Adjournment Debate - Tax Code.

Tuesday, 20 October 2009

Dáil Eireann Debate
Vol. 692 No. 2

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Deputy David Stanton: Information on David Stanton  Zoom on David Stanton  I thank the Office of the Ceann Comhairle for giving me permission to raise this matter. We speak much in the House about active citizenship. St. Patrick’s Hospital Fundraising Association in Fermoy is an example of active citizenship in practice. It recently purchased 12 new safe patient mobilisation beds at a cost of €53,000. These beds have made a [323]huge difference to the patients in the hospital and assist the staff in further enhancing the already high quality of care. It is without doubt that all of the hard work that goes into fundraising for local hospitals such as Fermoy greatly benefits the patients, most of whom are elderly.

All of this money was donated by the local community for the association, which is a registered charity. It is estimated that the association in Fermoy has raised over €100,000 between 2006 and 2009 in order to purchase appliances and equipment. Recently, a 30-bed unit was built at the community hospital in Fermoy and the association contributed €460,000. There is no doubting the very valuable and hard fundraising work that is carried out by people like those in Fermoy. Other groups in my constituency, such as those in Youghal, Midleton, Cobh and Mallow also have worked and continue to work very hard fundraising on a voluntary capacity to raise funds to purchase much needed equipment for their local community hospitals in order to support front line services. I am sure it is the same all over the country. Not one cent is wasted, unlike money in the charge of many State agencies, examples of which are well known.

To come back to the purchase of the safe patient mobilisation beds, costing €53,000, the Minister for Finance showed his gratitude to the people of Fermoy by charging VAT to the tune of 21.5% on the purchase. The Minister has set a threshold of €25,390 on each individual item in order to qualify for relief under the VAT refund order, SI 58/92. Even though the beds were one order, the purchase does not qualify for the relief because the refund only applies to medical equipment costing in excess of €25,390. The Minister charged a VAT bill on the purchase of €11,000. Imagine all the cake sales and raffles that had to be held in order to raise €11,000 simply to hand it over to the Minister. Imagine what could have been done in the hospital with that money, which was raised on a voluntary basis.

I call on the Minister to consider doing two things. First, he should reduce the threshold, and there is an opportunity to do this in the Finance Bill. Second, he should consider the purchase of items such as these beds as one item so that the VAT relief can be allowed to the voluntary association. This would encourage groups to continue to raise more money. It will save the State in the long run and do much good for those in real need in our communities. If the Government is really serious about active citizenship, it should encourage this kind of active citizenship on the ground, which is happening as we speak. I await the Minister of State’s reply. I hope this will not end here but will go further. Perhaps we can do something constructive on this matter.

Minister of State at the Department of Finance (Deputy Martin Mansergh): Information on Dr Martin Mansergh  Zoom on Dr Martin Mansergh  I pay tribute to those who engage in active citizenship and those who fundraise for vital medical equipment. Nothing I say will detract from that.

Deputy David Stanton: Information on David Stanton  Zoom on David Stanton  We will see.

Deputy Martin Mansergh: Information on Dr Martin Mansergh  Zoom on Dr Martin Mansergh  I would first like to set out the context of this relief. Non-profit making organisations and voluntary groups that are engaged in the supply of goods and services closely related to welfare and social security, such as hospitals, are exempt from VAT by virtue of paragraph (vii) of the First Schedule to the Value-Added Tax Act 1972. This exemption from VAT, which applies across all EU member states, means that such organisations or groups do not register for VAT; they do not charge VAT on their supplies of goods and services; and they are not entitled to credit for VAT incurred on goods or services acquired by them. In this regard, where a hospital purchases a good or engages a service, any VAT liable in the charge for that good or service must be borne by the hospital.

[324]However, there is provision within the Irish VAT code for the refund of VAT incurred on the purchase of a new medical instrument or appliance by a person who donates the medical equipment or appliance to a hospital. The Value Added Tax (Refund of Tax) (No. 23) Order 1992 provides that certain conditions must be met in order for a VAT refund to apply: in the first instance, the appliance or instrument must be donated to a hospital; the order applies to any new instrument or appliance, excluding means of transport, which has been designed and manufactured for use solely in medical research or diagnosis, prevention or treatment of an illness; the Minister for Health and Children must recommend that a refund of tax under the order is appropriate, having regard to the requirements of the health services in the State; it is a condition of the order that no part of the funds used to purchase the goods be provided directly or indirectly by the State, a State body or any public or local authority, or indeed by the hospital to which the equipment is donated; and, finally, the amount on which VAT is chargeable must exceed €25,390 in order to qualify. Therefore, individual medical instruments or appliances costing less than €25,390 do not qualify for a VAT refund under the scheme.

The effect of the order is to allow a refund of VAT paid on qualifying medical equipment purchased through voluntary donations. When the refund order was originally introduced in 1987, only partial relief was granted. However, since the order was amended in 1992, the relief applies a full repayment of VAT. In recent years, the number of repayments claimed under the medical donations refund order was 21 in 2007; 13 in 2008; and 22 to date in 2009. The cost of these repayments amounted to €483,000 in 2007; €196,000 in 2008; and €903,000 to date in 2009.

A similar VAT refund order was introduced in 1995 for the repayment of VAT incurred in the donation of any new instrument or appliance to a research institution or a university, school or similar educational body engaged in medical research in a laboratory. Similar conditions are attached to this order, including the minimum value threshold of €25,390. The VAT refund order was introduced to help defray the cost of more expensive items purchased by voluntary donations. Items costing less than the threshold of €25,390 are excluded from the relief in order to limit the relief to more expensive medical equipment.

The current threshold level has not changed in the 22 years since the refund was introduced in 1987 at £20,000, which was translated to €25,390 to coincide with the introduction of the euro in 2002. Given increasing inflation since the introduction of the current threshold, the value of the threshold has reduced significantly in real terms. Taking inflation into account, the 1987 threshold would equate to approximately €46,500 in 2009 values. In this context, a greater level of lower priced medical appliances now qualify under the order than when the relief was originally introduced. In the circumstances, therefore, there are no plans to change the current threshold.

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