724. Deputy John Lahart asked the Tánaiste and Minister for Finance if he acknowledges concerns that the current €42,500 VAT registration threshold for service providers creates a "cliff edge" for sole traders in tourism and other consumer-facing sectors; and whether he intends to address this issue in the forthcoming Budget. [60765/26]

725. Deputy John Lahart asked the Tánaiste and Minister for Finance the estimated Exchequer cost of increasing the VAT registration threshold for service-based businesses to €60,000, €75,000 and €85,000 respectively. [60764/26]

726. Deputy John Lahart asked the Tánaiste and Minister for Finance if he will provide details of any analysis undertaken comparing Ireland's VAT registration threshold for services with those applicable in other jurisdictions, including the United Kingdom. [60761/26]

727. Deputy John Lahart asked the Tánaiste and Minister for Finance if his Department has conducted any assessment of the impact of the current €42,500 VAT registration threshold on sole traders and micro-enterprises operating in business-to-consumer service sectors, including tourism and guiding services. [60760/26]

728. Deputy John Lahart asked the Tánaiste and Minister for Finance if he has considered increasing the VAT registration threshold for service-based businesses, which currently stands at €42,500; and if he will make a statement on the matter. [60759/26]

I propose to take Questions Nos. 724, 725, 726, 727 and 728 together.

As the Deputy will be aware, it is long-established practice that the Minister for Finance does not comment in advance of the Budget, on any tax matters that might be the subject of Budget decisions. There are commitments made under the agreed-upon Programme for Government to support Small and Medium Enterprises especially those in the retail and hospitality sectors.

I can confirm that no such assessment of any purported impact on the raising of VAT registration threshold for services on the sectors highlighted by the Deputy, nor has there been a comparative analysis between Ireland and the United Kingdom's VAT registration thresholds done by officials in my Department.

I am advised by Revenue that VAT registration thresholds are subject to the requirements of EU VAT law, with which Irish VAT law is obliged to comply. In general, the EU VAT Directive requires that all businesses supplying taxable goods and services are registered for VAT, charge VAT on those supplies to their customers, and file returns and remit the VAT to the relevant national tax authority.

Within the framework of the Directive, Ireland has operated VAT registration thresholds for goods and for services for many years. Following increases applied in Finance Act 2024, the levels are now €85,000 for supplies of goods and €42,500 for supplies of services. Generally, a business whose turnover is below the relevant threshold is not obliged to register for VAT and can supply its customers exempt from VAT; when its turnover reaches the threshold, the business is obliged to register for and operate VAT in accordance with normal rules. Businesses whose turnover is below the threshold are entitled to elect to register should they so wish. Separate to the turnover rules, as required under EU law, there are also other circumstances where businesses are required to register for VAT, for example, when making intra-community acquisitions or when accounting for VAT under the reverse charge mechanism because of receiving taxable services from a supplier outside the State.

The nature of the turnover thresholds means that the obligation to register and apply VAT comes into effect when the relevant threshold is reached. There is no scope under the EU VAT Directive for Ireland to introduce an adjustment to this impact at the threshold.

I am advised by Revenue that VAT returns do not require traders to state whether they supply services, goods or a mix of both. To distinguish services from other categories, the estimates below rely on each trader's reported trading description together with their NACE code, the EU standard classification system that categorises businesses by economic activity.

The estimated turnover is derived from multiple administrative data sources. Where traders have filed a Return of Trading Details (RTD), the reported sales figures are used and validated against turnover declared on annual tax returns to ensure accuracy. For the remaining VAT-registered traders where no direct turnover figure has been provided, Revenue has estimated turnover using information from VAT returns and other available administrative data. It should be noted that these turnover estimates are calibrated against the most recently available return data which, due to filing timelines, relate to earlier trading periods. Actual turnover levels for the most recent period may have changed over this timeframe.

The table below provides the estimated cost to the Exchequer of raising the VAT registration threshold for services from €42,500 to the levels requested by the Deputy. The estimate should be regarded as tentative. These estimates assume no behavioural change in response to a threshold increase. A proportion of these traders engage primarily in business-to-business activity, including subcontractors in the construction sector, and would likely elect to remain VAT registered in order to deduct VAT on input costs. The estimates do not account for this and may therefore overstate the actual revenue foregone. Therefore, the figures should be regarded as an upper bound.