CHARITIES are facing a battle to get back money from mobile phone companies who deducted too much tax from text message donations -- after the Revenue said it would not refund them directly.
Mobile phone operators do not have a system that differ-entiates between charitable donations sent by the public and standard text messages.
They apply the standard 23pc VAT rate to each full charitable donation via text, meaning that charities have got less from the donation than they were legally entitled to. The extra VAT was paid to the Revenue.
Text message donations of €1 or more have been increasingly used by charities such as Concern, Focus Ireland and Pieta House to raise funds in recent years.
But the Revenue is not going to refund the charities directly because this is not allowed under VAT legislation -- so they will have to get the money from the mobile phone companies.
Fianna Fail Galway West TD Eamon O Cuiv said that forcing charities to wait for the mobile companies and the Revenue to agree on refunds would take a long time.
"It's money the State shouldn't have anyway. Until they resolve the issue, they should give the charities in question a grant," he said.
For example, in the case of a €1 text donation, mobile companies should only have charged VAT on the operator fee of 5c -- the other 95c should have been VAT free.
And if the operator agreed to waive any fee, then the entire charitable donation should have been VAT free.
But the Department of Finance rejected Mr O Cuiv's call for grants to be given to charities who had missed out, saying it was a matter for Revenue, the mobile phone companies and the charities.
The department said it could not establish the size of the potential refund to charities because the VAT returns from mobile companies do not contain details of how much came from text message donations.
And it pointed out that several conditions will have to be met before charities get refunds.
VAT has been charged on text messages since their inception but the mobile companies will have to possess "adequate records" of the text message donations to be able to claim the money back from Revenue on the charities' behalf. This requirement could make it difficult for charities to recover VAT on donations made many years ago.
The Revenue warned that refunds could be ruled out if the charity had hired another company to act on its behalf to collect the money from the mobile company, which is a regular practice in the sector.
The Department of Finance confirmed last night that no refunds would be made unless all these conditions were met.
Charities are now working with mobile phone companies to develop a system that ensures charitable donations are not wrongly taxed.
O2 said last night that it could not comment. Vodafone, meanwhile, was unavailable for comment.