Michael McGrath (Cork South Central, Fianna Fail)
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Question 181: To ask the Minister for Finance his views on the fact that the below cost selling of alcohol results in retailers claiming a refund of VAT on the product from the Revenue Commissioners in view of the fact that the input credit on their purchase of the project exceeds the output tax charged to the consumer on the sale of the product (details supplied); if he believes this represents an indirect subsidy by the State on the below cost sale of alcohol; and if he will make a statement on the matter. [9166/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Under EU VAT rules traders who are registered for VAT collect VAT on the goods and services that they sell. In turn such traders are entitled to recover the VAT they incur on their business inputs used in the purchase or production of goods or delivery of services. VAT is a tax on the value added to a supply and the collection and recovery of VAT takes place at each stage of the chain of supply from manufacturing to retailer. Consequently, if there is a decrease in value at any stage in the process the trader is entitled to a refund of the excess of VAT incurred over that collected.