Darren O'Rourke (Meath East, Sinn Fein)
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264. To ask the Minister for Finance if he plans to allow bus and coach operators reclaim VAT on fuel costs; if his attention has been drawn to the fact that the competitive advantage that operators from the Northern Ireland have in this regard; and if he will make a statement on the matter. [16047/22]

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 EU VAT law, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate or exemption from VAT. In addition, the Directive allows for historic VAT treatment to be maintained under certain conditions and Ireland has retained the application of VAT exemption to the transport of passengers and their accompanying baggage. This means that the supplier does not register for VAT, does not charge VAT on the supply of their services and has no VAT recovery entitlement on costs where such costs are used for the exempt supply of passenger transport.

Ireland may continue to apply the VAT exemption on the supply of domestic passenger transport as governed by Article 371 of the VAT Directive; however, it cannot change the conditions under which the exemption was granted. In accordance with the Directive, a reduced rate of VAT (Ireland currently has two reduced VAT rates, 9% and 13.5%) could be introduced to the supply of passenger transport in place of the exemption that currently applies; this would give the transport operator deductibility in relation to VAT on their business inputs but would involve charging passengers VAT on their fares.

In relation to Northern Ireland, the UK continues to apply the zero rate of VAT to the supply of passenger transport, with the exception of a taxi service which is standard rated, and suppliers established in the UK have an entitlement to deductibility on the costs relating to the supply of these services where the place of supply is the UK. This was a historic standstill provision for only the UK and could not be availed of by Ireland or other Member States. In addition, as the UK is no longer part of the EU, their VAT rates are not subject to the VAT Directive.