I propose to take Questions Nos. 445 and 457 together.
The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate or exemption from VAT. In addition, the Directive allows for historic VAT treatment to be maintained under certain conditions and Ireland has retained the application of VAT exemption to the transport of passengers and their accompanying baggage. This means that under Ireland’s VAT rules, the supplier of passenger transport services does not register for VAT, does not charge VAT on the supply of their services and, consequently, has no VAT recovery entitlement on their input costs.
In accordance with the EU rules, Ireland may continue to apply this existing, historic VAT exemption on the supply of domestic passenger transport but, for as long as the exemption remains, the conditions under which the exemption was granted cannot be changed. The introduction of a new entitlement to VAT recovery for the passenger transport sector could only be done if Ireland were to decide to end its historic exemption for the sector and bring passenger transport services into the VAT net; this would then require suppliers to register for VAT and require them to charge VAT on their passenger fares.
There are currently no plans to end Ireland’s VAT exemption for passenger transport services.
Ireland has also maintained a relieving provision, the Value Added Tax (Refund of Tax) (Touring Coaches) Order of 2012, which provides for a refund of VAT on the cost of acquiring “qualifying vehicles” used for the carriage of tourists under contracts for group transport. The order defines “qualifying vehicles” as single deck touring coaches of specific dimensions (not less than 2,700 millimetres in height, 8,000 millimetres in length and 775 millimetres in floor height with an underfloor luggage capacity of less than 3 cubic meters), or alternatively, double deck touring coaches of particular dimensions (not more than 4,300 millimetres in height and not less than 10,000 millimetres in length).
