Dinny McGinley (Donegal South West, Fine Gael)
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Question 274: To ask the Minister for Finance his views on removing the VAT on all non-profit arts organisations vetted as bona fide by the Arts Council; and if he will make a statement on the matter. [9073/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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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. Only VAT registered businesses which charge VAT can recover VAT.

In addition, the VAT Act lists a range of activities exempt from VAT. Included in this list are the promotion of and admissions to live theatrical or musical performances. This broad exemption is allowed under Article 13(1)(n) of the sixth VAT directive. This means the promoter realises the full value of admission fees, as no VAT is applied. In this regard, the exemption is already generous and covers a broad range of activities accessible to the wider public.

The position on providing a VAT exemption for performance fees charged by musical or theatrical performers to non-profit arts organisations is that it would not be possible under EU law with which Irish VAT law must comply. Performance fees charged to non-profit arts organisations are therefore liable for VAT at the standard rate of 21%.

Richard Bruton (Dublin North Central, Fine Gael)
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Question 275: To ask the Minister for Finance the basis of the estimate of the cost of leaving the existing remittance basis of tax at €100 million; his estimate of the number of companies availing of this system and the number of individual taxpayers involved; and the way in which his estimate of the cost of this concession has grown over the past five years. [9250/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am informed by the Revenue Commissioners that individuals charged tax on the remittance basis of taxation pay tax on the income concerned under the self-assessment system. The Revenue Commissioners further informed me that the data sought by the Deputy cannot be separately identified because all foreign-sourced income, including income charged on the remittance basis, is grouped together and assessed for income tax under what is termed Case III of Schedule D. In addition, those individuals chargeable on the remittance basis are obliged to declare only so much of the foreign income received in, or remitted to, the State. Accordingly, details of un-remitted employment income under foreign contracts, in respect of which Irish tax was forgone, are not required.

Therefore, while the Revenue Commissioners could not quantify the number of employers and employees using the remittance basis, it was clear from information derived from normal Revenue operations that remuneration structures using the remittance basis were widely promoted. In particular, some offshore agencies targeted professionals such as pharmacists, doctors, dentists, engineers and architects, and others working in Ireland, offering foreign "off the peg" contracts purporting to ensure entitlement to the remittance basis.

It was also clear that the use of the remittance basis was spreading to a wide variety of sectors including the IT, financial services, pharmacy, pharmaceutical, mining, fishing and construction sectors. The remittance basis in the construction sector was promoted and used extensively in some large infrastructure projects. In the case of a small number of such contracts, the Exchequer loss was estimated by Revenue at €30 million. Estimated costs of €50 million in 2006, €75 million in 2007 and €100 million in subsequent years were arrived at on the basis of such existing costs and the day-to-day evidence of the promotion, and resulting spread, of the use of the remittance basis.