Catherine Murphy (Kildare North, Independent)
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Question 18: To ask the Minister for Finance his views on implementing a reduction in the VAT rate on labour intensive crafts in view of the fact that it is difficult for Irish instrument makers to compete with their UK counterparts in view of the relative weakness of the pound and since very few British makers are VAT registered; and if he will make a statement on the matter. [25189/11]

Michael Noonan (Limerick City, Fine Gael)
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The VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. Under the VAT Directive Member States may only apply the reduced VAT rate to those goods and services which are listed under Annex III of the VAT Directive. I understand that the major sectors within the Irish craft industry are pottery, glass, jewellery, textiles and furniture. Annex III does not provide for a reduced rate of VAT to be applied to these goods, which are consequentially subject to the standard VAT rate of 21%. I would draw to the Deputy's attention that the VAT treatment of persons supplying crafts, including instruments, in Ireland and the UK is very similar. Sales of crafts are liable to VAT at the standard rate of VAT, which is 21% in Ireland and 20% in the UK. In addition, in Ireland, a person who sells instruments is obliged to register for VAT if their sales exceed or are likely to exceed €75,000 in any twelve-month period. A similar person in the UK is obliged to register for VAT there if their sales exceed or are likely to exceed £73,000 (roughly equivalent to €84,000 at the current exchange rate. Below these thresholds persons supplying instruments are generally exempt from VAT.