Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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180. To ask the Minister for Finance if he will give consideration to an organisation’s recommendation (details supplied) to reduce VAT to 5% in the reuse, repair, and recycling sectors and to enhance VAT rebate schemes to promote sustainability and support social enterprises involved in these activities; and if he will make a statement on the matter. [36527/24]

Jack Chambers (Dublin West, Fianna Fail)
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The VAT rating of goods and services is subject to the requirements of 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 categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT.

The Directive also allows for a Member State’s historic VAT treatment to be maintained under certain strict conditions and, on this basis, Ireland has retained its long-standing application of its reduced rate, currently 13.5%, to the repair or maintenance of certain movable goods subject to the two thirds rule; one of the conditions is that the rate applied under the historic arrangement is ‘parked’, which means that EU law prohibits it being reduced below 12%.

Annex III of the Directive allows that a Member State may apply a reduced rate of VAT, of between 5% and 15%, on the collection and recycling of waste material and on the supply of certain repair services. On this basis, Ireland applies its 13.5% reduced VAT rate on the collection and recycling of waste material and on the supply of repair services on shoes or leather goods, clothing, household linen, and bicycles. However, because the Directive restricts a Member State from having more than two reduced rates of VAT, any proposal for Ireland to introduce a new 5% rate for such supplies would require Ireland to abolish one of its two existing reduced rates (13.5% and 9%) and move all other items at that rate either to the standard rate (23%) or the other reduced rate. This would give rise to increased VAT charges on items that move to a higher rate than their existing one, together with increased Exchequer costs for items moved to lower rates.

As regards the Deputy’s suggestion for a VAT rebate scheme to further promote sustainability and support social enterprises involved in the recycling sector, there is no scope under the Directive for Ireland to introduce such a measure.

The Deputy may wish to be aware that VAT law provides an optional margin scheme for taxable dealers of second-hand movable goods which are suitable for use either as they are or after repair. The margin scheme allows taxable dealers pay VAT on the difference between the sale price and purchase price (i.e., the “margin”) of certain second-hand goods. The VAT rate which applies to a sale of goods under the margin scheme is, with some exceptions, the same rate of VAT which is normally applicable to the particular good.