I should firstly explain that charities and non-profit groups are exempt from VAT under the EU sixth VAT directive. This means that they do not charge VAT on their services and cannot recover VAT incurred on goods and services that they purchase. Essentially, only VAT registered businesses which charge VAT are able to recover VAT. I am aware of the recent report commissioned by the Irish Charities Tax Reform Group which outlines the VAT incurred by charities as part of their day to day activities. I point out that, as is indicated in the report, Government subventions to affected organisations cover a significant element of the VAT incurred.
In my view, the cost of providing funding equivalent to VAT paid would be potentially more expensive than is outlined in the report. There would be pressure to extend such a scheme to charities not represented by the ICTRG and to other not-for-profit organisations. Such a system could encourage registration as charities by other organisations to benefit from such funding. Charities already benefit from considerable and generous tax reliefs. I have no plans to introduce a mechanism to provide additional funding to charities equivalent to the VAT paid by them.