Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The European Court of Justice Case C-554/07, which concerns the VAT treatment of State and public bodies in Ireland, ruled against Ireland on 16 July 2009. In compliance with the Court's ruling, Section 117 of the Finance Act 2010 included provision to make public bodies subject to VAT with effect from 1 July 2010. In summary, the VAT Act 1972, which has since been consolidated into the VAT Consolidation Act 2010, was amended to provide that public bodies, including local authorities, are made subject to VAT. More specifically, they are subject to VAT where they engage (i) in economic activities; (ii) in any activities as outlined in Annex I of the EU VAT Directive, unless the activity is carried out on such a small scale as to be negligible; and (iii) in the case of their regulatory capacity as a public authority, when their treatment as non-taxable could lead to a distortion of competition.

Services that became liable to VAT on 1 July 2010 include such services as waste collection, landfill and recycling services; off-street parking; toll roads; the operation of leisure facilities; rent from certain lettings of commercial property; and the supply of staff and data. It should be noted that such services had already been subject to VAT if provided by a private operator. VAT on the provision of community and sporting facilities by public bodies will come into effect by Ministerial order.

However, other services operated by public authorities were not made subject to VAT by the Finance Act 2010 provisions, as they are otherwise exempted. In that context, for example, the supply of water, education, health and passenger transport services were not made subject to VAT as they are otherwise exempted from VAT. Examples of the types of activities by public bodies where a charge applies which remain outside the scope of VAT, include parking fines, fees for passports, driving licences etc, development levies, casual trading licences and certificates of compliance. These are purely regulatory functions.