Vol. 558 No. 5
144 Mr. Stanton asked the Minister for Finance his views on the suggestion that the current standard rate of VAT here could potentially place Ireland at a competitive disadvantage for digital content enterprise and market development; and if he will make a statement on the matter. [25162/02]
The existing VAT treatment of electronic content services will be changed following agreement in May, 2002 on a directive to amend the VAT treatment of electronic services. It will come into force on 1 July 2003. The effect of this directive is that digitally supplied services supplied to business or private customers outside the EU will no longer be subject to VAT. Supplies across frontiers to business customers in the EU will be subject to a reverse charge regime. This means that the business customer will account for the VAT at the rate in the member state where the business receives the supply. The directive provides for a special scheme for supplies made to private consumers in the EU by third country providers, and these will be taxed at the rate applying in the member state of the consumer. Supplies within the EU to private consumers in the EU from suppliers in another member state will continue to be taxed at the rate that applies in the member state of the supplier. These are the supplies where competitive pressures arise in terms of the rate.
The Deputy will appreciate that to reduce the rate of VAT for such services, when provided by Irish businesses supplying private consumers in other member states, would require a general reduction in the standard rate. This would be costly for the Exchequer.
I consider moreover that the changes which will arise out of the adoption of this Directive will remedy many of the difficulties which have been raised in respect of the on-line supply of digital services.
