Analysis: The treatment of sign language interpretation as a luxury service is an anomaly within the EU's VAT system, one that runs counter to its intention
By Brendan McCarthy, Elaine Doyle and Elaine Rogers, UL
Value Added Tax (VAT) is an 'EU-level tax'. Flowing from a raft of EU Directives, it is operationalised by Member States giving effect to it through the passing of domestic legislation. VAT is also a ‘consumption tax’, in that it is charged on the value added to goods and services at each stage of the production line when coming to market.
While the tax is ultimately paid by the end-consumer, the onus is on the supplier to register, calculate and charge VAT, collect it from the consumer and remit it to the tax authorities by the appointed date. In this way, VAT is an ‘indirect tax’.
VAT is highly complex too, with a host of different rates to navigate. Some activities like medical and education services, for example, are specifically exempt from VAT to keep them affordable and accessible. Children’s clothing, bread, milk, vegetables and other essentials are zero-rated (0%) - this is to mitigate against the regressive impact tax can have on lower-income households - and a 13.5% rate applies to goods and services contributing to the wider economy, like the construction sector.
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These are not exhaustive. Where supplies do not fall within the parameters of these rates, they are likely liable to VAT at the highest rate of 23% - the ‘luxury’ rate. These are the rates as they currently apply in Ireland, but since VAT is an EU-level tax, this means that an exempt activity in Ireland is likely to be exempt in Germany, a zero-rated supply in Spain is likely to be zero-rated in Ireland, and so on.
This ensures a consistent approach across the bloc, providing certainty to international investors and preventing VAT from acting as a barrier to cross-border trade.
This does not preclude the possibility of other unintentional barriers arising, however. One such barrier concerns Sign Language Interpreters (hereafter, SLI) in Ireland. One might have assumed that SLI’s are providing an essential service to their consumers and as such, that their services would be zero-rated for VAT purposes.
Yet from a review of the website of the Irish Revenue Commissioners, SLI services do not fall under the 0% rate. Neither are they exempt. Rather, SLI services fall under the 23% rate, effectively treating them as a luxury service.
This means that if a VAT-registered SLI’s chargeable rate per hour was, say, €100, they would be obliged to charge a customer €123 for one hour of service and remit €23 of the fee to the Revenue.
While the SLI is arguably no worse off financially, it is nonetheless conceivable that a consumer on a budget, seeking to engage with a member of the Deaf community and who must avail of that SLI’s service to do this, would be obliged to limit the amount of time they use the service by almost one-quarter to stay within their means. This results in reduced participation and inclusion of Deaf SL users within wider society.
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Furthermore, a closer inspection of the Revenue Commissioners’ website reveals that VAT on SLI is included under the broader ‘Interpreter (Language)’ service category. This means that if an interpreter was to translate a speech from, say, French into English, that service would be ‘VAT-able’ at 23%. While it is conceivable that such a service might be categorised as ‘luxury’ under VAT legislation, it is inconceivable that the same rationale could be stretched to include SLI, especially when we consider the end-user: the inability to understand a foreign language does not constitute a disability. The inability to hear does.
In Ireland, The Disability Act 2005 (Section 2) defines disability as including physical, sensory, mental health, or intellectual impairments that substantially restrict a person’s capacity in areas like work or social life – this includes deafness. The Equal Status Acts 2000-2018 prohibit discrimination based on disability, including being Deaf or hard of hearing, in goods and services, and the Employment Equality Acts 1998-2015, which define disability as including hearing loss, oblige employers to provide reasonable accommodations.
Moreover, The Irish Sign Language (ISL) Act 2017 recognises ISL as a native language and requires public bodies to provide interpretation services. This chimes well with the United Nations Convention on the Rights of Persons with Disabilities (UNCRPD), which underlines the importance of sign language in realising the rights of persons with disabilities in several areas, including Accessibility (Article 9), Freedom of Expression and Opinion, and Access to Information (Article 21), Education (Article 24) and Participation in Cultural Life (Article 30). It states that those with disabilities are entitled to equal recognition and support for their cultural and linguistic identity, including sign language.
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VAT is an EU-level tax. SLI services are subject to VAT in Ireland at the highest rate and, with limited exceptions, this is the case across the EU. The EU has committed itself to playing its part in achieving the UN 2030 Agenda, including Sustainable Development Goal (SDG) 10 on Reducing Inequalities, as well as its commitment to Leave No-One Behind (LNOB). The VAT system is designed to prevent barriers to cross-border trade from arising, but it has nonetheless created a different kind of barrier, not to trade but to equal participation of its citizens.
Certainty may flow from consistency, but consistency is a poor excuse for complacency. The treatment of sign language interpretation as a luxury service is an anomaly within the EU’s VAT system. An anomaly that runs counter to the intention of international, regional and national law and policy which converge towards human rights principles of participation, equality, non-discrimination, and inclusion.
VAT is an indirect tax that may inadvertently give rise to indirect discrimination. As a prominent member of the EU, Ireland is well positioned to not only shine a light on this, but to build a coalition to rectify it and prevent this important issue from being ultimately lost in translation.
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Dr. Brendan McCarthy is an associate professor for the Department of Accounting & Finance in UL. Elaine Doyle is a professor for the Department of Accounting & Finance in UL and Elaine Rogers is a member of the Centre for Social Issues Research and Department of Psychology in UL.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
