To ask the Minister for Finance if consideration will be given to the extension of the reduced VAT rate of 9%, which has had a significant positive effect on tourism industries, to coach passenger operators..
– Seán Kyne.
Minister for Finance ( Mr Noonan) : The transport of passengers and their accompanying baggage is exempt from VAT in Ireland under paragraph 14(3) of Schedule 1 to the VAT Consolidation Act 2010. In this respect, services provided by the coach passenger operators are exempt from VAT and as such there is no charge to VAT. This means that a person who provides a bus or coach service does not register for VAT and does not charge VAT on the supply of their services. This also includes the hiring of a bus or coach with a driver. Persons who are exempt from VAT cannot recover VAT incurred on goods and services incurred in relation to their business, such as fuel, tyres and mechanic charges, used for the purposes of the person’s coach and bus service.
While persons who are VAT exempt cannot recover VAT incurred on goods and services incurred in relation to their business, I would point out that there is special provision within the VAT code to allow a refund of VAT incurred on the purchase of touring coaches. Under VAT Refund Order S.I. 266 of 2012 coach operators who are exempt from VAT may, subject to the conditions of the Order, be entitled to a refund of the VAT paid on touring coaches that are no more than 2 years old and are within specified dimensions.
Furthermore, while VAT exempt coach and bus operators are not entitled to claim the VAT incurred on their fuel costs, I would point out that Finance Act 2013 provides for relief from excise incurred on auto-diesel used in the course of business by qualifying bus and coach operators. The relief was originally intended to apply to licensed hauliers but, following consideration, it was decided to extend the relief to tax-compliant licensed passenger transport operators. The relief will operate on a sliding scale dependant on fuel prices generally but will not apply when the price of auto-diesel falls below €1.24 (including VAT). The maximum amount of the relief will be 7.5 cents per litre and will come into effect from 1 July 2013. It is estimated that the relief will cost in the region of €35 million gross in 2013 and €70 million gross in a full year.
With regard to introducing a charge to VAT at 9% on passenger transport services, I would point out that while it is possible under the EU VAT Directive to introduce such a charge, Ireland has traditionally exempted passenger transport services from VAT and this reduces the cost of those services for both the providers and the users of coach transport, including public transport. What must be remembered is that the cost of supplying goods and services that are exempt from VAT is always lower than if those goods and services were subject to VAT, despite the fact that VAT inputs cannot be claimed.