Tom Hayes (Tipperary South, Fine Gael)
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Question 168: To ask the Minister for Finance the reason the laundry and dry cleaning industry as a main service provider to the tourism industry, has not been included in the reduced VAT rate of 9%; if there are plans to reverse same; and if he will make a statement on the matter. [18681/11]

Michael Noonan (Limerick City, Fine Gael)
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VAT is charged on the supply of goods and services. The rate applying is subject to the requirements of EU VAT law, with which Irish VAT law must comply. While many tourist-related services were made subject to a new temporary lower reduced VAT rate of 9% from 1 July, it is not possible to extend this treatment to the goods and services that remain subject to the 13.5% rate. This arises from the fact that many of the goods and services to which Ireland applies a reduced rate of VAT, including dry cleaning and laundry services, have their basis under an EU derogation that provides that as we applied a reduced rate to these items on 1 January 1991, we are entitled to continue applying that reduced rate to those items. However, this continuation of reduced rate application is conditional on the rate being no less than 12%. These are known as 'parked' items, and are provided for under Article 118 of the EU VAT Directive. As laundry and dry cleaning services are such parked items, it is not possible for Ireland to apply the rate of 9% to them. It is for this reason that the Jobs Initiative introduced a 9% VAT rate in respect of tourist activities such as restaurant and hotel accommodation services, while other tourist activities such as tour guide services and the short-term hire of cars, boats, caravans and mobile homes remain liable to VAT at the 13.5%. However, it should be noted that in the majority of EU Member States dry cleaning and laundry services apply at their standard VAT rate of up to 25% in some cases, compared to 13.5% in Ireland.