Martin Heydon (Kildare South, Fine Gael)
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155. To ask the Minister for Finance if he will provide clarification on the VAT treatment of herbal teas; and if he will make a statement on the matter. [27158/14]

Michael McCarthy (Cork South West, Labour)
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157. To ask the Minister for Finance if consideration is being given to proposals to apply a VAT rate of 23% to herbal teas, vitamins and health supplements; if so, the reason this is being considered in view of the beneficial health effects of these products and the negative impact this proposal will have on employment in these industries; and if he will make a statement on the matter. [27194/14]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 155 and 157 together.

I am advised by the Revenue Commissioners that the EU VAT Directive (Council Directive 2006/112/EC) generally provides that supplies of goods and services are chargeable to VAT at the standard rate but that lower rates are permitted in very limited circumstances.  Food products can only benefit from the zero rating in accordance with Article 110 of the VAT Directive which permits the retention of the zero rate where the products were liable to VAT at the zero rate on and from 1 January 1991.

A range of food supplements and vitamins that encourage the maintenance of health, through the sustenance derived from a normal, healthy diet, benefit from the zero rate.  However, a food supplement taken for the purposes of muscle growth or body mass increase, or for the purposes of weight reduction or bodily sculpture, cannot benefit from the zero rate.  I would draw the Deputy's attention to Revenue eBrief 70/2011 which contains additional detail in relation to the VAT rates of vitamins and food supplements. 

I am further advised by the Revenue Commissioners that paragraph 8 of Schedule 2 of the Value-Added Tax Consolidation Act 2010 provides that that the supply of tea and preparations derived from the crushed leaves of the tea plant when supplied in non-drinkable form is liable to VAT at the zero rate.  The VAT applicable to herbal teas derived from plants other than the tea plant has been raised with me by the industry and the matter is subject to ongoing analysis.

Martin Heydon (Kildare South, Fine Gael)
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156. To ask the Minister for Finance if the health benefits of foods and drinks are considered when VAT rates on these items are being considered; the impact this consideration can have on the eventual VAT rate applied; and if he will make a statement on the matter. [27159/14]

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.  The EU VAT Directive generally provides that supplies of goods and services be chargeable to VAT at the standard rate, but that a reduced rate of 5% or higher can apply to food and drink in certain circumstances. Ireland applies the 13.5% reduced VAT rate to bakery goods and catered food, while the standard VAT rate of 23% applies to alcohol, soft drinks, confectionary and snacks.

In addition, Member States can retain historical zero-rated VAT treatment under Article 110 of the EU VAT Directive, where a good or service was zero rated on and from 1 January 1991.  Ireland applies the zero rate to most food. In this context, it is not possible to apply the zero rate to any new food and drink items that have not already applied at the zero rate, and where a decision is made to apply a positive VAT rate to food that is currently zero rated, it would not be possible to reintroduce the zero rate to that food.

The VAT rate applying to food and drink in Ireland was set many years ago and the historic VAT treatment places a limitation on the VAT policy options regarding food and drink.   Nonetheless, the health benefits of food and drink is reflected in the historic VAT rating of food and drink. The 23% standard VAT rate in general applies to less healthy food and drink such as alcohol, soft drinks, confectionary and snacks, while the zero rate applies fruit, vegetables, meat and dairy products.