Vol. 554 No. 5
426 Mr. F. McGrath asked the Minister for Finance if he will consider a plan to provide a mechanism to recoup local authorities for VAT paid on services brought in and to review all exemptions and remissions of rates. [16096/02]
The position under EU VAT law and hence under Irish VAT law is that State and local government authorities are exempt in respect of activities or transactions which they engage in as public authorities. Thus they do not generally charge VAT on their services and do not have the right to recover any of their input VAT.
They can, however, be considered to be within the VAT system where they engage in activities or transactions where their treatment as non-taxable persons give rise to significant distortions of competition. In such circumstances, they would be able to recover some or all of their input VAT but would have to charge VAT on the services they are providing.
The Exchequer contribution to the operation of local authorities amounts to €419.6 million in 2002. I do not intend to provide separate funding for the recoupment of VAT payments by local authorities. Apart from the concern that such a refund system may not be in compliance with EU VAT law, a VAT refund system as suggested would lead to a narrowing of the VAT base and the fall in VAT revenue from such a refund scheme would need to be made up from other sources.
The Valuation Act, 2001 – No. 13 of 2001 – which updated and modernised a body of legislation, which in some cases dated back over a century, listed in two schedules relevant property which is rateable and relevant property which is not rateable. There are no plans to review this legislation.
