Pearse Doherty
Question:94. Deputy Pearse Doherty asked the Minister for Finance the total annual cost of reducing the value added tax rate for construction activities to 11.5%, for work up to €25,000 in value. [29510/15]
View answerWednesday, 15 July 2015
Questions (94)
Written answers
The applicable VAT rate varies across different activities within the overall construction sector. I am informed by the Revenue Commissioners that, as the information furnished on VAT returns does not require the yield from particular activities or products to be identified, it is not possible to estimate the VAT yield for the sector mentioned by the Deputy. Accordingly, I am not in a position to provide the projected figures for the reduction of the VAT rate suggested by the Deputy.
I would point out that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. A change in VAT rates must be in compliance with the EU VAT Directive. Article 98 of the Directive limits to two the number of reduced rates a Member State may have. Since Ireland has two reduced rates, the 13.5% and the 9% rate, it would not be possible to introduce a third reduced rate for a category of construction activities as suggested by the Deputy.
As the Deputy is aware, I introduced the home renovation incentive (HRI) in Budget 2014 and extended it to rental properties, whose owners are liable to income tax, in Budget 2015. This incentive came into operation on 25 October 2013 and will run until 31 December 2015. The incentive provides tax relief for homeowners by way of a tax credit at 13.5% of qualifying expenditure incurred on repair, renovation or improvement work carried out on a principal private residence or a rental property. Qualifying expenditure is that which is subject to the 13.5% VAT rate.
The work must cost a minimum of €4,405 exclusive of VAT, at which level it would attract a credit of €595. Where the cost of the work exceeds €30,000 exclusive of VAT, a maximum credit of €4,050 will apply. The credit is payable over the two years following the year in which the work is paid for.
The aim of the measure is to increase and improve housing supply at a time when there is strong demand for housing and insufficient supply in certain areas. HRI has been very successful to date.
The incentive is generating significant employment in the tax compliant construction sector and increasing sales in building supplies, hardware and related businesses.
I am advised by the Revenue Commissioners that data relating to HRI are available from the statistics section of the Revenue website at http://www.revenue.ie/en/about/statistics/index.html. In particular, the data related to HRI are available in the "Tax Expenditures" section of the page at http://www.revenue.ie/en/about/statistics/hri-stats.pdf. These statistics will be updated in due course.