200. Deputy Marc MacSharry asked the Minister for Finance if his Department will simplify the VAT code on car sharing, abolishing the two-tier system that exists, and allowing all vehicle hires to be charged at the same rate of 13.5%, in keeping with conditions of the specific VAT Directive, that the rate cannot be less than 12%. [41362/24]

201. Deputy Marc MacSharry asked the Minister for Finance his views on swapping the word 'consecutive' to 'cumulative' in the Revenue tax manual, that would facilitate a singular VAT charge of 13.5% across all vehicle hires, supporting long-term usage of car sharing and sustainable transport; and if he will engage with Revenue officials on the means to do so. [41363/24]

I propose to take Questions Nos. 200 and 201 together.

I am advised by Revenue that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the VAT Directive provides that all goods and services are liable to VAT at the standard rate unless they are exempt from VAT or fall within Annex III of the Directive, in which case lower VAT rates may apply subject to certain rules.

The hiring of vehicles does not come within the goods and services listed in Annex III, so the Directive requires that Member States apply the standard rate, which in Ireland is currently 23%. However, the Directive also allows for historic VAT treatments to be maintained by a Member State under certain conditions, including a strict requirement that the scope of the historic treatment not be extended. On this basis, Ireland has retained its long-standing application of a reduced rate, currently 13.5%, to the supply of hiring vehicles used for a short period of time. The Irish legislation specifies that the reduced rate only applies where the period of the hire agreement together with any previous hiring to the same person – whether of the same vehicle or of another – during the 12 months ending on the commencement of the agreement, does not exceed 5 weeks. The supply of hiring a vehicle for any longer periods is subject to VAT at the standard rate. These statutory provisions and how they are implemented are explained in the Tax and Duty Manual that Revenue has published, and to which the Deputy refers.

There is no discretion under the Directive for Ireland to extend the application of the reduced rate of VAT to the long-term hire of vehicles. Nor does the Directive permit any broadening of the scope of our historic arrangement for short-term hires as the Deputy has suggested, either by explicitly lengthening the qualifying hire period, or by otherwise altering the statutory provision on how a qualifying period is measured.