Written answers

Thursday, 2 December 2021

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

28. To ask the Minister for Finance the derogation under which Ireland enjoys a reduced rate of VAT on energy for households; the conditions that are attached to this derogation; and if he will make a statement on the matter. [59596/21]

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

29. To ask the Minister for Finance his views on the European Union toolbox on energy on tackling energy prices statement that member states may decide to apply reduced VAT rates on energy products as long as they respect the minima laid down in the European Union VAT Directive and they consult the European Union VAT Committee and that the right to a reduced rate is a general albeit conditional one and not one that requires a derogation; and if he will make a statement on the matter. [59597/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I propose to take Questions Nos. 28 and 29 together.

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 no less than 5%, and which may be applied to certain goods and services:  any of those listed in Annex III of the Directive. Within this framework, Ireland currently applies a standard rate of 23% and two reduced rates of 13.5% and 9%.

The EU Directive permits derogations from the general rules to allow an individual Member State to continue certain historic tax treatments, such as the application of one of their reduced rates to particular goods and services which are not included in Annex III.  Ireland, in line with the VAT Directive and by way of special derogation from the general rule, maintains several “standstill” provisions and derogations that allow us to maintain reduced rates to certain supplies for historical reasons. It is on this basis that Ireland applies its 13.5% reduced rate of VAT to the supply of fuel, gas, oil, and electricity services for both domestic and commercial use. The current 13.5% VAT rate applied to energy products is a ‘parked rate’, governed by Article 118 of the VAT Directive and standstill provisions from 1991 and cannot be reduced below 12%.

Article 102 of the VAT Directive provides that, after consultation with the EU VAT Committee, a Member State may choose to apply a reduced rate (no less than 5%) to the supply of natural gas, electricity, or district heating on a temporary basis.  The EU Commission recently indicated that this provision could now be used by Member States without the requirement to consult the VAT Committee in advance.

Under its existing provisions, Ireland already applies a reduced VAT rate to a broader range of energy products (including the supply of fuel, gas, oil and electricity services) than would be allowed under Article 102, which is restricted only to supplies of natural gas, electricity, district heating.

Because a Member State may only have a maximum of two reduced rates, if Ireland were to consider introducing a new reduced rate, even on a temporary basis, for the supply of natural gas, electricity and district heating as allowed under Article 102 of the Directive, then it would not be permissible to also continue both of our existing reduced rates of 9% and 13.5%.  This would mean that one of those existing rates would have to be removed and the goods and services covered by those rates would have to move either to one of the other reduced rates or to the standard rate.  However, there is a significant restriction on this, as the services to which the 13.5% reduced rate applies on a historic basis (i.e. the “parked” services) cannot be moved to a rate below 12%.  Therefore, depending on the reduced rates chosen, this restriction could mean that the services that are currently at the ‘parked  rate’, would have to move to the standard rate of 23%.


No comments

Log in or join to post a public comment.