Seán Barrett (Dún Laoghaire, Fine Gael)
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Question 145: To ask the Minister for Finance if the Finance Bill 2010 will be amended to exclude services supplied by local authorities from the VAT code; the reason local authorities are considered to be for-profit organisations and, therefore, liable for VAT; the reason unprofitable leisure services provided by local authorities are subject to the imposition of VAT while leisure activities provided by sports clubs or schools are not liable for VAT; and if he will make a statement on the matter. [18179/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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On 16 July 2009 the European Court of Justice ruled in case C-544/07 against Ireland, that Ireland should amend its VAT legislation to provide that services provided by State and public bodies, including local authorities, are in general subject to VAT. The Finance Act 2010 provided that such services will become taxable from 1 July 2010.

With regard to the definition of not-for-profit activity under VAT legislation, under the EU VAT Directive, treating local authorities and State bodies as not-for-profit organisations is not possible. The Directive provides distinct and separate regulation for not-for-profit bodies and State bodies, including local authorities. It is not possible to exempt from VAT any activity of a State body, including a local authority, or indeed any other business, simply because it is not making a profit.

Nonetheless, provision was made in the Finance Act that VAT on the supply of sports and community-type facilities by public bodies will come into effect not on 1 July but by Ministerial order. This will allow for a more complete examination of the issues, including an analysis of how the new rules might best be implemented. In practical terms this means that, for the present, the supply by local authorities of football pitches, swimming pools, halls etc to local clubs and societies will not be subject to VAT.