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VAT – A Charity Viewpoint
CFE Conference Brussels – April 2006
Sheila Nordon Executive Director
Irish Charities Tax Research Ltd
The meaning of words - Exemption
• Charities in Ireland (like other countries) are exempt from many taxes:
– Income tax
– Corporation tax
– Capital Gains Tax
– Deposit Interest Retention Tax (DIRT)
– Capital Acquisitions Tax
– Stamp Duty
– Dividend Withholding Tax
• In all these cases "exemption" means that the charity does not have to pay the tax
When is an exemption not an
exemption?
• Charities are "exempt" from VAT under the Sixth VAT Directive but in this case "exemption" means that charities have to pay VAT that they can't recover!!
• The principle of encouraging the work of charities by exempting them from paying taxes is turned on its head in relation to VAT
• This results in serious human costs for charity client groups – children, old people, the disabled etc
VAT and Charities Ireland – 2001 the Cost
The Human Cost of VAT
3 Examples
• Concern - a large overseas development charity
• Respect – a medium sized disability charity
• The Well Woman Centre – a small charity dealing with womens' health
The Human cost of VAT for
Concern
• Last year paid out 1.5 million in VAT
• Total cost of country programme in Rwanda was 1.6m
• Concern could have doubled their programmes in Rwanda in 2005 with their VAT payments
• The Human Cost – the people, mostly children in Rwanda who didn't get this support for "childrens' survival and primary education"
The Human Cost of VAT for Respect
• Cares for 2,300 people with a disability – 800 in full time residential Care
• Building 9 purpose built houses for 54 seriously intellectually disabled people
• Cost = 12.5m
• VAT on building alone = 1.5m
• Vat on fundraising = 20k (2005)
• Human Cost = up to 9 people who need a house won't get it!
The Human Cost of VAT for The
Dublin Wellwoman Clinics
• 50,000 paid in VAT
• Total expenditure = 1,624,000
• VAT Bill would pay for an osteoporosis scanner for one of their clinics
or
would fund an Education Officer and programme for one year
Where does the solution lie?
• National Grant Schemes to compensate charities for the VAT they pay?
• EU level – Zero rates to allow charities to reclaim their input VAT?
• Charities are sent from pillar to post, from the EU Commission to National Governments and back again!
• The Human Cost of VAT makes a solution imperative – VAT is a "creeping tax" and the costs keep going up!!
• Since the EU caused the problem it has to be part of the solution