Vol. 529 No. 1
474 Mr. M. Higgins asked the Minister for Finance if a provision exists for the Government to reduce VAT, with European Commission approval, for labour intensive industries; and if he will make a statement on the matter. [1218/01]
Council Directive 99/85/EC authorises member states to apply a reduced rate of VAT as low as 5% for a maximum period of three years between 1 January 2000 and 31 December 2002 to a very restricted number of services, such as repairing bicycles, shoes and leather goods, clothing and household linen, including mending and alteration, renovation and repairing of private dwellings excluding materials which form a significant part of the value of the supply, window cleaning and cleaning in private households, domestic care services, for example, home help and care of the young, elderly, sick or disabled, and hairdressing. The services concerned must be labour intensive, largely provided direct to consumers, mainly local and not likely to create distortions of competition and there must be a close link between the lower prices resulting from the rate reduction and the foreseeable increase in demand and employment.
Ireland was fully supportive of this directive but decided not to participate as most of our labour intensive services are subject to the reduced VAT rate of 12.5%. The Government is also committed to retaining a low rate for labour intensive services and we will be closely examining any proposals in this respect which may emerge in 2003. Member states which wanted to participate were required to inform the Commission before 1 November 1999. It is therefore no longer possible to participate in the scheme at this stage. It is intended that before 31 December 2002 the Commission shall forward a global evaluation report to the Council and Parliament accompanied, if necessary, by a proposal for appropriate measures for a final decision on the VAT rate applicable to labour intensive services.
