John Lyons (Dublin North West, Labour)
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Question 69: To ask the Minister for Finance with regard to the measures announced in last month's jobs initiative regarding the introduction of a second reduced rate of VAT, primarily introduced to boost confidence in the high value and labour intensive tourism industry, in view of the fact that services such as hairdressing have been included within the banner of the tourism sector, if he will agree to consider other related services, including dry cleaning and laundry services. [15999/11]

Michael Noonan (Limerick City, Fine Gael)
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VAT is charged on the supply of goods and services, and the rate applying is subject to the requirements of EU VAT law with which Irish VAT law must comply. While many tourist related services are being made subject to a new temporary lower reduced VAT rate of 9% from 1 July next, it is not possible to extend this treatment to all goods and services that are currently subject to the 13.5% rate.

This arises from the fact that many of goods and services to which Ireland applies a reduced rate of VAT, including dry cleaning and laundry services, have their basis under an EU derogation that provides that as we applied a reduced rate to these items on 1 January 1991, we are entitled to continue applying that reduced rate to those items. However, this continuation of reduced rate application is conditional on the rate being no less than 12%. These are known as 'parked' items, and are provided for under Article 118 of the EU VAT Directive. As laundry and dry cleaning services are such parked items, it is not possible for Ireland to apply the rate of 9% to them.

It is also for this reason that the Jobs Initiative introduced a 9% VAT rate in respect of tourist activities such as restaurant and hotel accommodation services, while other tourist activities such as tour guide services and the short-term hire of cars, boat, caravans and mobile homes remain liable to VAT at the 13.5%. However, it should be noted that in the majority of EU Member States dry cleaning and laundry services apply at their standard VAT rate of up to 25% in some cases, compared to 13.5% in Ireland.