anomalies in Vat system

[SarahMc]

Its something I never gave much thought to, but having read this interesting article by Fergus Finlay
http://www.irishexaminer.com/opinio...eds-a-strong-dose-of-common-sense-238256.html

I had a browse myself of the various VAT rates, and there are some strange ones there, peanuts are zero rated, salted peanuts standard rate, white candles zero, coloured, standard.

http://www.revenue.ie/en/tax/vat/rates/index.jsp

What is the general logic, or have they evolved historically as a result of lobbying by various interest groups?

 

[mandelbrot]

Very sloppy lazy article really.

For example - Fergus doesn't seem to understand the very fundamental difference between zero-rated for VAT and VAT exempt ([broken link removed]).

The reason for exemption (note: not zero rating) of ballet classes is also explained, if he had been bothered to look: [broken link removed]

The question of membership shows another fundamental misunderstanding of what VAT actually is - in order for VAT to apply there has to be a taxable supply in the furtherance of a business - by definition a private sports club is not "in business", it exists purely for the benefit of its members and the wider community. Extending the logic of charging VAT on club memberships, you could end up with charities having to hand over VAT on donations received.

The suggestion that coffins attract "luxury" rate VAT is also a complete red herring - ([broken link removed]) - The supply of wreaths, coffins, etc as part of funeral account also exempt. However, the commercial supply of coffins manufactured by the undertaker (e.g. to another undertaker) is taxable at standard rate.

There is a logic behind all of the VAT rates - there's a huge body of legislation underpinning the whole system, it's not simply a case of someone picking a figure out of thin air, or bowing to pressure from a vested interest (although being the real world no doubt there will always be some close calls that will see pressure being brought to bear).

Fergus also omits to mention that there is no longer 40%+ relief on medical expenses, it has been standard rated (20%) for several years now.

Shoddy workmanship, Ted.

As for your own example of raw peanuts vs salted peanuts - the first is a raw foodstuff, the second has been processed (Value has been Added...).

For example potatoes are zero rated. Chips are also zero-rated, until they are cooked and ready to be eaten, when they become VATable at the reduced rate. Same thing with the potato waffles; zero-rated if raw or frozen, taxable if sold hot.

 

[Mrs Vimes]

White candles are zero rated because they are used in churches, so yes that would have been a lobbying thing (or a can't upset the church thing).

Also, while sanitary towels were zero rated, tampons were standard rated until a woman wrote to Charlie McCreevy years ago pointing out the anomaly which he corrected. Rumour has it John Charles McQuaid was behind the original vat rate, having failed to ban them

I expect all of the anomalies will have a reasonable explanation, well, an explanation anyway.

 

[huskerdu]

I expect all of the anomalies will have a reasonable explanation, well, an explanation anyway.

True, some are historical, and do need to be updated, but mostly, there is some sort of logic.

In the UK, there are regular rows about VAT. A recent one was over sausage rolls and pies.

There is a different VAT rate on sausage rolls if they are sold hot, or cold.


The famous row about whether a Jaffa cake is a cake or a biscuit went on for years.

The UK have VAT on chocolate biscuits but not choc cakes, so McVities fought for years to have Jaffa cakes classified as cakes. They won by arguing that a biscuit is crunchy and goes soft when stale and a cake is soft and goes hard when stale, so Jaffa cakes are cakes. Also, kids don't like them as much as other choc biscuits.

 

[huskerdu]

I just quickly read the article, there may be some sloppy errors, but his general point that there are anomalies that need to be reviewed is true.

 

[mandelbrot]

I just quickly read the article, there may be some sloppy errors, but his general point that there are anomalies that need to be reviewed is true.

Absolutely, and there are bound to be anomalies in any system that tries to classify almost everything under the sun, but I think he did the argument a disservice with the poor examples used, and the lack of understanding demonstrated.

 

[DB74]

Did he mention the absolutely ridiculous situation where School Boards of Management have to register for VAT and then account for VAT on a Reverse Charge basis if they are getting building work etc done

People of BOM are laypeople and volunteers and should not be expected to have to familiarise themselves with the VAT system or indeed the RCT system in order to satisfy the whims of the Revenue Commissioners

 

[T McGibney]

Its an appalling article. Finlay's main gripe is that parents can avail of tax relief on psychological assessments for their children. (btw he doesn't even realise that such relief has been standard rated for years). This in an era when youth suicides are increasingly commonplace. As a self-proclaimed children's rights advocate, he should hang his head in shame.

 

[Nige]

DB74, it's not just BOMs, its group water schemes and some other community groups.

It should be sufficient to pass a law requiring such bodies to only engage contractors who have a current tax clearance certificate.

 

[huskerdu]

Its an appalling article. Finlay's main gripe is that parents can avail of tax relief on psychological assessments for their children. (btw he doesn't even realise that such relief has been standard rated for years). This in an era when youth suicides are increasingly commonplace. As a self-proclaimed children's rights advocate, he should hang his head in shame.

He is talking about educational psychologist assessments to diagnose dyslexia or developmental delays or other issues. THe result of these assessments are used to decide how much educational support a child gets (resource teaching hours / SNA etc)

It is another dreadful inequality on Irish life that if you can afford to get the assessment done privately, you can get educational support for your child faster than those than can't . This inequality would exist regardless of the tax relief.

 

[T McGibney]

He is talking about educational psychologist assessments to diagnose dyslexia or developmental delays or other issues. THe result of these assessments are used to decide how much educational support a child gets (resource teaching hours / SNA etc)

It is another dreadful inequality on Irish life that if you can afford to get the assessment done privately, you can get educational support for your child faster than those than can't . This inequality would exist regardless of the tax relief.

He says, midway through the article

private industries grew up around the tax breaks — professionals left the public service in order to set up private practices for parents who could take advantage of the tax breaks.

Hence his apparent conclusion that psychological assessments are merely a tax avoidance measure. No attempt to reflect the reality that they can greatly help parents in identifying a child's difficulties and in enabling and empowering the child to overcome these difficulties.

 

[SarahMc]

Thanks for all the replies. It is enlightening.

Contraceptive pill, zero rated, Non oral contraception, such as condoms (more effective for reducing STDs) 13.5%.