204 Mr. J. Mitchell asked the Minister for Finance if private contractors in the refuse collection business pay a VAT rate of 12.5%; if the same rate is payable by local authorities; if the private operators can reclaim the VAT concerned; his views on whether the situation is acceptable; and his proposals to make amendments in this area. [4197/02]

I have no plans at the moment to make any changes to the existing VAT treatment of refuse collection by local authorities. Under VAT law, the service of accepting for disposal of waste material by private contractors is subject to the reduced rate of 12.5%. Such contractors are required to register for VAT provided they make supplies over €25,500. When registered they can recover input VAT incurred in respect of the provision of such activities.

State and local authorities are regarded in general as non-taxable bodies for the purposes of EU and national VAT law. This means that they do not recover VAT on their inputs but are not required to charge VAT on any services they provide, even where they charge a fee for such services. Under EU VAT law, the question of treating state or local authorities as taxable persons would only arise in circumstances where they were engaged in activities in which their treatment as non-taxable persons would lead to significant distortions of competition. Evidence would be needed that such circumstances arise before a change in Irish VAT law could be considered justified.

I am aware that concerns have been raised in this area by representatives of private waste contractors. If such a distortion of competition were proven and VAT law amended it would involve imposing VAT at 12.5% on all households and businesses who pay waste charges and whose waste is collected by a local authority.