Dáil Éireann Debate, Tuesday - 17 November 2009
153 Deputy Richard Bruton asked the Minister for Finance if he has plans to introduce a new 21% VAT rate on package holidays; the reason this is being proposed; if this will represent unfair competition if the component parts of the package bear a different tax rate or can be acquired overseas at a lower rate of tax; and if he will make a statement on the matter. [41313/09]
Amharc ar fhreagraThe Finance (No.2) Act 2008 amended the Value-Added Tax Act 1972 to provide for the introduction of a Travel Agents Margin Scheme. Under this scheme certain travel agents will be liable to VAT in respect of the travel agents margin on their supply of certain services, not in respect of the overall consideration they receive for such services. This scheme, which is provided for in Articles 306 to 310 of the EU VAT Directive, is being introduced with effect from 1 January 2010 and will bring Ireland into line with other EU Member States. Currently all EU States with the exception of Denmark and the Netherlands operate a Margin Scheme for tour operators. The scheme deals with the activities carried on by travel agents who act in the capacity of a principal when supplying certain travel services such as transport, accommodation, etc, which they have bought in from third parties for onward supply to travellers.
The EU VAT Directive sets out the various options for Member States in terms of rates of tax that may be applied to particular goods or services. However, the Directive does not provide an option for Member States to apply a reduced rate to a travel agent's margin on his or her supplies under the Margin Scheme. Where no such option is provided for in the Directive, the standard rate of VAT must be applied to those supplies.
With regard to the issue of unfair competition, Article 307 of the VAT Directive specifies that the travel facilities supplied by a travel agent acting as a principal are to be regarded as a single supply to the traveller, rather than multiple supplies of different travel facilities. In the absence of the Margin Scheme, stand-alone supplies of hotel room reservations would become taxable as the supply of accommodation in the country where the hotel is situated. In so far as accommodation within the EU is concerned, this would entail registration and accounting for VAT in each Member State involved. This would be contrary to the intention of the Margin Scheme at EU level, where the supply by the travel agent to the traveller is taxable only where the travel agent is established. Under the Margin Scheme, the travel agent is thus relieved of the obligation to register in all the Member States where the traveller uses accommodation bought in by the travel agent. In the circumstances, the rate of VAT that will apply to the supply of travel facilities by a travel agent covered by the Travel Agents Margin Scheme will be the standard rate of VAT, which is currently 21.5%.
