Ireland faces EU VAT rate questions

Tue 21st Feb 2017

The European Commission has challenged Ireland’s extensive use of reduced VAT rates.

In the EC’s latest economic and tax review of the country, it pointed to the low rates on hotels and tourism-related services as undermining the tax base.  Ireland introduced a 9% VAT rate on these services over five years ago to bolster its key tourism industry during the financial crisis.

The Commission pointed out that the sector has now recovered to pre-crisis levels, and so the tax subsidies should be withdrawn.  The previous VAT rate on this sector was 13.5%.  The difference is estimated at €626m lost revenues.  The Commission also highlighted that Ireland has one of the highest standard VAT rates in the EU, at 23%, but a relatively narrow base.

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