171. Deputy Pádraig O'Sullivan asked the Tánaiste and Minister for Finance whether he has considered applying a reduced rate of VAT to alcohol-free beers, wines, spirits and other non-alcoholic adult beverages as part of Budget 2027; and whether an assessment has been undertaken of the potential public health benefits of incentivising consumers to choose alcohol-free alternatives. [66591/26]

As the Deputy may be aware, the VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law must comply. In accordance with the Value-Added Consolidation Act, 2010, the supply of non-alcoholic drinks is generally liable to tax at the standard rate, currently 23 per cent.

The VAT Directive obliges each Member State to have a standard rate of VAT and also allows that a Member State may choose to have up to two reduced rates of VAT which may be applied to certain goods and services i.e. any of those listed in Annex III of the VAT Directive, which includes non-alcoholic beverages. Ireland currently operates two lower rates of VAT, 13.5 per cent and 9 per cent. At present, Ireland applies the 13.5 per cent VAT rate to certain non-alcoholic beverages such as tea, coffee and fruit juices where they are supplied in the course of catering. From 1 July 2026, these non-alcoholic beverages were reduced to 9 per cent where they are supplied in the course of catering. However, supplies of other non-alcoholic beverages such as bottled waters, soft drinks and sports drinks will remain at the standard VAT rate even when provided in the course of catering.

Any suggestion for extending the application of a reduced VAT rate to all non-alcoholic beverages would need to be considered carefully having regard to a range of factors including the impact on Exchequer revenues, and the practical concerns that it would be difficult to administer and would be likely to provide considerable scope for manipulation of the VAT system and opportunities for tax avoidance. It should also be noted that there is no reason to believe that any VAT reduction would be passed to consumers or lead to any change in consumer behaviour.

I will keep these matters under review.