Gift voucher expiry law could ‘recoup millions’ in VAT

Revenue is losing up to €16 million in VAT each year because the State doesn’t encourage consumers to redeem gift vouchers, a TD has claimed.

Gift vouchers, cards and tokens account for more than €300 million in retail sales every year in Ireland, but an estimated €70 million of that is never redeemed. Were the Government to introduce a minimum five-year expiry date, recipients would spend far more of the cards' value, so generating extra value-added tax, according to Catherine Murphy of the Social Democrats.

“It is very short-sighted of the Revenue Commissioners and the Government” not to copy the United States, where gift vouchers must last at least five years, she said. Although a huge amount is still not redeemed – $970 million out of $130 billion in 2015 – there has been a significant drop in unused gift cards.

In 2008, $7 of every $100 spent on vouchers and tokens went unused, but this dropped to 75c of every $100 by 2015, according to the US consumer website finder.com.

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Shops set own terms

Dermott Jewell of the Consumers' Association of Ireland said it called on businesses last year to consider a six-year expiry term. "Six years in Ireland is the statutory requirement for managing accounts, so it's not alien to the business world that they would place a minimum of a six-year term on the validity of any credit note or voucher," he said.

Currently however, retailers in Ireland set their own expiry dates and other terms. Ms Murphy said the State had been promising to act for more than two years and could move on legislation she introduced in the Dáil last month. As well as introducing a minimum five-year expiry date, the Consumer Rights (Gift Vouchers) Bill would prohibit charges for issuing vouchers, prevent companies from reducing the balances on cards not used by certain dates, and ban charges for the repayment of a credit balance to gift vouchers.

“No loss of VAT”

Minister for Finance Paschal Donohoe said in a written parliamentary reply that "no loss of VAT arises where gift vouchers are not redeemed as no supply of goods or services has taken place". He added: "Revenue has no estimate of the amount of VAT that would accrue to the exchequer if unredeemed gift vouchers were in fact redeemed."

Ms Murphy said Revenue could take in between 9 and 23 per cent of the total spent on vouchers, as more people would use them over a longer period.

Mr Jewell said Richard Bruton introduced a consumer Bill as minister for enterprise, in 2015, that would have tackled the issue, but it was shelved. “I can only imagine the extraordinary level of pushback that came from the business community, because they stand to lose millions on any form of regulation on gift cards and vouchers,” Mr Jewell said.

“They make millions, literally, by the simple fact that consumers don’t use them, or forget them or lose them or realise they’re out of date, and suddenly their money has devalued to nil [and is now] in the till or the pocket of the retailer.”