VAT snatches €36m from charities

The government is snatching over €36 million a year in VAT from Irish charities.

Fundraising organisations said money paid in VAT could be put to better use in helping the poor, the sick and others most in need.

The Irish Charities Tax Reform Group (ICTRG), representing 140 organisations countrywide, has called on Finance Minister Brian Cowen to abolish VAT paid by charities.

A small Cork-based charity, the Charleville Housing and Community Care Services, revealed it paid €200,000 in VAT after recently developing a premises for the elderly and those with special needs.

Charity spokeswoman Sr Celestine Farrissey said this money could have built a whole new unit. “Everything from contractors’ and architects’ fees to essential equipment in our premises attracted up to 21% VAT.

“If we were a commercial business, we would be able to reclaim it, but as a charity we cannot. As a result, we have paid the taxman the full cost of an additional house in VAT alone,” she said.

Sr Farrissey made her remarks as a group of Cork-based charities got together to start a campaign called, Abolish VAT on Giving. The group will lobby TDs in the run-up to the general election.

Sr Farrissey is asking the public to get behind the campaign. “Most people are unaware that a portion of every euro given to charities at different fundraising events is returned to the Government by way of VAT payments by the charities involved,” she said.

The European Commission has recently stated that the tax burden on charities is unfair and that it should be relieved through government grant schemes. The Danish government also recently conceded that charities there were entitled to VAT compensation.

Sr Farrissey said: “We want a similar commitment from our Minister for Finance. Under Section 20 of the VAT Act 1972, he has the power to make available, to charities, relief such as compensation equivalent to the amount of VAT they pay.

“Between now and the general election, we will be raising this issue with TDs and candidates alike, and we would greatly appreciate support from the public on the issue.”

Businesses are entitled to claim back VAT on all expenses, such as buildings and offices, equipment, fundraising, promotion and overheads. But charities are not entitled to reclaimed VAT.

The Irish Cancer Society has claimed it pays an annual VAT bill of €300,000,a sum that would run its entire cancer information service for a year, or provide eight oncology liaison nurses.

The aid agency, Concern, spent €1.5 million on humanitarian and health services in Rwanda last year, but had to pay almost the same amount in VAT.

The organisation said this money could be used to provide healthcare for 12,000 children in the developing world.