Aengus Ó Snodaigh
Question:185 Deputy Aengus Ó Snodaigh asked the Minister for Finance the implications of the EU ruling that local authority services will have VAT added in the future. [6351/10]
View answerTuesday, 9 February 2010
Questions (52)
Written answers
The Finance Bill, which was published on Thursday 4 February, 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 that could lead to a distortion of competition with private operators. More specifically, they will become 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. The standard or the reduced VAT rates will apply as appropriate. The changes will apply from 1 July 2010.
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.
Business customers that charge VAT will not be affected by this change as they can claim deduction for any VAT charged by a public body. The impact on private individuals, VAT exempt entities and other non-registered bodies, will depend on whether, and the degree to which, the VAT is passed on by the public bodies, which in any event should be limited somewhat since public bodies providing the service will have entitlement to deduct VAT on their inputs.
Question No. 186 answered with Question No. 167.