Pearse Doherty (Donegal, Sinn Fein)
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173. To ask the Minister for Finance the engagements his Department has had with the European Union Commission seeking changes in value added tax rates applicable here since 2013; and if he will make a statement on the matter. [6165/16]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that the VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law must comply. The Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless there is a provision in the Directive that permits a lower rate. Settled case law of the Court of Justice of the European Union (CJEU) requires that the limited circumstances in which rates other than the standard rate are used be strictly interpreted and narrowly applied so as not to create or increase divergence of VAT treatment in the EU Member States. These limited circumstances are set out in the Schedules of the Value-Added Tax Consolidation Act 2010

Schedule 1 of the Value-Added Tax Consolidation Act 2010 lists activities that are exempt from VAT and in respect of which the supplier has no entitlement to deduct input VAT. Schedule 2 lists supplies that are liable at the zero rate and in respect of which the supplier has an entitlement to deduct input VAT. Schedule 2 includes international services, human and animal oral medicines, children's clothing and footwear, books and a range of food and drink items. The range of food products that can benefit from the zero rating is constrained by Article 110 of the VAT Directive which permits the retention of the zero rate for "clearly defined social reasons" where the products were liable to VAT at the zero rate on 1 January 1991.

Schedule 3 lists the goods and services that are liable to VAT at the reduced rates of 9% and 13.5%. The goods and services currently liable to VAT at the 9% rate are ones listed in Annexe III of the VAT Directive and Ireland was permitted under Article 113 of the Directive to apply a rate lower than 12% to these goods and services. The goods and services liable to VAT at the 13.5% rate are ones that are not listed in Annexe III, but in respect of which Ireland is permitted under Article 118 to retain a reduced rate. The goods and services to which the 9% rate applies include:

- the supply of food and drink (excluding alcohol, soft drinks and bottled water) in the course of catering;

- hot take-away food and hot drinks;

- hotel lettings, including guest houses, caravan parks, camping sites etc.;

- admissions to cinemas, theatres, certain musical performances, museums, art gallery exhibitions;

- amusement services of the kind normally supplied in fairgrounds or amusement parks;

- the provision, by a person other than a non-profit making organisation, of facilities for taking part in sport;

- printed matter e.g. newspapers, magazines, brochures, leaflets, programmes, maps, catalogues, printed music (excluding books);

- hairdressing services.

The goods and services to which the 13.5% rate applies include:

- The supply of gas, electricity, solid fuel and home heating oil;

- The supply of new buildings, concrete block and ready to pour concrete;

- The supply of photographic services, agricultural services and photographic services;

- The hire of cars and boats;

- Beauty services such as facials, nail treatments, tanning and sunbed services.

The supply of goods and services not listed in the Schedules to the Value-Added Tax Consolidation Act 2010 is liable to VAT at the standard rate. Where a good or service is not specified in the Schedules mentioned then the correct rate is the standard rate. Revenue does have a VAT rates database on its website() that lists thousands of product and services types and gives the correct VAT rate by reference to the Schedules.

It is widely recognised that there are anomalies in the rates applying to goods and services and I receive Parliamentary Questions concerning particular anomalies from time to time. Under the VAT Directive the apparent anomalies can generally only be eliminated through applying higher rates to goods and services currently liable at the zero- rate or at one of the reduced rates. 

Any changes to VAT rates outside of what is currently permitted though the EU VAT Directive must be negotiated at EU technical working groups and ultimately agreed at ECOFIN. As with all tax files, any changes require unanimous agreement from all Member States. The EU Commission is planning to launch an Action Plan on VAT in the very near future which I expect to open up the possibility of adding more flexibility to the application of VAT rates by Member States. I expect technical discussions at an official level to begin during the current Dutch Presidency of the EU. My officials will engage fully in these discussions.