Irish charities pay over €25 million a year in VAT to the State, a body seeking tax reform for charities claimed yesterday.
The Irish Charities Tax Reform Group (ICTRG) told the Oireachtas Committee on Finance that a considerable proportion of the money donated by the general public to charities ended up in Government coffers because charities had no way of reclaiming VAT.
The group is seeking the creation of a Government compensation scheme to pay to charities the amount of money they spend on VAT. Charities pay VAT on most goods and services they use, including machinery, promotion and professional advice.
ICTRG chairman Richard Dixon said the requirement to pay VAT was "having a significant impact on our ability to undertake our work . . . It severely limits the work of charities for those most in need, both at home and abroad." He cited the example of international development charity Concern, which paid €1.4 million in VAT last year.
Mr Dixon also rejected the Government's position that it was unable to address the issue because under EU law it could not provide VAT rebates to bodies not themselves liable to levy VAT on their goods and services. He said the EU Commission had advised that a separate compensation scheme would not breach this rule and that such a scheme had already been introduced by the Danish government.