Vol. 500 No. 7
282 Mr. Gormley asked the Minister for Finance the reason for the anomaly in the VAT regime whereby VAT on energy consumption is lower than that on conservation; the reason VAT on gas and electricity is 12.5 per cent while VAT on lagging jackets and other forms of insulation is 21 per cent; and if he will make a statement on the matter. [5085/99]
There is no anomaly here. Ireland applies a reduced rate of 12.5 per cent VAT to all solid fuels, electricity, gas and oil for domestic or industrial heating. We have availed of a provision in the sixth EU VAT directive which gives member states the option of applying a reduced rate of not less than 12 per cent to items not on Annex H of the sixth VAT directive, but which were on a reduced rate in the member state concerned on 1 January 1991. The possibility of standard rating of energy products was considered by the environmental taxation group, which is chaired by my Department, in advance of this year's budget. To do so would create, inter alia, a huge difference between rates in Ireland and Northern Ireland.
As regards energy conservation products, such as lagging jackets and other forms of insulation, these were not on a reduced rate on 1 January 1991 and are not listed in Annex H of the sixth directive and must be standard rated at 21 per cent. Under EU VAT law, with which Irish VAT law must comply, it is not possible to zero rate or apply a reduced rate to such products.
