Paschal Donohoe (Dublin Central, Fine Gael)
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The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. As Ireland already operates 9% and 13.5% reduced VAT rates, it is not legally possible to introduce a third VAT rate at 5%. However, it is possible under Annex III of the VAT Directive to apply a reduced VAT rate of 9% or 13.5% to non-oral pharmaceutical products.

In order for a zero rate of VAT to be applied to a good or service, that good or service must have applied at the zero rate on 1 January 1991 and have continued to apply at that rate since. No new items may be charged at the zero rate, where they had not been subject to the zero rate before 1991. In Ireland the zero VAT rate applies to oral medicines, including oral medicines for animals, as they were subject to the zero rate on and since 1 January 1991. However, non-oral animal medicines were not subject to the zero rate on 1 January 1991, so it is not legally possible to apply the zero rate to them now.

Under the EU VAT Directive, Ireland has scope to potentially reduce the rate of VAT on non-oral animal medicines from 23% to a reduced rate. However, such a reduction would have a limited benefit to the farming community, as VAT-registered farmers are entitled to full VAT deductibility on their input costs while unregistered farmers are compensated for their VAT input costs through the flat rate addition they receive on payments for supplies of agricultural produce and services.