital gains tax, deposit interest retention tax, capital acquisitions tax, stamp duty, probate tax and dividend withholding tax.