Richard Bruton (Dublin North Central, Fine Gael)
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Question 293: To ask the Minister for Finance further to his recent decision to increase the thresholds at which VAT returns must be made, if he has used up his full discretion under EU rules to increase these thresholds; his views on the contention that Irish thresholds are lower than would apply to a trader based in Northern Ireland; and if he will make a statement on the matter. [7363/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The VAT Directive permits the value of the VAT registration thresholds, if desired, to be maintained in line with inflation. If the current thresholds were increased in line with inflation, they would rise to around €36,900 for services and €73,800 for goods.

However, I should point out that I have significantly increased the VAT registration thresholds over the last two budgets. In last year's budget the VAT registration thresholds were increased from €25,500 to €27,500 for services and from €51,000 to €55,000 for goods. In this year's budget these threshold were increased further to €35,000 in the case of services and €70,000 in the case of goods. Taken together these increases have raised the VAT registration thresholds by some 37% over the last two years. Furthermore, these increases are in line with the recommendation contained in the Small Business Forum report published last year.

In relation to the level of thresholds operated here versus or European counterparts, It should be recognised that Ireland operates the third highest registration threshold for goods and the second highest threshold for services in the EU. Indeed, some Member States do not operate any VAT registration threshold, requiring all businesses to register.

Finally, registration thresholds reduce the administrative burden on both small businesses often at the developmental stage and on the Revenue authorities. However, registration thresholds are not intended as a means of keeping small businesses permanently outside the VAT system. Therefore in setting registration thresholds levels, the objective is to strike an appropriate balance between the desirability of reducing the administrative burden on small businesses and the Revenue authorities and the need to avoid undermining tax compliance or causing competitive distortions relative to registered firms.