Brian Stanley (Laois-Offaly, Sinn Fein)
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Question 147: To ask the Minister for Finance if he has plans to address the issue of travel agents based here paying VAT twice when doing business in another jurisdiction, i.e. when they book accommodation or event tickets in another country, as when doing business in England this means paying 21% VAT and then 23% Irish VAT plus 12.5% corporation tax. [13752/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that provisions covering the Travel Agents Margin Scheme are contained in Section 88 of the VAT Consolidation Act 2010. This scheme, which is provided for in Articles 306 to 310 of the EU VAT Directive, with which Irish VAT law must comply, was introduced with effect from 1 January 2010. Detailed discussions with the travel industry were carried out prior to the introduction of the scheme which is a standard EU-wide Scheme in operation in most Member States of the EU. The scheme deals with the activities carried on by travel agents who act in the capacity of a principal when supplying certain travel services such as transport, accommodation, etc, which they have bought in from third parties for onward supply to travellers. Travel agents covered by the scheme are liable to VAT on their margin on the services provided rather than the full consideration they receive in respect of the supply of these services. For example, a travel agent acting as principal in arranging visits to the UK will pay UK VAT at 20% on hotel accommodation and event tickets and incur a zero UK VAT-rate on transport. The travel agent will then pay Irish VAT at 23% only on the margin, that is, the difference between his income from travellers and his expenses in buying in the services (accommodation, tickets, transport). None of the constituents that make up the income from the traveller is subject to VAT more than once.

The nature of the scheme means that the travel agent only has an obligation to account for VAT on the margin in the country where the agent is established. The travel agent has no further VAT obligations in places where the travel services are supplied. The travel agent cannot recover any VAT charged when he/she purchases the travel services but this is because VAT is only accounted for on the margin when the services are supplied on to the traveller. Travel agents, like other traders, can recover VAT on deductible overheads (electricity, heating, stationary) incurred by them in connection with their taxable supplies.

The margin scheme has benefits for a travel agent in terms of complying with their VAT obligations. In the absence of the scheme the travel agent may have compliance obligations across many Member Sates of the EU which would place significant administrative burdens on them.