Charities losing over €12m in VAT bill

IRISH charities are losing over €12m each year which could be used for essential services because their activities are excluded from VAT exemption under EU legislation.

A major report on the issue, due to be published later today at the annual conference of the Irish Charities Tax Reform Group in Dublin, will provide the first true estimate of the human cost of the problem.

The conference will also examine how Government tax reform could increase funding to the sector by removing existing tax burdens and stimulating new forms of donation.

“Few people realise that the greatest tax burden faced by charities in Ireland is their VAT bill,” said ICTRG chairperson, Niamh Ní Chonghaile.

“Irish charities pay 21% more than the commercial sector for goods and services because we cannot reclaim our VAT. People forget that because charities don’t charge VAT for their services, they are equally unable to reclaim VAT on their input costs for things like electricity and stationery.”

One leading charity, the Irish Cancer Society, has calculated that its annual VAT bill is over €200,000.

“Every €1 spent on VAT could be spent on the services which our members provide. It’s not hard to imagine just how much more good work we could do if this money could be reclaimed,” said Ms Ní Chonghaile.

The ICTRG, which represents over 120 charities and voluntary groups, had previously estimated that its collective VAT bill each year could be as high as €63m.

However, the group believes the lower figure will strengthen its case for tax reform.

“If anything, the fact that the figure of €12m is considerably less than we had previously believed should help to justify our calls for a change in the current system as it should not cause the Government any serious loss of revenue,” said Ms Ní Chonghaile.

She also says that such changes are permissible under EU legislation which allows individual member states to issues refund orders. Similar refund schemes are already available for equipment for the disabled and medical research.

“VAT continues to cost charities dearly. Charities struggle to raise funds for essential services to the most vulnerable and then have to generate more funds to pay the VAT bill,” said Ms Ní Chonghaile.

The ICTRG is also calling on the Government to introduce modest reforms to facilitate people who wish to donate shares to charities.

“Although donors who give shares don’t incur capital gains tax, many charities would find it easier if they got the cash value as they incur the cost of liquidising the shares,” said Ms Ní Chonghaile.

The ICTRG has called on the Government to use next year’s Finance Bill to address the VAT issue.