Cathal Crowe
Question:83. Deputy Cathal Crowe asked the Minister for Finance if he will consider applying a 0% VAT rate to all gluten-free food products; and if he will make a statement on the matter. [4248/24]
View answerThursday, 1 February 2024
Questions (83)
Oral answers (6 contributions)
I thank the Minister for taking my parliamentary question this morning. Approximately one in every 50 Irish people has a diagnosis of coeliac disease. A trip around the supermarket does not leave them many choices. Products they buy that are flour based have to be gluten free and they are expensive. Will the Minister and his Department consider making all gluten-free products for people with coeliac disease subject to VAT at 0%?
I thank Deputy Crowe. The VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT directive provides that all goods and services are liable to VAT at the standard rate unless they fall within categories of goods and services specified in Annex III of the VAT directive, in respect of which member states may apply a lower rate of VAT.
Currently, Ireland has two reduced rates: 13.5% and 9%. Member states can also apply a reduced rate lower than the 5% minimum and a 0% rate to certain categories in Annex III, namely supplies covered by categories 1 to 6 and 10c, which include foodstuffs, including beverages but excluding alcoholic beverages. On this basis, the 0% rate of VAT applies to food and drink – for example, flour, bread, pasta, cereals, butter, eggs, tea, sugar, meat, fish, milk and vegetables, fresh or frozen. Foods for special medical purposes for use under medical supervision to manage specific medical conditions, diseases or disorders are also zero-rated. However, certain food items are specifically excluded from the 0% rate of VAT and are liable to either the reduced VAT rate of 13.5% or the standard rate of 23%. Included are biscuits, cakes, savoury snacks and confectionery products. Gluten-free products are treated the same way as their standard equivalents.
EU law provides that reduced rates of VAT can be selective and restricted to “concrete and specific aspects” of a category in Annex III, provided this does not infringe on the principle of fiscal neutrality. This principle requires that similar products be treated in the same manner for VAT purposes. As such, similar products, such as a “normal” biscuit and a gluten-free biscuit, cannot be rated differently. Therefore, if a particular rate is applied, whether standard or reduced, it must be applied to all similar biscuit products. As such, any VAT rate reduction given to gluten-free food products, such as gluten-free biscuits, cakes, savoury snacks and confectionary, would also have to apply to their standard equivalents. However, this rule also means certain gluten-free products, such as flour, bread, pasta and cereals, are already zero-rated.
I thank the Minister. That was a very detailed response and it was very much appreciated. Many in my family have coeliac disease. It is quite prominent in Ireland and its diagnosis is on the rise. The Minister has explained really well why addressing this is tricky. Mothership Europe and the EU VAT directive govern much of what we can do here, but I argue that gluten-free products are somewhat similar to oral medicines, which are subject to a 0% VAT rate. Once someone finds out he or she has coeliac disease, he or she has no choice but to go on gluten-free products. Many restaurants now have items on the menu that are gluten-free. Some people have decided on foot of a lifestyle choice to buy and eat gluten-free products but for so many more it is not a choice but a necessity. In that regard, the products should be reclassified with medicines in Annex III because the affected people have no choice whatsoever. There is a mechanism by which PAYE workers can claw back a 20% rebate provided they submit receipts and prove their diagnosis. That seems excessively cumbersome. I would love to see the VAT rate reduced at source, when picking an item off the shelf in a supermarket.
The matter is complex, as the Deputy gathered from the reply. We do have to comply with the EU VAT directive. The key principle is that similar products are treated in a similar manner for VAT purposes. We could make a policy decision in Ireland to reduce the VAT on certain gluten-free products but we would also have to do it for the non-gluten-free equivalents. That is where we have flexibility, but that opens up a wider question on the revenue implications and equity considerations. However, the Deputy makes a fair point. I commit to examining the issue further in the context of our preparations for the next budget.
This is probably not the most exciting topic to be debating here today but it matters to so many. Having read through the technicalities, I believe that if the Minister has the scope to reclassify gluten-free products as medicinal, it will be beneficial. The gluten-free products are medicinal because the people affected have no choice but to pick them from the shelf. Reclassifying them as medicinal would untie the Minister’s hands somewhat in that he would no longer have to treat them like more regular biscuits or cakes. Have we scope in Ireland to do this, or is it covered by the EU VAT directive? In his final response, the Minister might deal with the 20% rebate that PAYE workers can get. It seems really cumbersome. So many people are not availing of it at all. Maybe it suits the Revenue Commissioners not to have to deal with it. Sometimes, over many years, I have thought this about taxation. There has to be an easier way to make life easier for affected people going into the supermarket. I am repeating myself in saying they have no choice because it entails a medicinal decision. Following a diagnosis, they have no choice but to buy gluten-free products to stay healthy.
I understand the points the Deputy has made. Let me put on record the tax reliefs available for gluten-free products. I am advised by the Revenue Commissioners that section 469 of the Taxes Consolidation Act 1997 provides for tax relief for an individual who proves he or she has incurred costs in respect of qualifying health expenses. Only health expenses incurred in the provision of healthcare that has been carried out or advised by a practitioner will qualify for the relief.
Broadly, healthcare is defined as the prevention, diagnosis, alleviation or treatment of an ailment, injury, infirmity, defect or disability. Tax relief will generally be available for the cost of foods that have been specifically manufactured to be gluten free, if the individual provides a letter from a doctor stating that the person for whom the foods have been purchased is a sufferer of coeliac disease. Claims for tax relief on qualifying health expenses - in this case the cost of food that have been specifically manufactured to be gluten free - can be made during the year the expenditure is incurred or after the year end. The benefit of making a claim during the year, as opposed to after the year end, is earlier repayment of tax relief.
I would be happy to engage further with the Deputy on the issue.