Charities pay €36m in VAT every year

THE Government is taking about €36 million annually in VAT from Irish charities, curbing vital services to help poor and sick people, a campaign group claimed yesterday.

A 2001 report estimated the VAT bill faced by charities to be in the region of €18m, but this was considered to be about half of the equivalent cost today.

Unlike businesses, charities are prevented by EU law from claiming back VAT, but governments are allowed to reimburse them by way of grants.

The aid agency Concern spent €1.5m on humanitarian and health services in Rwanda last year, but had to pay almost the same amount in VAT.

“In Rwanda, we provide essential services such as child survival programmes, a home-based malaria scheme, community-based health care for 12,000 children, care for pregnant women and supports for 12 schools,” said Concern’s deputy chief executive Paddy McGuinness.

The Irish Cancer Society faces an annual VAT bill of around €300,000 but, unlike the business sector, this money cannot be refunded by the Government.

John McCormack, the society’s chief executive, said this sum would run its entire cancer information service for a year.

“The same amount would provide eight additional oncology liaison nurses who offer support for cancer patients and their families, or a full year’s cash assistance grants to assist hundreds of people who experience financial stress due to cancer diagnosis,” he said.

Businesses are entitled to claim back the VAT element of all expenses, such as buildings and offices, equipment, fundraising, promotion and overheads.

But EU law prevents member states from directly refunding VAT to charities because they carry out non-business activity.

However, the Irish Charities Tax Reform Group insisted yesterday that there is no obstacle to a Government grant scheme to pay back the amount as long as it is not accounted for as a VAT refund.

The group, representing around 140 charity organisations, was launching its Abolish VAT on Giving campaign.

“Most people will not be aware that a portion of their euro given to charities at different fundraising events is returned to the Government by way of VAT payments by the charities involved,” said ICTRG chairperson Richard Dixon.

EU Commissioner Laszlo Kovacs said last year that the VAT burden on charities can be relieved by way of a Government grant scheme, which is already being put in place in Denmark.

“We need similar commitment and action from our Minister for Finance. Even if the VAT involved is now €36m, it’s just a small amount compared to the billions being earned in tax revenue,” he said.