Seanad Éireann debate -
Thursday, 4 Nov 1993

Vol. 138 No. 2

Adjournment Matters. - VAT Payable by Galway Hospice.

Mr. Fahey

I thank the Minister of State for coming to the House this afternoon to debate this issue. I hope that she will be able to give us some ray of hope in what is an extremely difficult situation. As the House may be aware, the Taoiseach recently laid the foundation stone for the Galway Hospice, which is being built by the Irish Hospice Foundation at a cost of approximately £1.9 million. It has transpired that the hospice foundation must pay the State approximately £215,000 in VAT payments as a result of this development. It is ludicrous that a voluntary organisation such as the hospice, which does such a wonderful job, a job which should be done by the State services, would be required to pay such a huge amount of taxation in VAT.

The Taoiseach responded in an understanding way to the difficulties. However, I feel that the problem is so serious that it should be raised in a formal way. The Minister for Finance should give immediate consideration to a change in the regulations for organisations such as the hospice, which has raised all the money for this development by voluntary contributions from ordinary citizens. It is hardly fair for the State to demand its share of those voluntary contributions, especially in the light of the wonderful work which is being done by the Irish Hospice Foundation throughout the country.

The Galway Hospice has not received any financial aid or grants from the Government over the years. There is an expectation that some moneys will be forthcoming, but paying a grant while at the same time requiring the hospice to pay such a large amount of VAT would be handing money from Peter to pay Paul. I appeal to the Minister for Finance and the Minister of State who is present to change the regulations immediately and give an indication to the Galway Hospice that they will not have to pay this VAT, which is a burden on the voluntary and social work they do.

Minister of State at the Department of Finance (Ms E. Fitzgerald)

I am sure we all recognise the sterling work undertaken by hospices throughout the country and applaud the many imaginative and successful fund-raising efforts which they undertake. The generosity of those who make financial contributions to the organisations concerned is equally laudable.

The position in relation to VAT is that hospitals and hospices are exempt from the tax under the terms of the Sixth EC VAT Directive, which in turn governs our national VAT régime. It is not therefore open to us to grant taxable status to such entities. In the medical area, exempt status applies where the bodies involved are funded publicly or through voluntary efforts. In VAT terms this means that while these organisations do not charge VAT on the services they provide, neither can they recover the VAT on the goods and services which they buy in the course of their activities, including the construction of facilities. Generally speaking, VAT is only recoverable by VAT registered traders who operate in the course of furtherance of business.

I should perhaps clarify that the Galway Hospice would not in fact pay VAT directly to the State. In accordance with VAT law, the tax in question would be charged by the various traders providing goods and services to the hospice in the course of the development of the project, and these traders would in turn account for it to the Revenue Commissioners in their normal VAT returns.

I should mention that the VAT Act empowers the Minister for Finance to make orders refunding an amount equivalent to VAT borne which does not qualify for deduction in the normal way, subject to whatever conditions are considered necessary. Refund orders already exist in relation to some restricted areas of charitable activities — for example, for certain high cost medical equipment purchased by way of voluntary subscription and certified as being appropriate by the Minister for Health. Hospices would be able to benefit under that scheme.

I would point out, however, that a refund order to be applied to the construction or development of a hospice could not be restricted to the Galway Hospice. At the very least it would have to be extended to all similar organisations undertaking this type of activity. This would give rise, understandably, to pressure to extend the concession to the numerous other types of charities. Thus, the cost in terms of VAT foregone to the Exchequer would be prohibitive and could not be contemplated in current budgetary circumstances.

I clearly state that I am not willing to accept the proposition that a change in the VAT regime is appropriate in these instances or is automatically justified by the activities involved, no matter how praiseworthy they may be.

The Government fully acknowledges the valuable contribution that organisations such as the hospices make to society in general and I point to the fact that many of them, including the Galway Hospice, are in receipt of lottery funding, in fact, the Galway Hospice received £30,000 last year. In addition, it is open to the Galway Hospice to apply to its local health board and make a case for funding to assist in its running costs.

Mr. Fahey

The £30,000 was for the provision of the home service. I am not happy with the answer given by the Minister of State. This must be further discussed. It is not good enough to say the tax would be charged by the various traders providing goods and services when it is subsequently paid to the Government. However, I appreciate the difficulties involved.

The Seanad adjourned at 4.20 p.m. until 2.30 p.m. on Wednesday, 10 November 1993.