Michael Creed (Cork North West, Fine Gael)
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Question 352: To ask the Minister for Finance if he will introduce a VAT refund on micro wind turbines; and if he will make a statement on the matter. [33936/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would point out that any proposed changes in VAT must be considered in the context of EU law, with which Irish VAT law must comply. There is no provision in European VAT law that would allow the application of a reduced VAT rate, or an exemption from VAT, on supplies of goods or services based on their environmental impact per se. While Member States can retain the zero rating provisions which they had in existence on 1 January 1991, they cannot introduce any new ones. Therefore, it is not possible for Ireland to apply a zero rate to micro wind turbines.

The supply of certain environmental products, such as insulation materials, wind turbine equipment, wood pellet boilers and solar panels, are chargeable at the standard VAT rate which in Ireland is 21.5%. However, the reduced VAT rate of 13.5% may be applied to such products where they are provided under a single supply and install contract where the VAT exclusive cost of the goods does not exceed two-thirds of the total VAT exclusive charge to the customer.

The Programme for Government contains a commitment to examine the current VAT classifications with a view to reducing the rate of VAT applied to certain environmental goods and services from the standard VAT rate to the reduced VAT rate of 13.5%. While the scope for reduced rates is limited, the Finance Act 2008 provided for the VAT rate applicable on the supply of miscanthus rhizomes, seeds, bulbs, roots and similar goods used for the agricultural production of bio-fuels being reduced from 21% to 13.5%. This and other measures under the Programme for Government clearly demonstrate the Government's commitment to addressing the environmental challenges which we face.

I would draw to your attention that the EU Commission recently undertook a study of the possibility of using reduced VAT rates as a tool to support the climate change agenda. Ireland expressed support for such a study. However, at a recent Council of Finance Ministers meeting, the Ministers noted that reduced VAT rates as a tool for achieving environmental policy objectives are relevant only to a certain extent.