Jennifer Whitmore (Wicklow, Social Democrats)
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194. To ask the Minister for Finance if he plans to review Ireland’s financial services tax regime, as encouraged by the Commission on Taxation and Welfare; if he plans to review the deemed disposal tax; and if he will make a statement on the matter. [46264/23]

Michael McGrath (Cork South Central, Fianna Fail)
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On 6 April this year I published the terms of reference for a review of Ireland’s funds sector and some related taxation issues. The objective of the review is to ensure that Ireland’s funds sector framework is up to date and fit for purpose in the years ahead, that we can maintain our globally competitive position by supporting long-term growth and a sustainable and resilient market and that the sector continues to support national and regional economic growth, as well as job creation.

In addition to the funds sector, the review will also examine three specific areas of taxation which were highlighted in the recommendations of the Commission on Taxation and Welfare. These issues are (1) the taxation regime for funds; life assurance policies and other related investment products; (2) the real estate investment trusts (REITs); and the Irish real estate funds (IREF) regimes and their role in the property sector; and (3) the use and scope of the section 110 regime.

A public consultation was launched during the summer and closed on 15 September. I am very pleased with the volume of submissions received in response to the consultation, totalling more than 190 responses. The responses came from a wide array of stakeholders, highlighting the significant interest in the review from both industry and from individual retail investors. In tandem with the public consultation, the review team has been engaging extensively with the funds sector and other relevant public sector and private sector stakeholders.

My Department established a specific team to work on the review of the fund's sector and that team is currently analysing the responses to the consultation and this work will inform further targeted engagement with stakeholders over the coming months. The review team will report to me in summer 2024 and I look forward to considering its findings at that point.

Michael Ring (Mayo, Fine Gael)
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195. To ask the Minister for Finance if he has plans to match the VAT threshold for a sector (details supplied) as has been done in other EU countries that have updated their regulations in support of the circular economy; and if he will make a statement on the matter. [46308/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I am advised by Revenue that the VAT registration thresholds are subject to the requirements of EU VAT law, with which Irish VAT law must comply. Ireland’s threshold for a business supplying services is €37,500 and our threshold for a business supplying goods is €75,000. Businesses whose annual turnover is below these levels are not obliged to register for VAT, although they may opt to do so. The Deputy is specifically asking about barter trade, and I can inform him that these thresholds encompass barter transactions.

Currently, EU VAT law provides that registration thresholds may only be raised by Member States to maintain their value in real terms, that is, they may not be increased above inflation. Ireland’s VAT thresholds were increased to their current values on 1 May 2008. As part of Budget 2024, I announced that the VAT registration thresholds for goods would rise to €40,000 and €80,000 for services and goods respectively. The new thresholds will apply from 1 January 2024.

The Deputy may wish to know that the VAT SME Package will enter into force on 1 January 2025. The amendments to the VAT Directive under this package will introduce an upper registration threshold limit of €85,000 for Member States.

Michael McGrath (Cork South Central, Fianna Fail)
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The Deputy should note that no decision was made in Budget 2024 to reduce the VAT rate on sports and fitness classes.

I did give the matter some consideration as amendments to the VAT Directive in 2022 permit a reduced rate to be applied to the supply of sport or physical exercise classes. In addition, Ireland has used a historical derogation to apply a 13.5% rate to care of the human body, which covers yoga.

However, on balance, I decided there would be challenges in determining how it would be defined in such a way as to avoid one type of activity having an advantage over another and thus be in breach of the principle of fiscal neutrality. For instance it would be challenging to provide a reduction on the basis of age or type of class.

The Deputy should note that when sports or fitness classes are provided by companies or sole traders who are not registered for VAT because they operate below the VAT registration threshold no VAT is charged.

Finally, as with other VAT rate reductions it should be noted that while the VAT charged must always be correct a company can increase the base price of the service so that the final consumer does not benefit from such a reduction.