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Dáil Éireann Debate, Tuesday - 27 November 2012

Tuesday, 27 November 2012

Questions (251, 252)

Brendan Griffin

Question:

251. Deputy Brendan Griffin asked the Minister for Finance if he will consider reducing the 13.5% VAT rate for car servicing as a road safety measure in view of the increasing number of older cars on our roads and the falling levels of servicing; and if he will make a statement on the matter. [52933/12]

View answer

Brendan Griffin

Question:

252. Deputy Brendan Griffin asked the Minister for Finance if he will reduce or scrap VRT and VAT on optional additional safety equipment and potentially life saving technology in new cars; and if he will make a statement on the matter. [52934/12]

View answer

Written answers

I propose to take Questions Nos. 251 and 252 together.

VAT is charged on the supply of goods and services and the rate applying is subject to the requirements of EU VAT law with which Irish VAT law must comply. With regard to reducing the VAT rate applied to car servicing, under EU law it is not possible to reduce the VAT rate applying to car servicing below 12%. This is because car servicing, including many of the goods and services to which Ireland applies a reduced rate of VAT, is based on an EU derogation under Article 118 of the EU VAT Directive, which provides that as we applied a reduced rate to these items on 1 January 1991, we are entitled to continue to apply that reduced rate to those items, provided the rate is no less than 12%. Furthermore, while is it possible to reduce the VAT rate on car servicing to 12%, this could only be done through the application of a 12% VAT rate to all goods and services that currently apply at the 13.5%, and such a move would be very costly to the Exchequer. However, it must be noted that in the majority of EU Member States, where the derogation under Article 118 does not apply, the servicing of cars is subject to a higher VAT rate.

In addition, the EU VAT Directive does not make specific provision for a reduced or zero rate to apply to safety equipment in vehicles and potentially life saving technology in new cars, and as such they are subject to the standard VAT rate, which is currently 23%. With regard to the VRT on optional additional safety equipment and potentially life saving technology in new cars, VRT is charged on the Open Market Selling Price (OMSP) of a vehicle which for new vehicles is defined in Section 133 (2) of the Finance Act 1992 as

“(2) (a) For a new vehicle on sale in the State which is supplied by a manufacturer or sole wholesale distributor, such manufacturer or distributor shall declare to the Commissioners in the prescribed manner the price, inclusive of all taxes and duties, which, in his opinion, a vehicle of that model and specification, including any enhancements or accessories fitted or attached thereto or supplied therewith by such manufacturer or distributor, might reasonably be expected to fetch on a first arm's length sale thereof in the open market in the State by retail.”

There are no plans to reduce or scrap the VRT on optional additional safety equipment as they are "enhancements or accessories fitted or attached" and as such are included in the VRT charge.

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