Cost of bin collections to soar
European court forces local authorities to include VAT on services they provide
Published 23/01/2010 | 05:00
HOUSEHOLDERS were warned yesterday that they would have to pay more for services provided by local authorities after it emerged that councils will now have to charge VAT.
Consumers will have VAT of up to 21pc imposed on services such as bin collections, car parking, swimming pools, the hiring of sports facilities and commercial water provision.
One local authority said it was likely it would be forced to add 13.5pc to the charge for bin collections as early as summer.
A statement from Dublin City Council explained that the European Court of Justice recently found against Ireland over the failure of public bodies to charge VAT for services they provide.
This is because private companies competing against local authorities by providing bin collections and other services are forced to charge VAT.
Imposing VAT on Fingal County Council's bin charges, for example, would see the annual charge rise from €110 to €124.85.
A spokesman for Dublin City Council said: "The Department of Finance is drafting legislation which will be incorporated in the Finance Act 2010, which will oblige public bodies to charge VAT on certain services."
The statement said it still had to be worked out which services would be charged at 13.5pc and which ones would have 21pc imposed on them.
"The imposition of VAT on services provided by local authorities will result in a higher cost to the customer for the service," the statement added.
A spokesman for South Dublin County Council said it was in talks with the Department of Environment but it expected to have to add 13.5pc to the cost of bin collections, with the new price being introduced in the second half of this year.
Private bin-collection companies already pay VAT.
Many county councils in the State have long since stopped providing bin collections and have instead contracted out the work to private operators.
However, VAT will apply to all other local authority services except those which are part of a council's statutory function, such as assessing planning applications. Other services likely to increase in price include the renting of sports facilities and community centres from local authorities.
Commercial water charges would also be considered for VAT, even though the council is the only supplier of water services to businesses in the city.
This is based on the fact that, in theory, there could be private companies competing with a council to provide water to companies.
Higher charges being imposed on companies for water are likely to be passed on to consumers.
However, MEP Mairead McGuinness insisted the ruling on VAT must not mean an increase in bin charges, water charges and other services to the public.
"Currently, local authorities are not registered for VAT, so they cannot claim back VAT on the costs associated with providing services to the public and to business. Once they register they can deduct these VAT charges.
"For example, a private waste-collection company charges VAT on its services at 13.5pc, but is entitled to deduct the VAT it pays on the costs involved in supplying the service -- usually 21pc.
"Local authorities currently cannot deduct VAT they pay on providing services, but arguably include their VAT costs in the prices they charge to the public for services," she said.