THE EUROPEAN Commission is planning to take the Republic to court in a VAT case that could hit investment in the bloodstock and greyhound industries.

Individuals or businesses that buy or import racehorses or greyhounds to the Republic pay VAT at 4.8 per cent, the rate charged for agricultural goods. But the commission believes the rate should be the standard 21 per cent charge.

Similar regimes exist in other EU countries, and the commission is bringing the Republic, France, Luxembourg, Germany and Austria to the European Court of Justice in an attempt to force them to increase their VAT charges for race and sport horses and dogs to their standard rates.

If the commission’s case succeeds, it would mean a quadrupling of VAT charges for anyone buying or importing horses or greyhounds. Fears exist that the increased levy could act as a disincentive to buyers. Sources said it could leave commercial breeders importing valuable stallions or broodmares to the Republic facing increased upfront charges, which would deter them from basing stock here. Some such operations are VAT-registered and will be able to get payments refunded.

However, it is understood that the Department of Finance intends to defend the commission’s action and is confident it has a strong case. The commission won a similar case against the Netherlands but the defence offered is understood to have been weak.

The commission argues that as race horses and greyhounds are not sold for human consumption, or as “agricultural inputs”, they should be subject to the standard rate of VAT.