Written answers
Tuesday, 24 November 2009
Department of Finance
Tax Code
9:00 pm
Richard Bruton (Dublin North Central, Fine Gael)
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Question 158: To ask the Minister for Finance if he will cost various options (details supplied) for reductions in both the standard 21.5% and reduced 12.5% rates of value added tax; the amount of revenue that will be raised in a full year from the income levies; the amount of this that will be raised from earned income; the amount which will be raised from unearned income; and if he will make a statement on the matter. [42677/09]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Revenue Commissioners that the estimated cost to the Exchequer in a full year of a reduction in the reduced and standard rates of VAT by 0.5%,1%,1.5%, 2%, 2.5%, 3% and 4% is as follows:
Reduced VAT Rate of 13.5%
| Reduction | New Rate | Cost €m |
| 0.5% | 13% | -127 |
| 1% | 12.5% | -253 |
| 1.5% | 12% | -380 |
| 2% | 11.5% | -454 |
| 2.5% | 11% | -528 |
| 3% | 10.5% | -602 |
| 4% | 9.5% | -751 |
It should be noted that certain goods and services that were at a reduced rate of VAT on 1 January 1991, under the provision of Council Directive 2006/112/EC, cannot be reduced below 12%; these are known as parked goods and services. Consequently the additional cost of reducing the VAT rate on parked goods and services below 12% is not included in the estimates provided for reducing the reduced rate by 2% or more.
Standard VAT Rate of 21.5%
| Reduction | New Rate | Cost €m |
| 0.5% | 21% | -167 |
| 1% | 20.5% | -334 |
| 1.5% | 20% | -501 |
| 2% | 19.5% | -667 |
| 2.5% | 19% | -834 |
| 3% | 18.5% | -1001 |
| 4% | 17.5% | -1335 |
The Income Levy was introduced in October of last year in Budget 2009 and the rates subsequently increased in the Supplementary Budget in April of this year. Based on the Supplementary Budget forecasts, it was estimated that the Income Levy would yield approximately €1.1 billion in 2009 and approximately €2 billion in a full year. Revised forecasts will be published in the White Paper on Receipts and Expenditure on 5 December, which will set out tax forecasts for 2010 revenues on a pre-Budget basis. As is customary, post-Budget tax forecasts for 2010 and later years will be published on Budget day, 9 December. As regards the income base for levies, I am advised by the Revenue Commissioners that it is estimated that approximately 95% is earned income and 5% is unearned income.
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