Clare Daly (Dublin North, United Left)
Link to this: Individually | In context | Oireachtas source

27. To ask the Minister for Finance his plans regarding the VAT Directive applicable only to multinationals, neutralising VAT between related companies, but providing a substantial cash flow advantage to multinational corporations competing in the same market place as small indigenous business; and if he will make a statement on the matter. [45947/14]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The EU VAT Directive does not provide specific rules that are applicable only to multinationals or allow for cash flow advantages that are available to multinational corporations and not to small indigenous business. My officials believe the Deputy may be referring to VAT groups.

I am advised by the Revenue Commissioners that the EU VAT Directive establishes the EU Community VAT legislation upon which the national VAT legislation of all EU Member States, including Ireland, must comply.  Article 11 of the VAT Directive provides that a Member State may regard as a single taxable person (or VAT group) any persons established in the territory of that Member State who, while legally independent, are closely bound to each other by financial, economic and organisational links.  Article 11 is transposed into Irish legislation in Section 15 of the Value-Added Tax Consolidation Act 2010.  Section 15 provides that the Revenue Commissioners may regard two or more person established in the State that are closely bound by financial, economic and organisational links as a single taxable person (or VAT group) if this seems necessary or appropriate for the purpose of efficient and effective administration (including collection).

Where the Revenue Commissioners treat a number of related persons as a single taxable person this generally removes the necessity of issuing VAT invoices in respect of transactions between these persons except in the case of certain property transactions. The persons that may be considered as related persons for the purposes of a single taxable person (or VAT group), is not confined to multinational corporations and includes a body corporate and an unincorporated body of persons as well as individuals.  Since the type of person who may be included in a VAT group is broad in scope I cannot accept that the VAT provisions referred to by the Deputy provide a greater advantage to multinational corporations.

Furthermore, the Irish VAT code provides a generous cash flow advantage, specifically for small to medium enterprises, under the cash accounting system.  While VAT is normally accounted for on the basis of invoices issued, regardless of whether or not the trader has been paid for the supply, businesses with an annual turnover of €2 million or less can opt to account for VAT on a cash receipts basis, where they do not have to pay VAT until payment for the supply is actually received.  This facility assists a significant number of small indigenous businesses in the critical area of cash flow.