Pearse Doherty (Donegal, Sinn Fein)
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81. To ask the Minister for Finance the steps he will take to ensure mountain rescue services can avail of a reduced tax burden given the stated European Commission position that, in general, member states can also introduce on a national level targeted compensation mechanisms outside the VAT system to alleviate the cost of VAT on acquisitions; and if he will make a statement on the matter. [5133/16]

Michael Noonan (Limerick City, Fine Gael)
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VAT law is governed by the EU VAT Directive, with which Irish VAT law must comply.  The EU VAT Directive makes specific provision under Articles 148 and 169, for a zero rate of VAT to apply to the supply of vessels for rescue or assistance at sea.  Irish VAT law transposed this provision in 1978 by providing that the zero rate of VAT apply to the supply of large vessels used for sea rescue.  In addition, a VAT Refund Order for the purchase of smaller sea rescue vessels was introduced from 1985, and extended in 2013 to apply to vessels for inland water rescue.  Irish VAT law does not provide for an exemption from VAT on supplies or purchases of mountain rescue equipment as this is not provided for under the EU VAT Directive.

Last year as part of Budget considerations a Working Group comprising representatives from the Department of Finance, the Revenue Commissioners and the Irish Charities Taxation Reform (ICTR) group was established to examine options available to reduce the VAT burden of charities. Having considered the report, I decided to take no action in relation to the VAT burden on charities at this time. 

Mountain rescue services are treated in a similar manner to charities in that they are exempt from VAT under the EU VAT Directive. This means that they do not register for VAT and cannot recover VAT incurred on goods and services that they purchase. This non-entitlement to VAT deductibility is a general feature of VAT exemption. Introducing a VAT refund scheme for an exempt organisation such as mountain rescue services would lead to similar claims from other VAT exempt organisations including charities and sporting organisations. Requests for new Ministerial Refund Orders have been consistently refused since the 1980s primarily to maintain the integrity of the VAT system and I will not be introducing a targeted compensation scheme for mountain rescue services at this time.