The position is that the application of VAT to goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. Passenger transport is exempt from VAT under the EU VAT Directive. This means that taxis cannot charge VAT on the services they supply and cannot recover VAT on the goods and services that they purchase. Essentially, only VAT registered businesses which charge VAT are able to recover VAT. VAT Refund Orders have in the past been used in a limited way to provide refunds of VAT on certain aids and appliances for the disabled and on medical equipment donated voluntarily to hospitals. However, under EU law, it is no longer possible to introduce new schemes to refund VAT on the purchase of goods or services by non VAT registered persons.
In relation to Vehicle Registration Tax (VRT), I have no plans to reduce or eliminate VRT on taxis. In this regard, it should be recognised that tax reliefs have proved at times to be a blunt, inflexible and expensive means of providing assistance and achieving policy aims which might be more effectively achieved through regulatory or direct expenditure means. VRT on vehicles helps to broaden the tax base and provides an important source of Exchequer revenue. I am asked regularly to introduce tax reliefs for one purpose or another, but to accede to all such requests would lead to an immediate narrowing of the tax base.