Paddy McHugh (Galway East, Independent)
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Question 280: To ask the Minister for Finance if he will introduce a provision exempting non-profit making cultural organisations from VAT on fees to international artists; and if he will make a statement on the matter. [4179/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I should explain that not-for-profit organisations are exempt from VAT under the EU VAT Directive with which Irish law must comply. This means that non-profit making organisations 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.

The VAT Act lists a range of activities that are exempt from VAT. Included in this list is the promotion of and admissions to live theatrical or musical performances. This very broad exemption is allowed under Article 132 of the EU VAT Directive. In effect, this means that the promoter realises the full value of admission fees as no VAT is applied to admission fees. In this regard, the current exemption is already very generous covering a broad range of actives accessible to the wider public.

In addition, one of the basic tenets of EU VAT law relates to the proper functioning of the internal market. This means that it is not possible to use VAT law to favour artists not resident in this state over artists that are resident in the state.

In relation to providing a VAT exemption for performance fees charged by musical or theatrical performers to not-for-profit arts organisations, the position is that the VAT treatment of a particular good or service is determined by the nature of the good or service, and not by the status of the customer. There is no provision in European VAT law that would allow for an exemption from VAT on supplies by non-resident artists when they perform for not-for-profit cultural organisations as such an exemption would have to apply to all such performers. It is estimated that this would cost in excess of €20 million. All performance fees are therefore liable to VAT at the standard rate of 21 per cent.