Dáil Éireann Debate, Wednesday - 5 November 2014
6. Deputy Paul Murphy asked the Minister for Finance the cost to the Exchequer of the proposal in the Finance Bill 2014 to exempt green fees and membership fees in member-owned and non-profit making golf clubs from VAT; and if he will make a statement on the matter. [41763/14]
View answerWhat will be the cost to the Exchequer of the proposal to put on a legislative basis the decision to exempt green fees and membership fees in member-owned and non-profit making golf clubs from VAT? Regardless of the decision of the European Court of Justice in the past year, does the Minister really think it is justified, in the context of a fourth regressive budget in a row, people being hammered with further austerity and unable to afford to pay water charges, to give a VAT exemption which will benefit disproportionately the better-off in society?
The proposal in the Finance Bill 2014 to exempt green fees in member-owned clubs from 1 January 2015 is necessary to ensure Irish VAT law complies with the recent decision of the European Court of Justice in the Bridport & West Dorset Golf Club Limited case, reference number C-495/12. Membership fees received from members of member-owned golf clubs had already been exempt from VAT and the ECJ judgment which has direct effect in the State found that green fees received from non-members should also benefit from a VAT exemption. Prior to the ECJ judgment, green fees charged by non-profit making organisations such as member-owned clubs to visitors had been liable to VAT at the 9% reduced rate of VAT.
Where a person or body supplies VAT exempt goods or services, this means that they do not charge VAT on these supplies and they are not entitled to claim input VAT on costs associated with such supplies. Until now member-owned golf clubs would have made exempt supplies on membership fees and taxable supplies on green fees charged to non-members and, as a result, would have been entitled to partial VAT input deductibility on their business costs, including on capital development projects.
From 1 January 2015, however, member-owned golf clubs will be exempt from VAT on green fees and membership fees, and they will no longer have an entitlement to a credit for VAT incurred on their inputs in regard to green fees. This means the changes may have an Exchequer impact in the future and retrospectively. It is difficult to cost the impact to the Exchequer of the changes to the VAT treatment of golf fees because Ireland's simplified VAT return system means that the necessary detailed information to determine the cost of specific changes is not captured on VAT returns. However, as many golf clubs will have substantial overheads relating to capital developments, where up to now a proportion of the VAT on these costs was deductible, it is likely that the judgment will have a favourable impact on only a small number of clubs, retrospectively and in the future, and, as such, it is likely that any impact on the Exchequer will be negligible.
In addition, where VAT refunds arise, the Revenue Commissioners must consider whether the refund would unjustly enrich the club. The Revenue Commissioners have met with the Golfing Union of Ireland and have consulted with individual member-owned clubs to discuss concerns surrounding the issue of unjust enrichment. They will issue guidance on their position regarding unjust enrichment once the discussions are concluded.
I am aware of the relevant case law from the European Court of Justice. However, it remains a political decision of the Government to put that into legislative effect by including it in the Finance Bill. The measure was not mentioned by the Minister in his Budget Statement. He cannot tell me the exact amount of money involved. I presume it is not a significant amount. For example, the 20% cut to the respite care grant saved the Government €25 million. Would it not be a better use of Exchequer funds to immediately reverse that cut, as people have demanded, rather than giving a VAT exemption for clubs which are, to a large degree, privileged and elitist institutions? Plenty of ordinary people play golf and I do not have a problem with that, but the entrance and annual fees of some clubs are substantial. Newlands Golf Club has an annual fee of almost €1,500, with an entrance fee of €5,000, Clontarf Golf Club has fees of over €1,000 and a joining fee of €5,000, and Dún Laoghaire Golf Club has a joining fee of €16,000. Is giving such clubs a VAT exemption or refund justified?
VAT is largely driven by EU VAT directives. When the European Court of Justice makes a ruling, it applies to Ireland whether we legislate domestically or not. We have to legislate domestically to incorporate it in the body of our VAT law. This is a very minor change and the reason it was not mentioned in the Budget Statement was that it was so minor. It was in the supporting documents for the budget.
Before any announcement was made, VAT was not paid on membership. Members of golf clubs were not liable for VAT on their membership fees. Visitors to golf clubs were charged VAT on green fees and the ruling of the European Court of Justice is that they should also be exempt. That is a disadvantage to many golf clubs because, while there was a small return on VAT from visitors paying green fees, member-owned golf clubs had the capacity to reclaim VAT for inputs. If a member-owned golf club spent €500,000 on upgrading a golf club, it was able to claim back the VAT, which was charged at 9%. Now, as a quid pro quo, golf clubs will no longer be able to do that.
It is difficult to get statistics on this, but I have received advice from my Department and the Revenue Commissioners that the influence on the Exchequer will be negligible and one balances the other. It is a very minor issue and there is no big gift to golfers coming from the change. The measure is simply to comply with a ruling of the European Court of Justice. We try to be compliant and operate in accordance with the law.
I understand the Revenue Commissioners made a decision at the start of this year to begin to apply the European Court of Justice ruling. What has it decided to do about refunds? It stated at that stage that it was in discussions and if there was to be a windfall for clubs it would not be given. Has it made a decision yet? If not, why not? This is important because it speaks to the nature of the budget and the taxation system. The Government likes to proclaim that we have one of the most progressive taxation systems in the world, but in doing so it speaks only about income tax and not about VAT, which is, overwhelmingly, a regressive tax. It is not a tax on luxury goods, with the result that those in the bottom 10% in our society in terms of income pay almost the same as a percentage of their total income in tax. This illustrates the regressive nature of our tax system.
Ireland is an effective, respectable and fair country and we try to keep our tax laws in line with international law. As VAT is driven by EU directives, if the European Court of Justice makes a ruling, we try to amend our laws to comply with that.
On the precise question on the current position of the Revenue Commissioners, as I said in my reply, where VAT refunds arise the Revenue Commissioners must consider whether the refund would unjustly enrich the club. The Revenue Commissioners have met the Golfing Union of Ireland and have consulted with individual member-owned clubs to discuss concerns surrounding the issue of unjust enrichment. The Revenue Commissioners will issue guidance on their position regarding unjust enrichment once the discussions are concluded and that will be available publicly. We can revisit the matter at that stage.
