Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

There are indications that certain structures or models have emerged in some sectors which, through a combination of normal VAT deductability rules and a flat-rate scheme, result in a much higher level of flat-addition payments and VAT recovery in the sector than would otherwise be available. VAT should not be a cost of business but simplification schemes should not result in businesses being overcompensated. Where there is overcompensation of flat-rate farmers in certain sectors for VAT borne on their input costs, this would have implications for VAT neutrality and possibly competitiveness within the sector and the agricultural industry generally.

In so far as Article 292.2 of the VAT Directive is concerned, under which we must operate, it allows Ireland to exclude from the flat-rate scheme certain categories of farmers, such as pig, dairy and poultry farmers. Where these schemes occur, they are likely to be widespread and because of their nature they are unlikely to arise in any sector other than those which are highly structured with a very close relationship between producer and processors. It is possible that a particular sector, given its size or the way it is structured, could be taken out. We could not specify it to an individual so the sector would be taken out. The operation for VAT deduction would then happen in the normal way and not in the flat-rate scheme.