Vol. 550 No. 1
82 Ms Clune asked the Minister for Finance if he is in receipt of correspondence from a person (details supplied) in County Cork regarding VAT charges for hairdressing salons; and if he will make a statement on the matter. [7342/02]
We have received correspondence from the individual. He has put forward three proposals in respect of the VAT treatment of hairdressing – to reduce VAT on hairdressing to zero, increase registration thresholds to €63,486.90, or abolish registration thresholds. Under the EU sixth VAT Directive, member states may retain the zero rates they had in place on 1 January 1991, but they are prohibited from introducing new zero rates. Since hairdressing was not at a zero rate on 1 January, 1991 I cannot exclude hairdressing from being liable for VAT. The registration thresholds for VAT were last increased in 1994 and are currently €25,500 for services and €51,000 for goods. Ireland has the second highest registration threshold for goods and services in the EU and some member states have no registration threshold for goods and services and require all taxable persons to register irrespective of their turnover.
EU VAT law, with which Irish VAT law must comply, determines the rules in respect of any change in the thresholds. This requires that it is possible to increase the thresholds but only in line with maintaining their real value. In effect therefore it would only be possible to increase the threshold to €30,000 for services and €60,000 for goods. Any increases beyond that amount would require EU approval. It would not be possible to increase the thresholds for hairdressing salons only. Any increase in the thresholds would have to apply to all taxable persons. Any change in the thresholds would have a significant Exchequer cost. Although the Directive provides for the option to introduce or increase thresholds, it does not explicitly provide for the removal of thresholds that are already in existence. It would be possible to abolish existing registration thresholds. However, the existence of the thresholds allows for certain small businesses to remain outside the VAT net, to help small new businesses develop and to avoid the administrative difficulties and cost for the Exchequer of including a wide range of small businesses in the VAT system. Therefore, I have no plans to increase or abolish the existing registration thresholds.
