Indirect Tax (VAT)
Finance Bill 2017
The main change in the Finance Bill is the introduction of a sugar tax for suppliers of sugar sweetened drinks. The tax will apply at a rate of 20c per litre where the sugar content is 5 grams or more but less than 8 grams per 100 ml and 30c where the sugar content is 8 grams or above. The person liable for the tax will be the business that first supplies the drinks in Ireland. As the tax applies to drinks that are consumed in Ireland it will not apply to exports out of Ireland. The introduction of the legislation is due to be effective from 1 April 2018. However, it will only come into effect on the issue of a commencement order which allows for the tax to become effective on a date on or after 1 April 2018.
The tax aims to reduce juvenile obesity and is being viewed as a trial tax to see whether taxes, such as this, can change consumer behaviour to benefit public health. If it is successful further taxes will follow.
On the VAT front there were two minor changes. The first is in the same vein as the sugar tax and targets the use of sunbeds which have been linked to greater instances of skin cancer. The bill provides that, effective from 1 January 2018, the standard rate of VAT, currently 23%, will apply to sunbed services instead of its present VAT rate of 13.5%.
Additionally, a change was made to the 2015 amendment to the VAT exemption for providers of vocational training. The VAT exemption, which had applied to private bodies providing such training before 2015, has been restored albeit with some strings to be attached. There is a clear indication that regulations as to the conditions under which private providers can qualify for VAT exemption are to be introduced. Private providers will have to wait to see what these conditions are before knowing whether they qualify or not. In any event it is clear that the change will have the effect of broadening the categories of business that can benefit from the exemption that applies to vocational training and retraining services.
We welcome the fact that the VAT exemption has been broadened which means that at least some private providers will be able to compete with public sector providers on an equal footing. VAT exemption continued to apply to public sector providers of vocational training following the 2015 change which was placing many private sector providers at a considerable disadvantage in competing for business in State and financial sectors. Hopefully the regulations will not dilute this otherwise welcome development.