Seanad Éireann - Volume 181 - 29 September, 2005
Mr. Browne Mr. Browne
Mr. Browne: I welcome the Minister to the House. Two constituents of mine were on holiday in Florida recently. The wife of the constituent who contacted me gave her mobile phone to an American friend in Orlando in order that he could phone his wife in Boston. This Irish couple were able to connect to the US network on that mobile phone, which their American friend borrowed to telephone his wife. He promised to pay the cost of the call. There was no difficulty about that and that was sorted. However, on returning home the couple discovered that they had been billed for calls made in the US to the tune of €52 on the basis of Irish value added tax. My constituent was puzzled as to how that charge could be levied given that the calls were made in another country.
When one travels to France or America and buys petrol, one is not charged Irish VAT on the price. Alternatively, if one goes to a restaurant or books a hotel in another country, one does not pay Irish VAT on such bills. The charge in this instance is unusual. It raises the issue that effectively people are possibly being charged double VAT when they use their mobile phones abroad. If I use my mobile phone in Dublin to telephone a friend in France, it makes sense that I pay Irish VAT on the cost of that telephone call. However, if I were in France and returned a telephone call to a friend in Dublin, I would be charged French VAT on the cost of that telephone call. In this instance there seems to be an element of double charging. I look forward to hearing the Minister’s reply on this matter. I said I would bring this matter to his attention. He can imagine the shock the couple got on returning home to discover a bill of €52 for Irish VAT on the telephone calls made, one being by their American friend to his wife in America.
Mr. Cowen Mr. Cowen
Mr. Cowen: I want to explain that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. The supply of telecommunications services is subject to the standard rate of VAT which in Ireland is set at 21%. The EU sixth VAT directive requires that such services are subject to the standard rate.
 Under Irish law the charging of VAT on mobile telephone calls made and completed or initiated in another state is covered by section 5(5) of the Value Added Tax Act 1972, as amended, which transposes Article 9(1) of the sixth VAT directive. In this regard, Article 9(1) states:
The place where a service is supplied shall be deemed to be place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where s/he has his permanent address or usually resides.
Therefore, Irish suppliers of mobile phone services are liable to charge the Irish standard VAT rate of 21% on services provided to business and private customers, established or resident in the State, for their usage of those services anywhere in the world.
Senator Browne is referring to roaming services available to Irish mobile phone users which enable them to avail of that service anywhere in the world. In this regard, the provision of telecommunications services to mobile phone users is a contract between the customer and the provider of the service with whom they hold the contract. When a customer uses this service in Ireland, he or she is subject to the 21% VAT rate as the service is supplied wholly within the State. When a customer uses the service outside Ireland the contract remains with the Irish supplier and again is subject to the 21% VAT rate.
Roaming services are the subject of a contract between the supplier of the service here in Ireland and the telecommunications provider in the other country. At no stage does the supplier of the telecommunications service in the foreign country bill the customer directly. Instead, it bills the telecommunications company supplier in Ireland with whom the customer has the contract.
The Irish supplier is subject to Irish VAT on the total cost of providing the service to the customer, which includes any charges incurred outside the State. This would include the cost of the provision of the telecommunications service to its customer with whom it has a contract in Ireland. Therefore, an obligation to account for VAT on the total consideration is in accordance with Irish and EU VAT legislation.
For example, an Irish person having a contract with an Irish telecommunications provider may avail of that service anywhere in Europe. The service provider in Europe bills the Irish provider for the use of the service when the Irish customer uses the foreign service. The Irish customer only has a contract with the Irish provider and pays VAT at the rate proper to the Irish provider. At  no stage is there any contractual agreement between the Irish customer and the foreign provider.
If Irish customers wish to avail of the VAT rates which apply in other countries, they would be required to enter into a contract with a service provider in that specific country. I hope this clarifies the matter for the Senator and provides him with an explanation at least of why the situation prevails.
Mr. Browne Mr. Browne
Mr. Browne: Does the Minister agree that there is an element of double charging for this service? I am sure that when Vodafone receives a bill from the telecommunications provider in France or Spain, it pays VAT at the local rate in that country and the consumer, in turn, also pays Irish VAT on calls made there. Therefore, there is an element of double charging.
Mr. Cowen Mr. Cowen
Mr. Cowen: I do not know if, in the contract between the service providers, they are allowed to include VAT as a charge for the service, but I can check that and come back to the Senator with that clarification. I am not aware whether they would only charge a call rate and that subsequently VAT is paid to the Irish provider. I expect that the purpose of these EU directives or double taxation treaties is to avoid a situation where the consumer is liable to tax in both jurisdictions. I expect the position is that they simply charge the call rate as part of the contract between, for example, the service providers in the US and Vodafone here, and subsequently the VAT is added on here. The contractual arrangement is between the home service provider and the customer here, regardless of where the call is made in the world. I can check that specifically but I imagine that is the position. I agree it is not clarified in the reply and I will try to get further clarification on it.
Seanad Éireann 181 Telecommunications Services.