Ireland will have to re-write its rules on how State and public bodies are subjected to VAT, following a judgment of the European Court of Justice.
A case was taken by the European Commission, after private car park operators complained that they have to charge VAT on parking, while local authorities operating off street parking are exempt.
Under the European sixth VAT Directive, if a public body is carrying out activities that are also being carried out by a private competitor, then the public body must charge VAT unless it is specifically exempt in law. The European Court said Ireland must comply with this Directive.
But under the current Irish legislation it is the reverse: public bodies are not subject to VAT law, unless a specific exemption has been made by a ministerial order.
Car parking, waste charges and local authority operated toll roads are the most likely areas that the enforcement of this Directive will affect.
Car parking is currently liable for VAT at 21.5%, waste collection and landfill at the reduced rate of 13.5%, and toll roads and bridges operated by private companies (e.g. NTR) at 21.5%
In the court, the State argued that public bodies can only engage in activities under specific laws and the minister for finance is aware of any potential distortion of competition and acts accordingly.
In the specific case of off street parking, the Government argued that local authorities were given powers to manage car parks as a traffic management measure, not as a business activity.
The Department of Finance, the Revenue Commissioners and the Attorney General's department will review the implications of the judgment to see if any additional VAT charges have to be made by public bodies.
