Carthy welcomes EU move to allow new reduced and zero VAT rates
Sinn Féin MEP Matt Carthy has welcomed a vote in the European Parliament today approving a proposal to restore powers to EU member states on applying reduced or zero rates of VAT to certain goods and services. The amended Directive will apply from 2022. This will be particularly important for areas such as life-saving equipment and some health products which currently have high rates of VAT applied. The Irish government will be in a position to reduce those VAT to zero in some cases.
Speaking from Strasbourg, Carthy said: “This has been a priority issue for me and Sinn Féin since my election to the European Parliament in 2014. This is an important move that will increase the powers of governments to introduce new reduced or zero VAT rates. If a reduced or zero rate was not already applied to a particular product prior to the current Directive coming into force, governments have been prevented from introducing a reduced rate. This will change from 2022.
“VAT is a regressive tax that disproportionately affects women and lower-income groups. The ability of governments to apply reduced or zero VAT rates to essential goods and services is crucial, and today the European Parliament urged member states to use this power in a way that promotes positive social and environmental outcomes.
“While the existing system is based on a so-called positive list that lists the goods and services that a reduced rate can be applied to, the new system will use a negative list that lists the goods and services that a reduced rate cannot be applied to – mainly luxury goods and socially harmful items such as weapons. This provides far more flexibility for member states to set reduced rates on the items they choose.
“Here in the Irish state we have been prevented for many years by the existing EU directive from applying a reduced or zero rate to essential, life-saving and socially beneficial goods and services.
“Local sports and community organisations such as Mountain Rescue and Sub-Aqua clubs have been campaigning for many years for a zero rate to be applied to life-saving medical equipment, such as defibrillators, which are already expensive goods.
“Similarly, the Irish Cancer Society has been campaigning for a reduced rate on suncream, in order to make it more affordable and reduce the number of people who are affected by skin cancer in Ireland.
“There is a range of other goods and services that should be considered essential or socially beneficial items, which reduced rates of VAT should be applied to, from contraceptive items to smoke detectors or fire extinguishers.
“We now need to have a broad consultative process to ensure that the public and groups hit particularly hard by VAT have a say in implementing this reform and deciding where VAT should be lowered or scrapped.” ENDS