Tom Hayes (Tipperary South, Fine Gael)
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Question 168: To ask the Minister for Finance if he has studied proposals for tax reform to ease the operation of charities; and his views on proposals for VAT compensation, threshold for donation relief and duty relief on banking cards. [4141/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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On the issue of the threshold for donations relief, amending the scheme to increase the tax relief available could significantly increase the current cost of the scheme to the Exchequer. 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, for example, a donation of just €5 per week over the course of a year would qualify. 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 that conclusion.

In relation to VAT compensation for charities and non-profit organisations, the position is that charities and non-profit groups engaged in non-commercial activity are exempt from VAT under the EU 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.

I understand that the Irish Charities Tax Reform Group (ICTRG) accepts that charities cannot be granted VAT refunds through the tax system. However, they are seeking the introduction of a grant or subsidy in lieu of the VAT charities pay on their business inputs and estimate that this would cost the Exchequer €18 million per annum. In this regard, the 140 bodies represented by the ICTRG already acknowledge that they receive €8.6 million in funding either directly or indirectly from the Exchequer.

The Revenue Commissioners have advised that there are approximately 7,000 charities registered with them. It is therefore likely that the introduction of a scheme along the lines proposed by the ICTRG would cost the Exchequer significantly more than the €18 million they have estimated. The introduction of a grant in lieu of VAT paid by registered charities would undoubtedly lead to other exempt bodies such as schools, hospitals and sporting organisations, many of which are already registered as charities, seeking to benefit from such a system. These are in most cases already receiving considerable Exchequer funding.

Finally, with regard to duty relief on banking cards, I assume the Deputy is referring to the proposal to introduce a donation scheme in relation to the stamp duty paid on such cards. I have no plans to introduce a scheme along the lines proposed. In line with normal practice, stamp duty revenues are applied by the Exchequer for the common good, as determined by the Oireachtas. Earmarking particular taxes reduces the discretion of Government and the Oireachtas in determining the priority areas in which public money should be spent.