Written Answers. - Tax Code.

Nora Owen

Question:

601 Mrs. Owen asked the Minister for Health and Children if he will have discussions with the Department of Finance with regard to removing the need for public hospitals to pay VAT on materials and services needed to run public hospitals in view of the fact that 21% of an allocation of money to hospitals to pay for supplies and other services is returned to the Government through VAT payments; and if he will make a statement on the matter. [20118/00]

Health services, which includes public hospitals, are exempt bodies for the purpose of EU and national VAT law. This means that while such hospitals are required to pay VAT on their purchases, including construction, no VAT is payable on the services which they provide, even where such services would otherwise be the subject of a charge.

It would not be possible under EU VAT law to remove the requirement for hospitals to pay VAT as suggested by the Deputy as it would in effect be zero rating. While we can retain existing zero rating provisions, we cannot, since 1 January 1991 introduce any new ones.

In addition, I should explain that budgeting for expenditure on the development and operation of public health services is done in the knowledge that VAT will apply. VAT does not therefore represent a financial burden for the health services.

Finally, the Deputy will be aware that the great majority of the costs of the health services relate to the employment of staff, to which VAT does not apply.