VAT may be added to bin charges and road toll fees

Local authority services such as bin collections could be subject to VAT in some regions as a result of changes that will be introduced in this year's Finance Bill.

The Government published the legislation earlier today. It will give effect to a range of measures announced in December's Budget, and a number of extra measures.

One will be to subject local authority services to VAT in areas where councils are providing them in competition with players from the private sector.

The change in the law is a result of a European Court of Justice (ECJ) ruling earlier this year, which found that the VAT exemption for Irish local authorities gave them an unfair advantage over private sector players.

The change will only apply in areas and where local authorities are competing with private sector operators. A number of services, including water, education and health will not be affected.

The bill gives effect to the carbon tax, announced in the budget and already applied to motor fuel since December.

It will extend mortgage interest relief up to the end of 2017 for home loans and for those taken out before the end of December 2011.

Transitional measures will be introduced for home loans taken out between the end of next year and 2012 and the relief will be abolished altogether in 2018.

It will also introduced a 200,000 charge for non-resident Irish citizens but who are domiciled here, and have worldwide income of more than 1 million a-year and assets located in Ireland of more than 5 million.

The bill includes a number of measures aimed at attracting investment and the Republic's image as a good global citizen.

It will extend the tax treatment that applies to conventional financial transactions to those conducted under Islamic or Sharia law.

This will clarify the Republic's laws in this area and is aimed at attracting investment from the Muslim world. Shari'a finance is one of the industry's fastest growing sectors.

It also clears up a number of issues covering research and development and intellectual property.

Publishing the Bill today, Minister for Finance Brian Lenihan said the Bill “strikes a balance between providing targeted support to enterprise to assist in our economic recovery and enhancing the ability of the Revenue Commissioners to carry out their work.

“It also ensures that all sectors play their part in stabilising the public finances and thereby restoring domestic and international confidence in our economy".

The Bill closes a loophole allowing multinationals to maximise profits through the State's low corporate tax rate.

The Bill, which must be enacted by April 9th, will regulate what is known as "arm's length" trading between associated companies, introducing a regime based on what a company would charge on the open market for the goods in question. There are already limited arm's length pricing rules for manufacturing trading in Ireland, which are due to end this year.

The measures will bring Ireland into line with other trading partners, such as the US.

The provision of measures to cover a car scrappage scheme for the year is also contained in the Bill, along with the expansion of VRT exemptions and relief schemes for electrical and hybrid electric vehicles. It also rubber stamps the reduction of half a per cent in VAT, and the drop in excise duty on alcohol.

Mr Lenihan described taxation measures contained in the Bill as "pro-enterprise", and said they would put the economy in a position to take advantage of the recovery forecast for the end of the year”.

The Bill will also extend the existing scheme of tax exemption on the income and gains of new start-up companies over the first three years of operation to include those commencing trade in 2010, and also contains a package of reforms for Capital Acquisitions Tax.

It covers measures to increase Ireland's attractiveness as a location for development of Islamic finance, which covers financing arrangements compliant with the principles of Sharia law, and extends the tax treatment applicable to conventional finance transactions to it.