Vol. 436 No. 1
14 Dr. Upton asked the Minister for Finance the total amount of money collected by the Revenue Commissioners from VAT on scientific research equipment used in university laboratories and other laboratories; and if he will make a statement on the matter.
46 Dr. Upton asked the Minister for Finance if he will introduce a zero VAT rating on scientific research equipment as Ireland is the only OECD country to levy VAT at 21 per cent on scientific research equipment; and if he will make a statement on the matter.
I will take Questions Nos. 14 and 46 together.
VAT returns are not completed in a manner which would enable the yield from particular goods or services to be identified. From available non-Revenue data, it is estimated that the VAT yield from scientific research equipment used in university laboratories is of the order of £2 million.
As regards the suggested introduction of a zero rate of VAT on scientific research equipment, I must advise the Deputy that it would not be possible to do so. Under the EC VAT Rates Directive, it is not open to member states to introduce new zero rates. Furthermore, as the items in question are not on the list of goods and service in the directive to which a reduced rate may be applied, and as they were not in a reduced rate here on 1 January 1991, it would not be possible for Ireland to apply a reduced rate to them, even on a temporary basis. Thus, the standard rate of VAT must continue to be applied.
However, I would point out that, under the terms of a special refund scheme, a refund is given equivalent to the full amount of VAT borne on certain high cost medical equipment purchased through voluntary donations for use in hospitals, including equipment used in their laboratories.
In addition, there is provision under the Protocol on Privileges and Immunities of the European Communities whereby institutions of the EC are entitled to recover any VAT charged to them on foot of purchases for their official use. For example, where a research contract is carried out commercially for an EC institution, such contracts are, in effect, zero-rated. It should be noted that the relief is allowable only where the expenditure is borne directly by the EC institutions but it would, of course, apply to any equipment directly purchased in the course of a research project. The relief does not apply to expenditure borne directly by a university or other non-taxable body carrying out contract works for the EC since these bodies do not charge VAT and are not entitled to recover the VAT element in any expenditure borne by them.
Regarding the possible implication in the Deputy's question that Ireland may be seriously out of line with the VAT treatment of scientific research equipment in other OECD countries, particularly having regard to the rules in operation within the European Community, which represents half the membership of the OECD I have requested inquiries to be made to find out precisely how scientific research equipment is treated for VAT purposes in the other member states of the European Community and in other OECD countries. As soon as I get that data I will consult the Deputy.
Is the Minister prepared to make some arrangement to allow funding of £3.3 million, which comes into this country from the Wellcome Trust for Irish scientists — at present Wellcome Trust is supporting 20 projects throughout the country — which is spent on scientific research equipment to be zero rated? The reason I ask is that I understand Wellcome Trust is concerned that it has to pay VAT here whereas in the United Kingdom when it provides funds for a British scientist it does not pay VAT. This is a matter of grave concern to the point where, I understand, it is considering withdrawing from funding Irish research. That would be a very undesirable state of affairs.
The Irish beneficiaries of the Wellcome Trust have written to me and others recently. They pointed out there are provisions in the UK VAT law which allow the same equipment the trust is funding here to be zero rated in limited circumstances — I do not have the details. Our scheme comes under the Protocol on Privileges and Immunities of the European Communities. It was stated that some of these projects are EC funded. If that is the case and if the EC are controlling them, there is a way of handling it. Alternatively, there is the scheme to which I referred earlier in reply to Deputy Flanagan regarding the hospice. I will endeavour to obtain the data on how this scheme is operated. As I understand it Wellcome Trust spends huge sums of money in university institutions in Ireland. Based on the EC Directive it should not be on the zero rate but obviously it has found some mechanism for dealing with that. I have already asked for the data and when I receive it I shall examine it.
