Dinny McGinley
Question:190 Mr. McGinley asked the Minister for Finance if he will consider reallocating products to lower VAT rates on the basis of their superior impact on the environment. [5472/03]
Written Answers - Tax Code.
As the Deputy will appreciate, there is no agreement on what exactly constitutes a product which has a superior impact on the environment. Even if the changes in the rates of VAT were considered desirable for encouraging use of environmentally friendly products, the options for using the VAT system to promote such products are limited. While we can maintain existing zero rates on certain food, books and oral medicines, we cannot introduce any new zero rates of VAT. It would not be possible to introduce new zero rates for environmentally friendly products if they are not now zero rated. Likewise, there are restrictions on the extent to which reduced rates can be introduced for any products which might be considered to be environmentally friendly.
In general, it is not evident that making changes to VAT rates is the most appropriate way of incentivising environmentally friendly products. The effect of introducing a reduced VAT rate may not be evident in the overall price of an environmentally friendly product. In addition, the price impact of any reduced rate of VAT may not be significant enough to change consumption patterns. If there are no changes in consumption patterns as a result of a tax change aimed at incentivising environmentally friendly behaviour, then such tax changes may not be appropriate.
The Deputy will appreciate that I receive many requests for VAT reliefs and reductions for different types of products and services. If it was possible to concede a relief in respect of environmentally friendly products, then it would lead to pressure for similar concessions in goods and services subject to VAT. The Deputy will appreciate that the yield from VAT makes a significant contribution to the funding of necessary public services in the State.