The position is that the standard rate of VAT in Ireland is 21 per cent. This rate complies with Article 12 of the EU Sixth VAT Directive which stipulates that the standard rate may not be less than 15 per cent.
Ireland is not significantly out of line with the rest of the European Union in this regard. The arithmetic average of the standard rates is about 19 per cent and three member states have rates higher than ours. I would point out that our standard rate has also come down considerably in recent years, from 25 per cent in 1990. In addition, a very sizeable proportion of Irish business enjoy the benefit of zero or reduced rating: only about 51 per cent of the VAT base is standard rated. Furthermore, our zero rating provisions (e.g. for food, children's clothing etc.) are very broad by EU standards. Only the UK and Ireland make extensive use of zero rating.
I would also like to point out to the Deputy that the cost of a one percentage point reduction in the standard rate is very considerable, some £126 million in a full year.
As regards harmonisation of rates, the situation is that a transitional system has been in operation in the European Union since the introduction of the Single Market on 1 January 1993. This system continues automatically until the Council decides on a definitive system. In July 1996, the Commission brought forward a work programme which involves a phased presentation of proposals up to the end of 1999 in order to work towards a common VAT system. The Commission have indicated that their proposals will be based on a single place of registration for traders and will involve considerable harmonisation of the rating structure. The standard rate, it is suggested, could be set within a narrow band and a small number of reduced rates would be allowed, but their number and scope would be limited. The Commission have only recently begun to table formal proposals from this work programme and their proposals on the main elements and in relation to the rating structure have yet to emerge. The Government will examine any such proposals on their merits and with due regard to the national interest.
Finally, the Deputy asked for a list of the standard rates in other member states, which is as follows: