Dáil Éireann Debate, Wednesday - 28 November 2012
68. Deputy Michael Healy-Rae asked the Minister for Finance his views on whether there should be a reduction in the lower 13.5% VAT rate for servicing and repairs and a tax rate off for service/repair work undertaken in tax compliant businesses; and if he will make a statement on the matter. [53197/12]
View answerVAT 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. The repair and maintenance of movable goods, such as motor vehicles, is subject to VAT at the 13.5% rate and it is not possible to reduce the VAT rate applying to such repairs servicing below 12%. This is because such repairs, including many of the goods and services to which Ireland applies a reduced rate of VAT, are 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 repairs and 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, repair and servicing is subject to a higher VAT rate. With regard to removing VAT on the supply of service and repair work undertaken by tax compliant businesses, the EU VAT Directive does not allow for such a distinction between taxpayers, and in any case, it is not possible to remove the VAT on such supplies. Furthermore, the enforcement of tax law through tax reductions is not an advisable policy, especially in the current economic climate. The black economy in the construction sector is dealt with, and should continue to be dealt with, through ongoing enforcement procedures by the Revenue Commissioners.
