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VAT Exemptions

Dáil Éireann Debate, Wednesday - 17 April 2019

Wednesday, 17 April 2019

Questions (55, 63)

Gino Kenny

Question:

55. Deputy Gino Kenny asked the Minister for Finance if his attention has been drawn to the precedent set by his predecessor (details supplied) in which his predecessor intervened in a decision by the Revenue Commissioners to impose VAT on herbal teas in 2014 which resulted in the abandonment of the proposed VAT imposition; if he has given consideration to intervening in the proposed imposition of 23% VAT on food supplements planned to commence on 1 March 2019; and if he will make a statement on the matter. [17646/19]

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Gino Kenny

Question:

63. Deputy Gino Kenny asked the Minister for Finance his plans to intervene to defer the planned imposition of 23% VAT on food supplements until a review of the impact of same on small businesses and employees has taken place, in view of the impending effect of Brexit in addition to the VAT hike; and if he will make a statement on the matter. [17647/19]

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Written answers

I propose to take Questions Nos. 55 and 63 together.

The background to the issue is that VAT legislation does not apply the zero rate of VAT to food supplements but shortly after the introduction of VAT Revenue applied a concessionary zero rating to certain vitamin, mineral and fish oil food supplement products. As the market developed this treatment resulted in the zero rating by Revenue of further similar products.  However, it had become increasingly difficult to maintain an effective distinction between food supplements that could benefit from the zero rate and those that were standard rated.

After undertaking a comprehensive review of the VAT treatment of food supplements, including getting an expert report on the definition of food for the purposes of the VAT Consolidation Act, Revenue concluded that the status quo was no longer sustainable and issued new guidance in December 2018 which removed the concessionary zero rating of various food supplement products with effect from 1 March 2019.

Following representation from Deputies and from the industry I wrote to Revenue outlining my plans to examine the policy and legislative options for the taxation of food supplement products in the context of Finance Bill 2019. Revenue responded by delaying the withdrawal of its concessionary zero rating of the food supplement products concerned until 1 November 2019. This will allow time for the enactment of any legislative changes in the context of Budget 2020. The Deputy referred to the example of the change in the VAT treatment of herbal teas. The change in that instance was affected by amending the VAT Consolidation Act by way of an amendment in Finance Act 2014. Following the consultation process that is planned I will consider if an amendment concerning food supplements is necessary.

I have committed to putting in place a consultation process to help me identify the policy options in relation to VAT on food supplements and will publish the conclusions in the Tax Strategy Papers later this year. I envisage seeking input from a wide range of interested parties, including from health and nutrition experts, to ensure that any legislative changes I bring forward are evidence based, and I will consult with my colleague the Minister for Health in this regard.

Details on the public consultation will be announced shortly.

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