Gerald Nash (Louth, Labour)
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89. To ask the Minister for Finance if he will consider a short-term reduction in the rate of VAT charged on energy and certain other household utility bills to assist households with escalating heating and energy costs; and if he will make a statement on the matter. [54318/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. The VAT Directive obliges each Member State to have a standard rate of VAT and also allows that a Member State may choose to have no more than two reduced rates of VAT which may be applied to certain goods and services i.e. any of those listed in Annex III of the Directive. In addition, within this rates structure, the Directive allows for historic VAT treatment to be maintained under certain conditions on certain goods and services not provided for in Annex III. Under this framework, Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%. Also, Ireland has retained its historic application of one of the reduced rates of VAT, 13.5%, to a range of services (including the supply of fuel, gas, oil and electricity services) and, under the Directive, the rate applicable to such services cannot be reduced below 12%. There is no provision in the Directive that would allow a VAT exemption or a VAT rebate in respect of domestic energy supplies.

Of course the Government recognises the impact the increase in energy costs is having on households and in Budget 2022 a targeted package of social protection interventions was provided for through both the redistribution of carbon tax receipts and direct Exchequer funding.

Louise O'Reilly (Dublin Fingal, Sinn Fein)
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90. To ask the Minister for Finance if there are barriers to reducing the VAT on non-alcoholic beer, stout and cider; and if he will make a statement on the matter. [54211/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue 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. In accordance with the Value-Added Consolidation Act, 2010 the supply of non-alcoholic drinks is generally liable to tax at the standard rate, currently 23%.

The VAT Directive obliges each Member State to have a standard rate of VAT and also allows that a Member State may choose to have up to two reduced rates of VAT which may be applied to certain goods and services i.e. any of those listed in Annex III of the Directive, which includes non-alcoholic beverages. Ireland currently operates two lower rates of VAT, 13.5% and 9%. At present, Ireland applies the 9% VAT rate to certain non-alcoholic beverages such as tea, coffee and fruit juices where they are supplied in the course of catering. As the Deputy will be aware, this will revert to 13.5% from 1 September 2022 in line with the rest of the hospitality and tourism sector.

Any suggestion for extending the application of a reduced VAT rate further to non-alcoholic beverages would need to be considered carefully having regard to a range of factors including the impact on Exchequer revenues, and the practical concerns that it would be difficult to administer and would be likely to provide considerable scope for manipulation of the VAT system and opportunities for tax avoidance.