I propose to take Questions Nos. 97 and 98 together.
VAT is governed by the EU VAT Directive, with which Irish VAT law must comply. The VAT treatment of food and drink in Ireland is varied and has developed over time. Most basic foods apply at the zero rate under an historical derogation from the normal VAT rules. Catered food primarily applies at the 13.5% reduced rate, including hot beverages. Most drinks apply at the standard VAT rate, including alcohol, soft drinks, bottled water and fruit juices.
VAT rates are reviewed annually in the context of the Budget and Finance Bill cycle. However, any changes to VAT rating are restricted by EU VAT rules. If the VAT rate on food or drink that currently applies at the zero rate were to be increased, it would not be possible to return that food or drink to the zero rate at a later date. In addition, it is not possible to apply the zero rate to any new food or drink that has not applied at that rate on and from 1 January 1991.
The European Commission published a proposal in January 2018 which aims to simplify VAT rating, allowing Member States greater freedom in setting VAT rates. The proposal has not yet progressed at EU Council. It is expected that discussions on the proposal will be robust and will provide for an opportunity to undertake a fuller examination of the VAT rates in general, including those applicable to food and drink.
Separate from the EU policy on VAT rating, one of the main principles of EU VAT law is fiscal neutrality, which provides that different VAT rates cannot apply to goods that are considered the same. For example, it is not possible to apply different VAT rates to restaurant services based on the nutritional value of the food being served.
EU VAT rules also dictate that a Member State can only apply a limited number of VAT rates, which would similarly be the case under the Commission's revised system. As such, any determination in respect of categories of foods would have to be limited to the available number of VAT rates, while also considering any additional complexity and administrative burden that could be generated, both for business and tax administrations.