John Gormley (Dublin South East, Green Party)
Link to this: Individually | In context

Question 151: To ask the Minister for Finance if he intends to introduce a lower rate of VAT on district heating in view of the decision of the Council of Ministers to allow for a reduced VAT rate of as little as 5.5%, taking into consideration the environmental benefits that such projects can provide compared with conventional heating systems; and if he will make a statement on the matter. [19210/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

The Deputy is referring to the amendment to Article 12 of the Sixth VAT Directive, which allows Member States to apply the reduced VAT rate to supplies of natural gas, electricity and district heating provided that no risk of a distortion of competition exists. However, the position is that under Irish law the supplies of fuel used to create heat or light are already subject to the reduced rate of VAT of 13.5 per cent. Under Article 28 (2)(e) of the Sixth VAT Directive the supply of fuel is subject to the reduced VAT rate. 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 apply a reduced rate provided for in Article 12(3) to such supplies. Under EU law Member States can continue to apply reduced rates in such cases provided the rate is not below 12%. Such a reduction in the reduced VAT rate, while having a significant Exchequer cost, would have little or no impact on the retail price of such products.

It should also be noted that the Council decision referred to by the Deputy would not have any impact on the rate of VAT applicable to alternative energy systems which are subject to the standard rate of VAT. In Ireland the standard rate of VAT is 21%.