Brian Hayes MEP today said that in light of the new EU VAT rules proposed by the European Commission, the government should permanently reduce the VAT rate on the construction of new homes and apartments to 9%.
“This week the European Commission launched a new Action Plan for VAT reform which set out options to give Member States greater flexibility in setting VAT rates. EU VAT rules have limited Ireland in the past from reducing rates in certain areas.
“The VAT rate for the construction of new homes and apartments is currently 13.5%. There have been efforts to reduce this to 9% but the government has consistently said that because of EU rules, they cannot reduce VAT rates for the building of new homes because different rules apply to residential and non-residential construction.
“Because of the serious housing shortage problems, especially in Dublin, the need to create better conditions for construction is vitally important. Currently, there is absolutely no EU restriction on reducing the rate of VAT to 9% for residential construction. The same does not apply to non-residential construction. It is understandable that the government does not want to create two rates of VAT between residential and non-residential construction. But the housing situation is urgent and we need change.
“I believe there should at least be a temporary reduction of the VAT rate to 9% for the construction of residential properties. This measure should be taken with a view to permanently reducing the overall VAT rate for the construction of new properties when new EU rules come into play.
“The Commission’s Action plan is looking at ways where Member States should gain more flexibility in setting its VAT rates. This may mean that the EU’s VAT rates would be abolished and Member States could adopt their own rates of VAT – this is an option that the EU is seriously considering. Whatever the outcome of the new EU VAT regime, I believe it is in Ireland’s interest to ensure that favourable rules are in place so that we can meet housing demands.
“The VAT rate was reduced to 9% in the tourism sector in 2011; this was a hugely successful development and there has since been over 30,000 jobs added to our tourism industry.”