John Gormley (Dublin South East, Green Party)
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Question 304: To ask the Minister for Finance if a ministerial order requires to be issued to remedy the situation concerning VAT being charged to registered charities, thus avoiding the necessity of changing the tax laws; and if he will make a statement on the matter. [14784/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Charities and non-profit groups engaged in non-commercial activity are exempt from VAT under the EU sixth VAT directive, with which Irish VAT law must comply. This means they do not charge VAT on the services they provide and cannot recover VAT incurred on goods and services that they purchase. Essentially, only VAT registered businesses which charge VAT are able to recover VAT.

Ministerial orders have 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 specific circumstances. However, under EU law, it would not be possible to introduce new schemes within the VAT Act 1972 to relieve charities from the obligation to pay VAT on goods and services that they purchase.

The tax code 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. Moreover, charities also benefit significantly from the uniform scheme of tax relief for donations, which was introduced in the Finance Act 2001 and which, for the first time, allowed tax relief on personal donations to domestic charities and other approved bodies. The relief is based on the taxpayer's marginal rate which for an individual donor could be as high as 42% and, in the case of donations from the PAYE sector, is given directly to the charities.