Written answers

Wednesday, 18 September 2013

Department of Finance

VAT Rates Application

Photo of Tony McLoughlinTony McLoughlin (Sligo-North Leitrim, Fine Gael)
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151. To ask the Minister for Finance if consideration will be given to the current VAT rate on coal, based on the fact that there remains a price differential of 7.5% in terms of VAT between this Country and Northern Ireland and furthermore that the price difference from 1 May 2014 will be €52.67 per tonne due to proposed increases in carbon taxes (details supplied); and if he will make a statement on the matter. [36968/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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With regard to the VAT rate applicable to supplies of coal, any change in VAT rates must be in compliance with EU VAT law, with which Irish VAT law must comply. The EU VAT Directive provides that coal, in general, should apply at the standard VAT rate of a Member State, which in Ireland is 23%. However, the VAT Directive has a number of derogating provisions whereby Member States may maintain a tax rate applicable at a certain date even though such supplies would ordinarily be supplied at the standard rate. The UK can apply the 5% rate to coal and other fuels used for residential purposes on the basis that they had a zero VAT rate in place for those supplies on 1 January 1991. This provision also allows Ireland to apply the zero VAT rate to certain foodstuffs, children’s clothes and shoes, and certain medicines on the basis that the VAT rate in force on 1 January 1991 was zero. However, it is not possible for Ireland to apply a zero rate or 5% rate to coal, as we did not apply a zero rate to coal on that date. Nonetheless, as Ireland applied a reduced VAT rate to coal on 1 January 1991, this allows us to continue to apply a reduced rate to coal, but only where the rate is 12% or more. In this context, the only means of reducing the VAT rate on coal would be through a general reduction in the 13.5% VAT rate, which would be excessively costly to the Exchequer. The application of carbon tax on solid fuels does give rise to a price differential with Northern Ireland, but the supply of solid fuel in the State is strictly controlled under regulations made by the Minister for the Environment, Community and Local Government and the commencement of solid fuel carbon tax, with effect from 1 May 2013, was announced on that basis in Budget 2013.

The Air Pollution Act, 1987 (Marketing, Sale and Distribution of Fuels)(Amendment) Regulations 2011 (S.I. No. 270 of 2011), made by the Minister for the Environment, Community and Local Government, specifies the standards for coal placed on the market and extends the regulatory framework in relation to the distribution and sale of coal in the State. Under the Regulations, coal merchants supplying coal products in the State, including those based in Northern Ireland, are obliged to register with the Environmental Protection Agency and comply with sulphur content and packaging standards applicable to coal sold in the State. These standards differ to those applying in Northern Ireland. In particular, the sulphur content of coal that may be sold in the State, which is not more than 0.7% sulphur by weight, is lower than the standard which applies in Northern Ireland. Therefore, coal supplied in Northern Ireland, to standards applicable in that market, do not meet the fuel standards applicable in the State and may not be sold in the State. Compliance with the Regulations is enforced by the Local Authorities.

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