THOUSANDS of parents face a 21 per cent rise in child-care costs" because creches and child-minding services say the Revenue Commissioners will impose VAT on them for the first time.
A 1977 EU directive made some child-care services liable to VAT but it has not been enforced until now, according to Ms Martina Murphy, chairwoman of the National Children's Nurseries' Association.
A spokesman for the Revenue Commissioners denied there was anything new in demanding VAT from child-care services. But Ms Murphy said VAT inspectors had only begun approaching child-care services recently. "It will come as a huge shock to parents and to service providers," she said.
For parents of up to 50,000 children, the move will mean increases of £10 to £16 a week in Dublin, with lesser increases outside the capital where weekly charges are lower.
The NCNA says some preschool services have already been approached by VAT inspectors. "The owner of one creche and Montessori school told The Irish Times that she had recently paid, £6,000 in VAT.
Ms Murphy said the VAT increase comes on top of an expected rise in costs as pre-school services meet new standards under the Child Care Act.
The Revenue Commissioners spokesman said creches and child-minding services were liable for VAT at 21 per cent if their income exceeded £20,000 a year, the threshold for registration for VAT. Educational services such as Montessori schools were exempt, he said.
An establishment which cared for children and also had a Montessori school would be liable to VAT on the child-minding part of the service.
At the current charges of £50 to £80 a week in Dublin, a child-care service with 10 children, charging would find itself in the VAT net, according to Ms Murphy.
The NCNA is asking parents to sign a petition against the imposition of VAT and has written to politicians, she said.
Because of the absence of a register, she said, it was impossible to say how many people would be affected. But she estimated that 50,000 to 60,000 children under the age of three years are receiving day care.
"I see it as being anti-family," said Ms Murphy.
Because of the developmental needs of small children, all preschool services should be seen as educational and exempted from VAT, she added.
One woman who received a VAT demand for her Montessori service said her initial reaction was that the VAT people were simply wrong and that they were still in the wrong.
She has paid £6,000 VAT on what the Revenue Commissioners consider non-educational aspects of her service.
She says she considers the entire service educational and the imposition of VAT to be an insult.
The Partnership 2000 agreement between the social partners includes an undertaking to clarify the VAT status of child-care services and promises that guidelines will be drawn up and published by the Revenue Commissioners.
It also promises to make child care more affordable and accessible.