EU ‘won’t allow Vat cut to help road safety’

The Department of Finance claims EU taxation laws rule out the possibility of the Government implementing a key recommendation in the current Road Safety Strategy.
EU ‘won’t allow Vat cut to help road safety’

Documents seen by the Irish Examiner show that the Road Safety Authority sought assistance from the Department of Finance in addressing two specific actions required under the Road Safety Strategy 2013-2020.

Under the strategy’s action plan, the RSA was required to evaluate the cost-benefit of reducing Vat from personal protective equipment such as child restraints and motorcycle and bicycle helmets with a view towards increasing usage of the highest-quality equipment.

Similarly, the strategy recommended evaluating the cost-benefit of incentivising the purchase of vehicle components and devices as well as personal protective equipment that are proven to have a positive road safety impact.

As part of its key target of reducing fatalities on Irish roads from 162 in 2012 to 124 or fewer by 2020, the RSA proposed examining the feasibility of removing or reducing the rate of Vat and VRT on safety-related equipment and technology: “Vehicles need to be properly maintained to ensure their safe operation. Recent economic challenges may deter vehicle owners from undertaking routine maintenance.”

However, secretary general of the Department of Finance, Derek Moran, informed the RSA in December 2015 that Irish law on Vat is bound by EU legislation: “The EU Vat directive does not make specific provision for a reduced or zero rate to apply to safety equipment and as such they are the subject to the standard Vat rate which is currently 23%. Therefore, under EU law, Ireland is not permitted to reduce the VAT rate on personal protective equipment.”

He acknowledged that for historic reasons the zero rate of Vat applies to safety clothing, helmet and visibility clothing for children up to 10 years of age as such a rate was already in place in January 1991.

Mr Moran said it is also unclear what role the Department of Finance could play in incentivising the purchase of vehicle components, devices and protective equipment that were proven to have a positive road safety impact given the restrictions imposed on Ireland by the EU Vat directive.

A senior official in the Department of Transport said: “Other than making a case at EU level to change the law applying to Vat, there is little we can do. There is no doubt that Ireland on its own would not be able to bring about the required change at EU level without considerable support from other member states which is unlikely to take place in the short to medium term.”

The official said the position adopted Finance made the requirement of the RSA to conduct cost-benefit analyses “meaningless”.

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