Plans for a significant cut to the rate of VAT on bicycles and electronic bikes were dropped at the last minute in the run-up to last year's budget.
Officials at the Department of Finance had been working on plans for chopping the rate applying to bikes from 23% to 13.5% with Finance Minister Michael McGrath eager that the change was in place for the Christmas market.
However, the plan did not go ahead with complexities around legislating for the change and the possibility it would encourage others to start looking for similar reductions in VAT on their products.
A Department of Finance submission said officials had examined the possibility of reducing the VAT rate to just 9% as a way of encouraging the purchase and use of bicycles and e-bikes.
However, the submission said: "Our concern is that if a concession is made to a category such as bikes, others may build a case to be moved into this lower category".
"We believe that a reduction from 23% to 13.5% is a very significant concession and there is not a compelling case to move the rate to 9%," the submission added.
In a submission in late September, Minister Michael McGrath had written: "For now, please do the necessary drafting to reduce VAT on bikes and e-bikes to 9%".
"I will make a final call on this closer to the Budget. Given the importance of the Christmas market, it seems to me this measure would need to come into effect on 1 November 2023."
However, in a later submission in early October, Mr McGrath wrote instead: "Noted with thanks. I do not intend to proceed with any change to VAT rates in this area in Budget 2024."
Other changes to VAT in the budget included the extension of the reduced rate that applies to gas and electricity, which had been due to expire last autumn.
Minister McGrath was told a 12 month extension would cost the Exchequer in the region of €315m, with Revenue having checked those figures to ensure they were neither under nor over-estimated.
A note from Mr McGrath said: "I wish to extend the 9% reduced rate for gas and electricity beyond 31 October 2023".
"The length of the extension will be the subject of a political discussion. For now, please pencil in 1 July 2024."
Changes were also made to the VAT registration thresholds for small businesses were also introduced increasing the level of €37,500 for services and €75,000 for goods to €40,000 and €80,000 respectively.
The Department of Enterprise had been pushing for the change due to "inflationary pressures in the economy" and believed the cost of the measure would be in the region of €20m.
However, it was subsequently determined from Revenue, that the cost to the Exchequer was more likely to be just €6m.
Minister McGrath was also briefed by officials on a change that was needed to make the installation of solar panels on the rooves of schools exempt from VAT.
A submission said this measure would cost just €500,000 but should not be extended to all public buildings just yet.
The pre-budget submission said: "It is not suggested to broaden the scope of public buildings beyond schools at this time as the majority of such buildings are state-owned and any larger discussion on what constitutes a public building could require clarification from the European Commission."
Reporting by Ken Foxe
