Dáil Éireann Debate, Tuesday - 2 February 2010
255 Deputy Ruairí Quinn asked the Minister for Finance his plans regarding the drafting of legislation to be included in the Finance Act 2010, which will oblige public bodies to charge VAT on certain services; if water charges will incur VAT at 13.5% or at 21%; if he will consider exempting schools, which have paid metered water charges since 1 January 2010, from having to pay VAT; and if he will make a statement on the matter. [5140/10]
View answerThe forthcoming Finance Bill, which is published this coming Thursday 4 February 2010, includes provision to make public bodies subject to VAT in accordance with the European Court of Justice ruling against Ireland of 16 July 2009 in Case C-554/07. In summary, the VAT Act is being amended to provide that public bodies, including local authorities, are made subject to VAT where they engage in activities (a) other than in their capacity as a public authority (e.g. regulatory functions); (b) in the case of their capacity as a public authority when their treatment as non-taxable could lead to a distortion of competition; and (c) as outlined in Annex I of the EU VAT Directive, unless otherwise exempted, and unless the activity is carried out on such a small scale as to be negligible.
Services that will become liable to VAT include such services as waste collection, landfill and recycling services; off-street parking; toll roads; the operation of leisure facilities; rent from certain lettings of commercial property; and the supply of staff and data. It should be noted that such services are already subject to VAT if provided by a private operator. Such services would be subject to the standard or reduced VAT rate as appropriate.
However, other services operated by public authorities are not being made subject to VAT by the Finance Bill provision, as they are otherwise exempted. In that context, for example, the supply of water, education, health and passenger transport services are not being made subject to VAT as they are otherwise exempted from VAT. Examples of the types of activities by public bodies where a charge applies which will remain outside the scope of VAT, include parking fines, fees for passports, driving licences etc, development levies, casual trading licences and certificates of compliance. These are purely regulatory functions.
Charges for water services will continue to be exempt from VAT under a derogation of the VAT Directive which allows Member States to continue to exempt such transactions where they were exempt on 1 January 1978. As Irish VAT law exempted the supply of water by local authorities on 1 January 1978 we are in a position to continue to exempt such services.
