41 Mr. T. Foxe asked the Minister for Finance what plans, if any, he has to change the system whereby VAT is demanded on materials used in the construction of community centres in view of the fact that most of the funds are from local subscriptions and most of the labour is provided voluntarily; and if he will make a statement on the matter. [5957/96]

The VAT treatment of charities and similar organisations is a direct consequence of EU VAT law. The Sixth VAT Directive, with which Irish law must comply, provides that most charitable and voluntary activities are exempt from VAT: this means that bodies engaged in such activities do not charge VAT on the services that they provide but, as a necessary corollary, neither are they entitled to recover the tax borne on the goods and services they purchase in the course of these activities. Generally speaking, VAT can only be recovered by VAT-registered businesses.