Chris Andrews (Dublin South East, Fianna Fail)
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Question 186: To ask the Minister for Finance his views on the consideration of a reduction in, VAT for a period of 24 months, in biodegradable packaging, to encourage the sale of that product and reduce the use of non biodegradable packaging. [7596/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Packaging, including biodegradable packaging, is liable to VAT at the standard rate of 21%. However, where goods are supplied packed for sale and no separate charge is made for the package in which the goods are contained, the rate of VAT chargeable on that packaging is the rate that applies to those goods. With regard to incentivising environmentally friendly goods or packaging, there is no provision in European VAT law that would allow the application of a reduced VAT rate, on a temporary or permanent basis, on supplies of goods or services based on their environmental impact per se.

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 the standard VAT rate to the reduced rate of 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 also draw to the Deputy's attention that in 2008 the EU Commission 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 Council of Finance Ministers meeting in March 2009 the Ministers noted that reduced VAT rates as a tool for achieving environmental policy objectives are relevant only to a certain extent.