Dáil Question to the Minister for Finance

To ask the Minister for Finance the possible impact that a sugar tax would have on inflation; his views on the possibility of reducing VAT for some healthier foods in order to neutralise the impact of inflation; and if he will make a statement on the matter.

Minister for Finance ( Mr Noonan) :           Without specific details, it is not possible to estimate the effect on inflation of a sugar tax.  

With regard to reducing the VAT rate on healthier foods, I would point out that the VAT rating of various foods already provides for such a distinction.   Most food products sold by retail shops are liable to VAT at the zero rate, including basic foodstuffs, for example, bread, butter, tea, meat, milk and vegetables.   However, flour or egg-based bakery products such as cakes, crackers and certain wafers and biscuits are liable to VAT at the 13.5% reduced rate.   Furthermore, the standard VAT rate of 23% applies to sweets, chocolates, chocolate wafers and biscuits and other similar products, confectionery, crisps, ice-creams and soft drinks, and also frozen desserts, frozen yogurts and similar frozen products.

I would also point out that the zero VAT rate that applies to bread is specifically designed to include healthy breads, such as breads with seeds and grains, gluten-free breads; and to exclude those breads that contain excessively high levels of sugar and fat, such as croissants, brioche and danishes, which are liable to VAT at 13.5%.

In general the VAT treatment of food is historic, where the application of the zero rate to healthier food products is a derogation from general EU VAT law, that Ireland is entitled to continue under the EU VAT Directive as we applied the zero rate to such foods on and from 1 January 1991.   It is not possible to apply the zero rate to any new food products.