Paul Donnelly (Dublin West, Sinn Fein)
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320. To ask the Minister for Finance the reason the VAT rate for dog grooming is at 23%, while the hair dressing industry is taxed at 9%; and if he will make a statement on the matter. [13029/23]

Michael McGrath (Cork South Central, Fianna Fail)
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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 Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply either one or two reduced rates of VAT. Ireland currently operates two reduced rates of VAT, 13.5% and 9%, as permitted by the Directive.

The provision of dog grooming services is not included in Annex III and as such is subject to the standard rate of VAT, currently 23%. There is no discretion under the Directive for Ireland to apply a reduced rate of VAT to this service.

As hairdressing is included in Annex III of the VAT Directive a reduced rate of VAT may be applied to it.

The Deputy may be interested to know that by way of special derogation from the general rule, Ireland is permitted to continue its long-standing practice of applying a reduced rate, currently 13.5%, to the supply of services by a veterinary surgeon in the course of their profession, but there are strict restrictions on this derogation, including that the rate cannot be reduced below 12%. However, where a veterinary surgeon carries out a dog grooming services as part of the veterinary procedure, such as treating an illness or disease, the dog grooming is considered part of the veterinary procedure and the entire procedure is liable to VAT at the reduced rate. Where a veterinary surgeon provides a dog grooming service as a supply that is distinct from a veterinary procedure the service is liable to VAT at the standard rate of 23%.

Michael McGrath (Cork South Central, Fianna Fail)
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The application of excise duty on fuel in Ireland is governed by European Union law as set out in Directive 2003/96/EC, commonly known as the Energy Tax Directive (ETD). The ETD prescribes minimum tax rates for fuel with which all Member States must comply. ETD provisions on mineral oils are transposed into national law in Finance Act 1999 (as amended). Finance Act 1999 provides for the application of excise duty in the form of Mineral Oil Tax (MOT) to liquid fuels used for motor or heating purposes.

MOT is comprised of a non-carbon component and a carbon component with the carbon component being commonly referred to as carbon tax. The non-carbon component of MOT is often referred to as “excise”, “fuel excise”, “fuel tax” or “fuel duty” but it is important to note that both components are part of MOT which is an excise duty. MOT law specifies rates of taxation for certain fuels and uses. Standard rates apply to fuels used for propellant purposes including in road vehicles. Reduced rates apply to fuels used for all other purposes, such as heating. Full details on current MOT rates are published on the Revenue website at www.revenue.ie/en/tax-professionals/tdm/excise/excise-duty-rates/energy-excise-duty-rates.pdf.

The Deputy has asked about taxation of an alternative fuel, namely Hydrotreated Vegetable Oil (HVO).Where a liquid that is not specified in MOT law is used as a motor or heating fuel, “substitute fuel” rates apply. A substitute fuel used in place of auto-diesel attracts the auto-diesel rate of MOT and petrol substitutes are taxed at MOT rate applicable to petrol. Substitute fuels used for reduced rate purposes, attract the Marked Gas Oil rate of MOT. Where a substitute fuel meets the criteria of being produced entirely from biomass it is regarded as a biofuel for MOT purposes. The State’s MOT law - as governed by the ETD - relieves biofuels from the carbon component of MOT. This relief is provided for in section 100(5) of Finance Act 1999 which has been in place since 2012. The table below summarises current MOT rates applicable to substitute fuels. It also details the effective MOT rate on qualifying biofuels, net of the carbon tax relief.

MOT Rates Applicable To Substitute Fuels per 1000 Litres

As the rates above indicate, biofuels such as HVO benefit from significantly lower MOT rates due to the carbon tax relief.

In relation to Value-Added Tax (VAT), the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply either one or two reduced rates of VAT. Ireland currently operates two reduced rates of VAT, 13.5% and 9%, as permitted by the Directive. Motor fuels such as petrol including bio-ethanol petrol blends and auto-diesel are not included in the categories of goods and services on which the EU Directive allows a lower rate of VAT or an exemption to be applied, and so they are liable to VAT at the standard rate, currently 23%. Biofuel and non-food vegetable oils, such as HVO, used to fuel vehicles also attract the standard rate of VAT. HVO used as heating fuel is liable for the reduced VAT rate of 13.5%.

I am informed by my colleague, the Minister for Environment, Climate and Communication, that HVO is subject to the Renewable Transport Fuel Levy, provided for by section 44N of the National Oil Reserves Agency Act 2007 (as amended). The current rate of the levy is €1 per 1000 litres of relevant disposals of renewable transport fuels, reduced from €20 per 1000 litres in 2020. The reduced rate was applied to incentivise biofuel use and to help to bridge any cost differentials between biofuels and fossil fuels. The Renewable Transport Fuel Levy is collected by the National Oil Reserves Agency and is used to offset costs involved in the administration by the Agency of the Renewable Transport Fuel Obligation Scheme.