Dáil Éireann - Volume 459 - 05 December, 1995
Written Answers. - Implications of VAT Imposition.
Mr. D. Ahern Mr. D. Ahern
74. Mr. D. Ahern asked the Minister for Finance if his attention has been drawn to the implications for both tourism and non-profit making golfing societies of the proposed imposition of the reduced rate of VAT on golfing green fees; and if he will make a statement on the matter. [18043/95]
Minister for Finance (Mr. Quinn) Ruairí Quinn
Minister for Finance (Mr. Quinn): I can confirm that I have received representations on this matter. The position is as follows.
Member-owned golf clubs are exempt from VAT in so far as they are non-profit making bodies providing facilities for persons taking part in sport. However, the relevant provision in EU VAT law explicitly requires that this exemption cannot apply if the basic purpose of the service being supplied is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises which are liable to the tax. Commercial golf courses have been liable to VAT since 1992 in accordance with the provisions of EU and Irish VAT law because they are clearly engaged in the course or furtherance of business.
For some time, the representatives of  the commercial clubs have complained that the present situation, whereby they had to charge VAT on their facilities, but the traditional golf clubs did not, was putting them at a competitive disadvantage. It should be noted that all the representations I have received claim that green fees are an important source of income for the member-owned clubs. In fact, many clubs have pointed out that this income is vital for their financial viability and the maintenance and development of their facilities. Furthermore, much has been made of the leading role taken by the member owned clubs in promoting Ireland abroad as a holiday destination for international golfing tourists. All this only serves to underline the fact that the member-owned clubs compete with commercial clubs for green-fee type income.
While extending the application of VAT to member owned golf clubs, great pains were taken to ensure that the requirement, as provided for in the 1995 Finance Act, was carefully targeted at the particular area of distortion. From 1 January, 1996, VAt at the 12.5 per cent rate will apply to the green-fee type turnover of member owned clubs but only where a club's turnover from such sources exceeds, or is likely to exceed, £20,000 in any period of 12 months; membership fees will remain exempt from VAT. Turnover from membership fees, bar receipts etc., are not taken into account in calculating the £20,000 registration threshold.
Golf is not the only sporting area where distortions of competition can arise. Accordingly, the 1995 Finance Act also contains measures enabling the Revenue Commissioners to designate any exempt sports facility liable to VAT where they are satisfied that the facility in question is creating, or likely to create, a distortion of competition for a taxable person providing similar services.
Finally, as regards the effect on tourism of VAT on green fees, the following points are relevant. Firstly, in many instances, the effective VAT rate should be less than 12.5 per cent. This is  because the organisations concerned will be able to recover the VAT borne on their inputs such as buildings, machinery, greens maintenance etc., in respect of the taxable part of their activities, a facility denied to them up to now because of their exempt status. Secondly, member owned clubs have had a reasonable period to prepare for the new situation. Thirdly, I would point out that, unlike their competitors in the UK, France and Spain, where the standard rates of VAT apply to green fees, that is, 17.5 per cent, 20.6 per cent and 16 per cent respectively, Irish clubs will be subject to the reduced rate of 12.5 per cent.
Dáil Éireann 459 Written Answers. Implications of VAT Imposition.