Coalition to fight ruling on VAT rate for breeders
THE Government and the European Commission are set to clash after the commission said Ireland must scrap some tax breaks for horse breeders because they have no clearly defined social reason and do not appear to benefit the consumer.
The commission said yesterday that it had given the Government two months to abolish a special 4.8pc rate which applies to the covering of horses, the hiring of horses and the supply of horses and greyhounds.
Most VAT is charged at 21pc, although some services are charged at 4.8pc, 5.2pc and 13.5pc. Failure to raise the rate within two months could see Ireland being referred to the European Court of Justice in Luxembourg, the commission warned.
An official at the Department of Finance said the Government would examine the objections but planned to defend the existing VAT rates in court.
A decision to hike VAT rates would come as a blow to horse breeders who can earn hundreds of thousands of euro from top stallions every time their horse covers a mare. Reports earlier this year said prize-winning stallion Sea The Stars would cover more than 90 mares for a fee of around €85,000 each time.
"Horse breeding is an integral part of almost every community," said Shane O'Dwyer, the head of the Irish Thoroughbred Breeders' Association. "We'll be fighting it (the decision)."
An increase in VAT would harm small breeders in "almost every parish" as 93pc of all breeders owned fewer than three mares, he added.
The commission regularly issues rulings on VAT rates to discourage governments from helping certain industry sectors which would distort the market across the European Union.
The Government was allowed to charge the 4.8pc rate in the past because it dated back further than 1991 and officials in Brussels agreed that the low rate of tax had clearly defined social reasons and was of the benefit to the final consumer.