James Bannon (Longford-Westmeath, Fine Gael)
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Question 106: To ask the Minister for Finance if he will postpone the intended introduction of VAT on the sale of affordable houses, the operation of shared ownership schemes and local authority provided leisure activities from 1 July 2010 until 1 January 2011 in view of the fact that transitional measures are usually included when the scope of VAT is extended, to avoid any double charge of irrecoverable VAT; and if he will make a statement on the matter. [19743/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would like to point out in regard to deferring the implementation date of applying VAT on services provided by public bodies, that the European Court of Justice ruled, in the case C-544/07 against Ireland on 16 July 2009, that Ireland should amend its VAT legislation to provide that State and public bodies are in general subject to VAT. This case goes back to 2004 when infringement proceedings were taken by the European Commission against Ireland. Given the time that has passed since the Court's Judgement, and since the commencement of the case, it is imperative that the VAT implementation takes place as soon as possible.

1 July 2010 was chosen as the date of implementation of VAT in this regard in order to allow time to process the relevant legislation and for State and public bodies including local authorities, to prepare for the change to their administrative systems. Indeed, since the Judgement issued the European Commission have corresponded with us on a number of occasions seeking updates on our progress as regards its implementation and we have informed them of the recent enactment of the Finance Act 2010. Consequently, in the circumstances any deferral of the implementation date is not at this stage realistically feasible.

With regard to the specific local authority services outlined by the Deputy, I would point out that the shared ownership scheme, as a financial service, would, in any case, be exempt from VAT. In the case of local authority provided leisure activities, 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.

In relation to whether the sale of affordable housing operated by local authorities should become subject to VAT, I would point out that the ECJ Judgement, and the EU VAT Directive, provide that services supplied by State bodies in the case of their regulatory capacity as a public authority would remain outside the scope of VAT to the extent that their treatment as non-taxable would not lead to a distortion of competition. The supply of affordable housing would be considered a regulatory function of local authorities in this regard, however, the extent to which those services are in competition with private developers is currently being considered. I would also like to draw to your attention that where a service is made subject to VAT, the provider of the service is entitled to claim VAT on inputs in the provision of that service, where the VAT on inputs arise after the date the service is made subject to VAT.

The Revenue Commissioners are proceeding with implementing the new regime and liaising where possible with local authorities to ensure transition to the new VAT arrangements. While it is accepted that there may be initial teething problems, it is expected, as in the case of all tax legislation, that the State and public bodies comply with the new VAT rules from 1 July 2010.

James Bannon (Longford-Westmeath, Fine Gael)
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Question 107: To ask the Minister for Finance if he will list the sale of affordable houses and the operation of the shared ownership scheme as non-taxable services in the amended Finance Bill in view of the fact that these are severely impacting on local authorities; and if he will make a statement on the matter. [19744/10]

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

The shared ownership scheme, as a financial service, would be exempt from VAT. In relation to whether the sale of affordable housing operated by local authorities should become subject to VAT, I would point out that the ECJ Judgement, and the EU VAT Directive, provide that services supplied by State bodies in the case of their regulatory capacity as a public authority would remain outside the scope of VAT to the extent that their treatment as non-taxable would not lead to a distortion of competition. The supply of affordable housing would be considered a regulatory function of local authorities in this regard, however, the extent to which those services are in competition with private developers is currently being considered.

I would also like to draw to your attention that where a service is made subject to VAT, the provider of the service is entitled to claim VAT on inputs in the provision of that service, where the VAT on inputs arise after the date the service is made subject to VAT.