Billy Timmins (Wicklow, Fine Gael)
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Question 107: To ask the Tánaiste and Minister for Finance if he has been informed of an agreement on the format for compensating for the loss of fuel rebate in public transport. [2150/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The 2003 EU Energy Tax Directive incorporated special derogations which allowed specific excise duty reliefs to be applied in a number of Member States. In the Irish context, these derogations allowed for reduced rates to apply to fuel used for public transport services which includes school transport services.

While these derogations expired on 31 December 2006, Ireland, along with other Member States, sought retention of its derogations beyond that date. However the European Commission, who are the deciding authority, have to date refused all such requests. The Commission maintain that, in keeping with the EU Energy Tax Directive, Member States must withdraw the existing excise reliefs. The Commission's decision was published on its website in March 2007. At the Commission's behest my officials have indicated that Ireland will avail of the forthcoming Finance Bill to make the necessary legislative changes to conform with the Directive.

In the case of public passenger transport services, including school transport services, the Department of Transport and other relevant line Departments, in conjunction with my Department, are exploring alternative non-tax support mechanisms that could be put in place where appropriate to maintain the assistance currently being provided, subject of course to compatibility with EU State Aid requirements. In the interim the reduced rates applicable to fuel used will be maintained.

Kathleen Lynch (Cork North Central, Labour)
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Question 109: To ask the Tánaiste and Minister for Finance if he will clarify the element of EU legislation the reduction of VAT on condoms is incompatible with; and if he will make a statement on the matter. [2311/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The position is that the VAT rating of all goods and services are subject to the requirements of EU VAT law with which Irish VAT law must comply.

The standard VAT rate of 21% applies to condoms. Under EU VAT law, it is not possible to introduce new zero rates of VAT, as we can only retain the zero rating that was in existence on 1 January 1991. As condoms were not subject to the zero rate on 1 January 1991 it would not be possible to apply the zero rate of VAT to condoms.

Member States may have up to two reduced VAT rates of not less than 5 per cent for a specified number of goods or services which are set out in Annex III of the EU VAT Directive. Certain pharmaceutical products including condoms are included in Annex III. Ireland in common with the vast majority of EU Member States operates a single reduced rate. It would be possible to apply our reduced rate of 13.5% to condoms. The VAT treatment of this and similar products are being reviewed in the context of the Finance Bill process.

Martin Ferris (Kerry North, Sinn Fein)
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Question 110: To ask the Tánaiste and Minister for Finance if, in view of recent economic developments and the forecast made in Budget 2008 for Exchequer deficit of €4,866 billion in 2008, he accepts that the commitments to cut income tax contained in the Programme for Government are not viable; and if he will make a statement outlining that it is not his intention to implement these proposed cuts in the foreseeable future. [2396/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Programme for Government sets out a commitment to reduce the standard rate of income tax to 18 per cent and the top rate of income tax to 40 per cent over the lifetime of the Government, provided economic resources allow.

It is clear that we have now entered a period of lower economic growth than was generally envisaged in the early part of last year. This is reflected in the economic forecasts for 2008 published with the Budget in December last. Real GDP is expected to increase by 3 per cent in 2008 before picking up thereafter so that average growth over the three year period 2008 to 2010 is forecast at 31⁄2 per cent.

I would remind the Deputy that the Programme for Government is a five year programme. Budget 2008 was the first instalment of the delivery of that programme.