Irish government’s VAT plans for supplements now meet tax approach hurdle

By Will Chu

- Last updated on GMT

After a number of delays, Ireland looks set to tax food supplements much to the dismay of industry groups, although the latest stumbling block appears to be which tax rate should the government apply.

After a number of delays, Ireland looks set to tax food supplements much to the dismay of industry groups, although the latest stumbling block appears to be which tax rate should the government apply.

Documents made available by the country’s Department of Finance state that a main issue is selecting which rate is most appropriate out of the standard 23% rate and reduced rates of 13.5% and 9%.

“There are significant concerns over maintaining separate rates for different food supplements,”​ the department’s tax strategy group state.

“Revenue’s report has advised that food supplement products are a distinct category of products, which includes vitamins, minerals, botanicals, protein powders, etc.

“Sports supplement products and slimming aids are considered food supplement products which, in general, are composed of the same ingredients as other food supplement products and as a result there is an inherent difficulty in distinguishing these products from other food supplement products.”

Current regulations

Current EU Food Safety Regulations and the Food Safety Authority of Ireland only differentiate between food and food supplements.

This makes it complicated to adopt an all-inclusive approach where a supplement product subcategory would be instantly recognisable on a consistent and transparent basis.

The report states that introducing two rates of VAT for food supplement products would create administrative challenges as along with similar product composition, their labelling and marketing remain the only method of differentiation.

Ireland’s Minister for Health, Simon Harris pointed to the Government recommendations on healthy eating and outline a balanced diet for adults, teenagers and children under five years.

He noted that the Department of Health does not generally recommend the consumption of food supplements as a replacement for the nutrition contained in normal foods, as most of the population should be able to obtain the nutrients they need from their food.

Harris cited two exceptions: folic acid for women who could become pregnant, and vitamin D for infants.

In addition, health professionals may recommend food supplement products in specific circumstances for their patients.

A drawn out process

The Government’s proposed plans represent the latest in a long drawn out process that began during the Finance Bill 2018 debates. Here, the Minister for Finance’s department agreed to address the matter for 2019’s Tax Strategy Group.

In March 2019, Ireland’s Revenue Commissioners postponed plans to tax food supplements until 1 November of this year after industry groups and consumers petitioned the government not to approve the planned increase.

As a result, the Minister was given time to re-examine the policy and legislative options for the taxation of food supplement products ahead of Budget 2020.

While Revenue indicated it is not possible to estimate the yield to the exchequer from the various options outlined, the report Revenue commissioned identified the marketplace for food supplements in Ireland had an estimated value of some €60m in 2016.

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