Paschal Donohoe (Dublin Central, Fine Gael)
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Question 101: To ask the Minister for Finance his plans to lower the rate of VAT on architectural services to a possible 13%; and if he will make a statement on the matter. [15880/11]

Michael Noonan (Limerick City, Fine Gael)
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Any proposed changes in VAT must be considered in the context of EU law, to which Irish VAT law must comply. In this regard, there is no provision in European VAT law that would allow the application of a reduced VAT rate on supplies of architectural services. Annex III of the VAT Directive lists the goods and services to which Member States may apply a reduced rate. In addition, Member States can retain the reduced rated provisions which they had in existence on 1 January 1991. As architectural services are not contained in Annex III, nor did a zero or reduced rate apply to such services in 1991, a reduced rate cannot now be applied to such services.

Paschal Donohoe (Dublin Central, Fine Gael)
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Question 102: To ask the Minister for Finance his plans to reduce the VAT rate on energy reducing services from 21% to 13% as a means to incentivise householders to undertake energy upgrading of their homes and to increase construction employment; and if he will make a statement on the matter. [15881/11]

Michael Noonan (Limerick City, Fine Gael)
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I would point out that the VAT rate applicable to construction and maintenance services, including energy reducing services therein, is 13.5% and such services have applied at a reduced VAT rate since the introduction of VAT in 1973.

The supply of certain environmental products, such as insulation materials, wind turbine equipment, wood pellet boilers and solar panels, are chargeable at the standard VAT rate of 21%. However, the reduced VAT rate of 13.5% may be applied to such products where they are provided under a single supply and install contract where the VAT exclusive cost of the goods does not exceed two-thirds of the total VAT exclusive charge to the customer.

EU VAT law, with which Irish VAT law must comply, does not permit reductions in VAT, for environmental or other reasons, that would create a distortion of competition between similar goods or services. The EU Commission undertook a study of the possibility of using reduced VAT rates as a tool to support the climate change agenda. While Ireland expressed support for such a study, the EU Council of Finance Ministers decided in 2009 not to allow reduced VAT rates as a tool for achieving environmental policy objectives. In general it was considered that if assistance was required, providing it through direct expenditure measures was the better approach to adopt.

In this context, the recent Jobs Initiative made provision for encouraging energy reducing services in the construction industry through the investment of an additional €30 million in 2011 in the national home retrofitting scheme.