Olivia Mitchell (Dublin South, Fine Gael)
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Question 127: To ask the Minister for Finance if he will postpone the introduction of the VAT for inward tour operators, at least until 2011, in order that it can be incorporated in quoted prices, as contracts for 2009 and 2010 are already negotiated; and if he will make a statement on the matter. [45537/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The new VAT arrangements for tour operators being introduced under the Finance Bill arise from an Appeal Commissioners' decision which made all tour operators liable to VAT. Any deferral of the proposed measures would mean that the normal VAT rules would apply creating difficulties and inequity of treatment whereby domestic and in-bound tour operators providing holidays in Ireland would pay VAT, while out-bound tour operators would not be obliged to pay VAT, but would still be entitled to recover VAT on their inputs.

The measures under the Finance Bill will ensure equity of treatment for tour operators and will bring their VAT treatment into line with most other EU Member States by introducing what is called a Margin Scheme. Under the Margin Scheme, Irish tour operators will have to account for VAT on the profit margin realised on the supply of a travel package. Inward tour operators established outside of the EU will not be subject to VAT.

The commencement of the Margin Scheme on 1 January 2010 is considered to provide ample opportunity for tour operators to prepare for the changes being made. My officials will be consulting with the sector in order to ensure a smooth implementation and operation of the new arrangements.