I propose to take Questions Nos. 207 to 214, inclusive, together.
The VAT rating of goods and services is governed by the EU VAT Directive, with which Irish VAT law must comply. The VAT Directive generally provides that supplies of goods and services should be subject to VAT at the standard rate, which in Ireland is 23%. Regarding reduced rates of VAT, the VAT Directive is restrictive in relation to the application of such rates, whereby Member States may apply up to two reduced rates of VAT of between 5% and 15% but only to specific goods and services set out in Annex III of that Directive. In addition, Member States may retain a zero rate of VAT, or a rate of VAT less than 5%, on goods and services where that rate applied to those goods and services on 1 January 1991. However, no new activity can apply at those rates, and once removed activity cannot be reinstated at those rates. The VAT Directive also allows the continuation of a reduced rate on goods and services not listed in Annex III, where they carried a reduced rate on 1 January 1991, however, the Directive requires that a reduced rate of at least 12% apply to those goods and services.
In general, the VAT rates applying to the goods and services referred to by the Deputy are a result of these EU VAT rules. However, I would draw to the Deputy’s attention that catheters used for use solely or principally with urinary drainage kits or colostomy/ostomy devices apply at the zero rate of VAT. In addition, while solar panels apply at the 23% standard rate, Irish and EU law provide that where the installation of a solar panel accounts for at least one third of the cost of the supply, then the 13.5% reduced VAT rate can be applied. In relation to the hire of a limousine with a driver, this service is exempt from VAT on the basis of a derogation from EU VAT law, where Ireland applies a VAT exemption to the transport of passengers and their accompanying baggage. Furthermore, the EU VAT Directive contains detailed rules regarding the VAT treatment of investment gold in order to avoid VAT fraud, which is why the supply of gold is exempt from VAT.
In general, Ireland applies a reduced VAT rate and zero rate of VAT to a far greater range of goods and services than other EU Member States. In this regard, Ireland already applies the zero rate of VAT to basic foods, and the reduced VAT rate of 13.5% applies to most services, while tourist related services currently apply at the 9% rate. In addition, the 23% standard rate applies to most luxury goods. In this context, while there is generally scope to apply a higher rate of VAT to many goods and service, there is very little scope to do the reverse.
With regard to undertaking a comprehensive review of the different rates of VAT that are applied to different product types, the VAT system and its structure are reviewed on an annual basis in the lead up to the Budget, bearing in mind the constraints of the EU VAT Directive.
