Maureen O'Sullivan (Dublin Central, Independent)
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24. To ask the Minister for Finance his views on whether the tax system would be fairer if self-employed persons were allowed to earn a modest income before registering for VAT, as the current threshold of €37,500 turnover does not equate to that sum in income, and that this threshold could be interpreted as problematic. [27555/16]

Michael Noonan (Limerick City, Fine Gael)
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The registration thresholds is a special scheme for small enterprises. In general, there are two thresholds: the goods threshold, which is currently €75,000, and the services threshold, which is €37,500. Different VAT registration thresholds for the supply of goods and services are a feature of the EU VAT Directive and Irish VAT legislation and reflect the profound difference between the two supplies; in general, the value added in relation to the supply of goods will be much smaller relative to turnover compared with a supply of services.

In the absence of this special scheme very small enterprises would be required to register for VAT, charge VAT on supplies and make periodic VAT returns and payments. In many cases, the compliance burden on such small enterprises would exceed the VAT payments to the Exchequer. In general, a person or company who exceeds the thresholds must register and account for VAT where their annual income exceeds the services threshold of €37,500, or the goods threshold of €75,000. For income tax purposes the income earned by a self-employed person is treated in the same manner as income earned by any other taxpayer.

VAT is governed by the EU VAT Directive (Council Directive 2006/112/EC), with which Irish VAT law must comply. The EU VAT Directive provides that VAT registration thresholds may only be raised by Member States to maintain their value in real terms, that is, they may only be increased in line with inflation. The VAT thresholds were increased to their current values on 1 May 2008. As the Central Statistics Office figures show the consumer price index is below the level it reached in 2008, it is not possible to increase the thresholds. I would point out, however, that Ireland's VAT registration threshold for small enterprises supplying services is the seventh highest in the EU while the goods threshold is the third highest.