Michael Healy-Rae (Kerry South, Independent)
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Question 74: To ask the Minister for Finance if he will reduce from €250 to €100 the amount of money on which tax relief can be achieved when being donated to charitable causes; and if he will make a statement on the matter. [27876/11]

Michael Noonan (Limerick City, Fine Gael)
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Section 848A of the Taxes Consolidation Act 1997 allows tax relief at the marginal rate on donations made by either individuals or corporate bodies to eligible charities and other approved bodies. In order to qualify for the tax relief currently, a minimum donation of €250 must be made to the body concerned. The number of donors in respect of whom tax relief was claimed was approximately 155,000 in 2009. Reducing the threshold to allow tax relief on smaller donations, as the Deputy has proposed, could significantly increase the current cost of the scheme to the Exchequer. Representatives of the charities sector estimated in 2005 that such a measure could double the cost of the scheme.

The tax relief available for donations is already very generous. There is no upper limit on the amount that can be donated generally and relief is granted at the donor's marginal rate of income tax. Donations can be cumulative, so that a donation of just €5 per week over the course of a year would qualify.

Reducing the threshold to €100 would greatly increase the administration overhead associated with the scheme. For example, many donors making such smaller donations may not be paying tax at all, but may not indicate this on the relevant form, with the result that the charitable body might claim a refund from Revenue on the basis that the donor is a PAYE taxpayer. The additional checking required and possible denial of the refund would increase the administrative burden all round.

The €250 threshold has not changed since it was introduced in 2002. Normal inflation levels effectively have reduced the value of the threshold over time. In addition, the donations scheme was introduced to encourage the donation of large sums of money to charities and certain other bodies. It was never envisaged that the scheme should subsidise smaller donations, which in all likelihood, would be made in any event.

Notwithstanding the foregoing, the Deputy will be aware that all tax reliefs and incentives are subject to regular review as part of the annual Budget and Finance Bill process. Any significant decisions taken by the Government to change such reliefs or incentives in this regard would normally be announced on Budget Day.

It is worth also noting that the Government has re-established the Forum on Philanthropy and Fundraising and it will be considering how philanthropy can be encouraged, including suggestions for tax changes.

Michael Healy-Rae (Kerry South, Independent)
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Question 75: To ask the Minister for Finance if a VAT compensation scheme for charities will be introduced operating within the EU Commission rules; and if he will make a statement on the matter. [27877/11]

Michael Noonan (Limerick City, Fine Gael)
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Charities and non-profit groups engaged in non-commercial activity are exempt from VAT under the EU VAT Directive, with which Irish VAT law must comply. This means they do not charge VAT on the services they provide and cannot recover VAT incurred on goods and services that they purchase. Essentially only VAT registered businesses which charge VAT are able to recover VAT. I have no plans to introduce a VAT refund scheme for charities. It is not clear that refunding VAT paid by charities is an appropriate method as opposed to grant-aiding the activities of charities using other criteria.

The tax code already treats charities in a favourable manner. The tax code currently provides exemption for charities from Income Tax, Corporation Tax, Capital Gains Tax, Deposit Interest Retention Tax, Capital Acquisitions Tax, Stamp Duty, Probate Tax, Dividend Withholding Tax and the uniform scheme of tax relief for donations.