Written answers

Thursday, 25 September 2008

5:00 pm

Photo of Martin FerrisMartin Ferris (Kerry North, Sinn Fein)
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Question 45: To ask the Minister for Finance if his Department has examined whether there are essential everyday items subject to 21% VAT that should be more correctly subjected to 13.5% VAT. [31315/08]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. Under VAT law Member States must apply a standard rate of VAT and may opt to also apply one or two reduced rates of VAT to certain goods and services listed in Annex III of the EU VAT Directive. In addition, where a Member State applied a zero rate or reduced rate to specific goods or services on 1 January 1991, they may retain that system, although no new items may be added. Ireland basically operates three rates of VAT; a zero rate, a standard rate of 21%, and a reduced rate of 13.5%. I should point out that the standard VAT rate, as its title indicates, is meant to be the normal VAT rate to be applied to goods and services. Variations from the standard rate are meant to be exceptions. Compared to other Member States Ireland, as outlined below, has widely used such exceptions to apply a zero rate or reduced rate of VAT to a wide range of goods and services.

The majority of foods in Ireland are currently charged at the zero rate of VAT, as are children's clothes and shoes, books and oral medicines, as these items were zero-rated on 1 January 1991. Under normal EU rules such goods would be chargeable at the reduced rate of 13.5%, with the exception of children's clothes and shoes, which would be chargeable at 21%. In relation to the reduced rate, in Ireland, fuel used for heat or light are chargeable to VAT at the reduced VAT rate of 13.5%, being only one of eight EU Member States to do so. The provision of residential housing is also chargeable at this rate. In recent years children's car safety seats were added to the list of reduce-rated goods. In terms of services, many labour intensive services are subject to the reduced rate of VAT. These include general repair and maintenance services e.g. car repairs, repair of electrical appliances and services consisting of the care of the human body e.g. hairdressing. In addition, the reduced rate applies to waste acceptance and disposal services and veterinary services and agricultural services. In this regard, it should be noted that in Ireland, zero and reduced rated goods and services amount to 46% of all goods and services liable to VAT, which is high relative to most other Member States.

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