International professional service provider Deloitte & Touche announced earlier this week that it intends to take the Irish tax authorities before the European Union over a dispute which centres on VAT on canteen subsidies.
According to Deloitte & Touche, under European law, the Revenue Commissioners are permitted to charge VAT only on the actual price paid by the customer for canteen products. However, the Revenue has been charging VAT on the 'actual cost of production', a method which takes account of any subsidies provided by the employer to reduce the price.
If the consultancy firm is successful in its challenge- which seems more than likely, as following a similar case in Denmark recently, the government was forced to pay back more than £275 million after the court ruled that charging on such subsidies was illegal- Finance Minister Charlie McCreevy may be prevented from amending the law to secure VAT payments on subsidies in the future.
However, the Revenue Department seems less than concerned at facing such a formidable foe, and is expectant of success in the European courts. 'We are confident we can rebut any claims in this regard,' a spokesman told the Irish Times this week.
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