Written answers

Tuesday, 6 July 2010

10:00 am

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 124: To ask the Minister for Finance the likely full year cost to the Exchequer of reducing the rate of VAT charged on non-oral medicines to 13.5%, 5% and 0% respectively; if such reductions are permissible under EU legislation; the reason non-oral medicines continue to attract the standard rate VAT charge; and if he will make a statement on the matter. [29214/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I am advised by the Revenue Commissioners that the full year cost to the Exchequer of reducing the rate of VAT charged on non-oral medicines from the current rate of 21% to 13.5%, 5% and the zero rate is estimated to be €30 million, €64 million and €83 million respectively. As the Deputy will be aware, Member States must apply a standard rate of VAT, and may opt to also apply one or two reduced rates of VAT to certain goods and services listed in Annex III of the EU VAT Directive. In addition, where a Member State applied a zero rate or reduced rate to specific goods or services on 1 January 1991, they may retain that system. However, no other items may be charged at the zero rate, or items outside of those listed in Annex III at a reduced rate, where they had not been subject to the reduced or zero rate before 1991. In this context, Annex III permits Member States to apply a reduced rate to certain pharmaceutical products, of between 5% and 15%, and this applies to non-oral medicines. However, as the zero rate did not apply to non-oral medicines on 1 January 1991, they cannot legally apply at that rate.

In Ireland the zero VAT rate applies to oral medicines, as it was in place prior to 1 January 1991. The standard VAT rate of 21% applies to non-oral medicines, as it does to the majority of all goods and services in the State. The standard rate of VAT is applied to non-oral medicines in view of the cost involved in applying a reduced rate. The application of a reduced rate to such medicines would also lead to calls for other goods and services to be charged at a reduced rate.

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