Michael McGrath (Cork South Central, Fianna Fail)
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As the Deputy will be aware, the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they are exempt from VAT or fall within Annex III of the Directive, in which case lower VAT rates may apply subject to certain rules. Currently Ireland has a standard VAT rate of 23% and two reduced rates of 13.5% and 9%.

The supply of car hire is not listed in Annex III and therefore would in general be subject to the standard rate. However, the Directive allows for historic VAT treatment to be maintained under certain conditions and Ireland has retained the application of the reduced rate of VAT, currently 13.5%, to the supply of short term car hire.

This is known as a ‘parked rate’ and the continuation of this reduced rate application is conditional on the rate being no less than 12% and the requirements for the derogation are maintained. Therefore, there is no discretion under the Directive for Ireland to widen the scope of the derogation and apply a reduced VAT rate to the supply of long term car hire (for a period greater than 5 weeks in total in a twelve-month period).