Written answers

Monday, 11 September 2017

Department of Finance

VAT Rate Application

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry, Independent)
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119. To ask the Minister for Finance if he will address a matter (details supplied) regarding the VAT rate for retailers and small businesses; and if he will make a statement on the matter. [37202/17]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I would point out that VAT is charged on the supply of goods and services, and the rate applying is subject to the requirements of EU VAT law with which Irish VAT law must comply. The VAT 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 VAT Directive that permits a lower rate. In this respect, when the 9% VAT rate was introduced in 2011 for tourism related services, it was introduced in respect of certain goods and services to which a 9% VAT rate was permissible under EU VAT law, which were deemed relevant to tourism. Some tourism related activity, such as car hire, remains liable to VAT at the 13.5% rate as the provisions of the EU VAT Directive do not allow for a 9% VAT rate to apply to them. In this context VAT does not apply to retailers but to the goods supplied by retailers and the rate applying will depend on the goods being supplied. It is not possible to apply a 9% VAT rate to all supplies made by retailers. EU VAT is a tax on consumption and VAT rates are charged on goods and supplies, not persons.

Any changes to VAT rates outside of what is currently permitted by the EU VAT Directive must be negotiated at EU technical working groups and ultimately agreed by the EU Council of Finance Ministers. The EU Commission published an Action Plan on the future of VAT “Towards a single EU VAT Area - Time to decide”, which sets out the Commission’s pathway for modernising the VAT system and contains a proposal to look at VAT rate policy across the EU in 2017. The Action Plan’s proposal on rates may offer Member States more flexibility in the future in determining VAT rates applicable to goods and services. However, the Deputy will be aware that any proposed changes to the current EU VAT Directive would require unanimous agreement from all Member States.

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