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New EU rules give us opportunity to overhaul current Irish VAT system

Brian Hayes MEP today (Wednesday) said that a new landmark proposal from the Commission would allow for major changes to Ireland’s VAT system. Mr. Hayes called on the Department of Finance to develop a roadmap for a new VAT system.

“The European Parliament today gave its approval for an overhaul of EU VAT rules which would give more flexibility for Member States to set and define their different VAT rates.

“Currently, Member States can only apply the reduced rates to certain goods and services in accordance with a restrictive EU list. The Commission has proposed to scrap this list and the European Parliament today gave its consent to such a move.

“The file now rests with the European Council where Member States must hash out amongst themselves what approach to take. There does seem to be general consensus that Member States should be given the flexibility to decide which goods and services should get the reduced rates. However, there are diverse views on how to proceed with the legislation.

“In any case, the proposed rules gives us the chance to overhaul our own system of VAT. We have given so much focus to providing a reduced rate for the hospitality sector in recent years and this might be at the expense of several other sectors.

“The construction sector is still subject to a rate of 13.5%, despite the urgent need to increase our housing supply. The majority of medicinal products are subject to the standard rate of 23%, the same applies to many basic health and hygiene goods. Additionally, essential safety equipment, such as motorcycle helmets, is subject to a rate of 23%.

“Without EU restrictions on how we apply our reduced VAT rates, we now have an opportunity to create a VAT system which offers incentives to areas of the economy where they are most needed.

“The new EU rules could come into force by the end of 2021. The Department of Finance should already start developing a Roadmap for a new VAT system on the basis of what is being proposed. While the legislation is still not agreed, it is safe to work on the basis that we will be afforded much more VAT flexibility into the future.”

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