Local authorities will be forced to charge VAT for a number of services under measures included in the Finance Bill. The Bill, which gives legal effect to measures announced in the December Budget, was published this afternoon.
The Bill proposes the scrapping of a number of tax reliefs, including the relief on service charges, though this will not come into effect until 2012.
Read the Bill in full here
It also includes measures to extend VAT to some services provided by local authorities. This will cover areas such as waste collection and is a response to a European Court of Justice ruling last year. This could lead to higher charges for bin collection if VAT is passed on.
Other areas covered by the VAT extension include recycling services, off-street parking and the operation of leisure facilities. This is because private providers of such services have to charge VAT. But the Department of Finance has stressed that education, health, water and transport services are not covered by the VAT changes.
Other reliefs being ended include capital allowances for childcare facilities and gifts of property to the State.
The levy on life assurance premiums introduced last year is being removed from pension products in order not to discourage investment in pensions.
The Government is also to bring in legislation covering transfer pricing, in order to regulate the trading of goods and services between subsidiaries in the same group of companies. This is aimed at preventing companies from under-stating their Irish profits for tax purposes.
There are also some measures giving additional powers to Revenue. The National Asset Management Agency will be required to provide the tax authorities with information to ensure that property deals are correctly dealt with for tax purposes.
The Bill also contains other measures aimed at making Ireland more attractive for overseas businesses, in particular financial services. There are also plans for measures designed to make Ireland more attractive for Islamic finance - financial arrangements which comply with Shari'a law.
Fine Gael finance spokesperson Richard Bruton said the Finance Bill was merely a tinkering exercise and contained nothing that would help stem the tide of unemployment. Labour's Joan Burton said ordinary families would be dismayed to find themselves paying more for important services. Sinn Fein's Arthur Morgan said it was a lightweight measure that would not provide the revenue to get us out of recession.
Financial Services Ireland (FSI), which represents the IFSC, welcomed measures in the Bill, in particular the extension of the remittance tax scheme to EU nationals. The remittance scheme is a tax incentive encouraging highly skilled foreign staff to locate in Ireland.
Employers' group IBEC said that while the Bill included some useful measures, it was disappointing that more was not done to stimulate enterprise and employment. It was particularly unhappy that the tax credit arrangements for research and development were not made more flexible.
Meanwhile, the Taoiseach has called for a new attitude of confidence in facing up to the country's economic difficulties. In a speech to Dublin Chamber of Commerce tonight, Brian Cowen called on everyone to work together to get through the recession in the best possible shape.
