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VAT reduction on sport and exercise classes considered by government for upcoming budget

A reduced VAT rate of 13.5% is available for yoga classes and could extend to other classes subject to the standard VAT rate.

A REDUCTION IN the rate of VAT on sport and exercise classes is being considered by the government for the upcoming Budget.

At present, a reduced VAT rate of 13.5% is available to services that “consist of services for the care of the human body”.

This list of services includes yoga and Pilates classes due what Finance Minister Paschal Donohoe has described as a “historical derogation”.

This derogation does not apply to other exercise and fitness classes, which are subject to the standard VAT rate of 23%.

However, the government is proposing that a reduced rate of VAT of 9% or 13.5% could now be applied to other classes like gymnastics and martial arts.

A document from the government outlining the plans notes that it is “not possible to provide an estimate for the cost of such a measure as there is no available data from existing VAT returns”.

It adds: “The principle of fiscal neutrality means that any reduced rate applied to sports or physical exercise classes would need to consider whether a reduction of VAT for one type of class would give it an advantage in comparison to others.”

Ireland Active, a body with over 350 members including Local Authority leisure centres and exercise studios, called for VAT rates on exercise classes to be reduced to 5%.

It also called for the VAT rate on access to gyms and swimming pools to be reduced to 5%.

“Taxes on physical activity are counterproductive to getting people exercising in line with the national physical activity plan,” said Ireland Active in its pre-budget submission.

Dr Brenda Monaghan is an Assistant Professor in Physiotherapy with Trinity College Dublin.

Speaking to The Journal, she said the proposed changes are “very necessary”. 

Monaghan pointed to recently updated guidelines from the World Health Organisation which recommends that adults should engage in at least 150-300 minutes of moderate-intensity aerobic exercise every week, or 75-150 minutes of vigorous-intensity.

“The beneficial effects of exercise and physical activity have been demonstrated in many chronic inflammatory diseases, including cardiovascular disease, type 2 diabetes mellitus, and cancer,” said Monaghan.

“However, in Ireland 54% of adults fail to reach these guidelines, as reported by Healthy Ireland in 2019.

“As over 50% of all adults that do participate in sport, participate in personal exercise and swimming, which takes place in gyms, leisure centres and swimming pools, I would therefore welcome the proposals to reduce vat rates to 9% or 13% in the supply of sport and exercise classes.”

Monaghan told The Journal that this could help “stabilise costs in the current cost of living crisis”, as well as “encouraging more participants to take part or at least encouraging those already attending to stay”.

However, Monaghan noted that the “level of benefit for consumers may be lower than intended”.

In its document, the Department of Finance explained: “It is important to note that some providers of such classes already operate below the VAT threshold so changes in the VAT rate would have no impact on them.

“For those supplying such services operating above the VAT threshold, there is no requirement that a VAT reduction would result in lower prices for the final consumer.”

Monaghan added that more work needs to be done “to explore ways to increase physical activity across the entire population, particularly among those not currently active.” 

 

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