Vol. 570 No. 2
230 Mr. R. Bruton asked the Minister for Finance the reason cakes and confectionery products are assigned to the 21% VAT rate, while all other food products are zero-rated; if his attention has been drawn to the sharp decline in employment in the confectionery business; and the cost and the feasibility of reducing the VAT on confectionery products to the same rate as all other food products. [18580/03]
Three rates of VAT apply to food items: a zero rate; a reduced rate of 13.5%; and a standard rate of 21%. For the purposes of VAT law, confectionery at the standard rate of VAT refers to soft drinks, sweets, chocolates, chocolate biscuits, peanuts, crisps and ice cream. Flour-based and egg-based products such as pastries are subject to the reduced VAT rate. Bread, milk and other basic food products are subject to the zero VAT rate.
Under EU VAT law, with which Irish VAT law must comply, member states may retain the zero rates they had in place on 1 January 1991, but they are prohibited from introducing new zero rates. As confectionery products were not zero rated before 1991, it is not possible to apply a zero rate of VAT to such products now.
Annex H of the EU Sixth VAT Directive allows for a reduced rate as low as 5% to apply to certain goods and services and this includes food for human consumption. If all the confectionery products currently at the standard rate of VAT were made subject to a reduced rate of VAT of 5%, it would cost the Exchequer in the region of €228 million in a full year. Given the cost to the Exchequer I have no plans to alter the current VAT rates for confectionery products.
I am anxious to see employment maintained in all sectors of the economy. The best way to pursue this, in my view, is to keep the tax burden low, as we have done, especially on the direct tax side as this has the greatest effect on stimulating and sustaining employment.
231 Mr. Neville asked the Minister for Finance the reason motorcycle helmets are charged at 21% VAT and not at 12.5% for such a vital health and safety appliance. [18586/03]
The reduced VAT rate was increased from 12.5% to 13.5% in Budget 2003. EU VAT rules determine the extent to which goods and services can be reduced rated. It is only possible to introduce reduced rates where they are specifically provided for in existing VAT law. As this is not the case with motorcycle helmets and protective clothing, they continue to be subject to the standard rate of VAT of 21%.
