Dáil Éireann Debate, Tuesday - 31 May 2022
163. Deputy Darren O'Rourke asked the Minister for Finance if he has examined reducing or abolishing VAT on bicycles, e-bikes and cargo bikes; the estimated cost of abolishing VAT on bicycles, e-bikes and cargo bikes; and if he will make a statement on the matter. [27252/22]
View answer168. Deputy Jim O'Callaghan asked the Minister for Finance if he will reduce VAT on bicycles to 0% as was permitted by the European Union in December 2021; and if he will make a statement on the matter. [27362/22]
View answerI propose to take Questions Nos. 163 and 168 together.
I am advised by Revenue that the VAT rating of goods and services is subject to the requirements of the EU VAT Directive, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate or exempt from VAT. Bicycles, e-bikes and cargo bikes have not previously been included in the categories of goods and services on which the EU Directive allows a lower rate of VAT or an exemption to be applied, and so they have been liable to VAT at the standard rate.
Following a new agreement on VAT rates coming into force in April, officials in my Department are currently reviewing the options now available to Ireland in setting VAT rates. This will include consideration of the new options available to Member States as a result of the recently updated EU VAT rules when setting VAT rates as well as the new limitations introduced on how reduced rates may be applied. It should be noted that the amended VAT rules will not permit a zero rate of VAT to be applied to the sale of bicylces.
Decisions about tax changes are generally taken in the context of the Budget and, as part of our normal annual Budget preparations. In this context, various options for tax policy changes will be considered by the Tax Strategy Group prior to Budget 2023.
Traders are not required to separately identify the VAT yield generated from the sale or supply of specific products or services in their periodic VAT returns. Therefore, the information requested by the Deputy is not available from Revenue records directly.
However, using third-party information sources, Revenue estimates that the annual VAT yield from the supply of bicycles (of all forms) is in the region of €14m, based on 2022 VAT base. This suggests that, if there were no behavioural change by consumers, the Exchequer cost of a reduction in VAT on bicycles from 23% to 13.5% could be in the region of €6m annually.
