Oireachtas Joint and Select Committees
Wednesday, 8 May 2024
Joint Oireachtas Committee on Agriculture, Food and the Marine
VAT Refunds to Unregistered Farmers: Revenue Commissioners
Jackie Cahill (Tipperary, Fianna Fail)
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Before I move on to the agenda, please be aware that in all audio files or Teams meetings there is no guarantee for members that the meeting will not be recorded by someone else in error.
We have received apologies from Deputy Mythen. Before we begin I bring to the attention of those present that witnesses giving evidence from within the parliamentary precincts are protected by absolute privilege in respect of the evidence they give to a committee. This means they have a full defence in any defamation action for anything said at a committee meeting. However, witnesses are expected not to abuse this privilege and may be directed to cease giving evidence on an issue at the Chair's direction. Witnesses should follow the direction of the Chair in this regard. They are reminded of the long-standing parliamentary practice to the effect that, as is reasonable, no adverse commentary should be made against an identifiable third person or entity. Witnesses who give evidence from a location outside the parliamentary precincts are asked to note that they may not benefit from the same level of immunity from legal proceedings as a witness giving evidence within the parliamentary precincts. They may consider it appropriate to take legal advice on this matter. Privilege against defamation does not apply to publication by them of any matters arising from the proceedings outside the proceedings held by the committee.
The purpose of the first session of today's meeting is for the committee to examine VAT refunds to unregistered farmers. The committee will hear from the following officials from the Revenue Commissioners: Mr. Chad Egan, principal officer in the direct tax policy and legislation division; Ms Davena Lyon, principal officer in the collector general's division; Ms Leeann Kennedy, principal officer, Revenue's Oireachtas committee liaison; Mr. Colin Bissell, assistant principal officer in the indirect taxes policy and legislation division; and Ms Oonagh Ruddle, assistant principal officer in the collector general's division. They are welcome.
I will allow five minutes for Mr. Egan to read his opening statement and then we will proceed to a question and answer session.
Mr. Chad Egan:
I thank the Chair for the opportunity to make my opening statement. I am joined by Ms Davena Lyons, principal officer in the collector general’s office and Ms Leeann Kennedy, Revenue’s Oireachtas committee liaison.
Generally, businesses that are not registered for VAT cannot reclaim the VAT they incur. However, underpinned by legislation which I will refer to as the "refund order", Revenue operates the VAT refund scheme, which allows unregistered farmers to claim VAT refunds for certain expenditure. The objective is to get VAT refunds to qualifying farmers as quickly and efficiently as possible. To explain the background to that, under the VAT refund order, unregistered farmers can claim VAT refunds for the construction, extension, alteration or reconstruction of farm buildings or structures; fencing, draining and reclamation of farmland; and construction and-or installation of qualifying equipment for the purpose of micro-generation of electricity for use in a farm business. Outlay incurred for other purposes, for example, the acquisition of farm machinery or equipment, is not permitted under the order.
The refund order is an historic derogation which has been in place since 1972 and the allowable expenditure has remained almost the same for 50 years, apart from certain items for micro-generation of electricity. For each of the past three years, Revenue received more than 37,000 claims for VAT refunds from unregistered farmers, 96% of which were approved for payment. For the years 2021 to 2023, the value of approved claims under the VAT refund scheme was €85.7 million, €89.3 million and €88 million respectively. Approximately 55% of refunds arising from claims approved in 2023 issued within five days.
Revenue operates the VAT refund scheme on a self-assessment basis, with unregistered farmers submitting claims via Revenue’s online service, either through ROS or MyAccount. To support claims, Revenue encourages that invoices are supplied along with supporting documentation, photos, a detailed description of the works carried out, including the installation of any equipment and any contracts when claims are submitted.
This, in turn, assists Revenue caseworkers in validating such claims. In line with Revenue’s approach to processing claims across other taxes, claims made under the refund order are reviewed by Revenue against risk-based criteria and assessed on their own merits. Claims can be fully approved, partially approved or fully disallowed. Where a claim is subject to review, Revenue may return the claim to the claimant seeking further information. Where the conditions of the refund order are not met, such claims cannot qualify for a refund of the VAT.
Revenue has demonstrated a significant amount of flexibility around the administration of the refund order and gives due consideration to the context and nature of the claims that are made. Revenue has not changed its interpretation of the law on the refund order. Revenue’s risk assessment process has identified ineligible claims on certain types of farm equipment which are outside the scope of the refund order. While farming equipment is not provided for under the order, equipment may be allowed where it is considered a fixture. A fixture is an item that is permanently installed in the farm building and, once installed, cannot be removed without causing significant damage or destruction to the farm building or to the fixture itself. Claims for fixtures must demonstrate the construction, extension, alteration or reconstruction of a farm building. Claims which have been approved for a refund of VAT include water troughs that have been plumbed, meal bins over 10 tonnes in size, cubicle mats that have been bolted to the floor, hydraulic scrapers, drafting gates and new-build milk parlours. However, VAT refund claims for other types of expenditure are not allowed as they do not meet the conditions of the refund order, and these include heat and health monitoring systems and slurry bags.
Revenue is engaging with the farming sector to explain the situation with regard to the law and the claims process. Revenue, together with officials from the Department of Finance, met with the Irish Creamery Milk Suppliers Association, ICMSA, in December 2023 and the Irish Farmers Association in January 2024. A follow-up meeting with the ICMSA was held on 22 April 2024. Revenue is engaging proactively with both representative bodies with a view to providing clarification regarding meal bins, calf feeders, milk tanks, certain cubicle or slat mats, water systems and matters related to multi-year farming construction projects and has invited submissions from the representative bodies in this regard. Once these outstanding matters are finalised, Revenue intends to publish updated guidance which will address any lack of clarity about the operation of the scheme.
The items for which VAT can be reclaimed under the refund order are determined by legislation. Revenue can only refund VAT incurred on the particular business expenditure outlined above in line with EU and Irish VAT law. Revenue cannot interpret the order in such a way as to allow refunds for expenditure which are not specifically provided for in legislation. Under VAT law, it is always open to a farmer to elect to register for VAT in respect of their farming business. All VAT-registered farmers are entitled to claim a deduction for any VAT they incur on inputs used for their business, subject to the normal rules on deductibility. I take this opportunity to draw the committee’s attention to section 851A of the Taxes Consolidation Act 1997 and the obligation to uphold taxpayer confidentiality. Subject to this constraint, we are happy to answer the committee’s questions.
Jackie Cahill (Tipperary, Fianna Fail)
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I thank Mr. Egan. I have spoken in the Dáil on this issue on a few occasions since March 2023. I had started to receive calls on the VAT refund issue around that time. It was the first time I had ever received calls about it. I have received numerous calls about the VAT refund issue during the past 12 months. Therefore, I have to take issue with the suggestion that the interpretation of the refund did not change. From what I hear when I talk to my constituents, it seems that items that were previously reclaimable - I suppose "refundable" is the correct word - are being refused. I accept that the opening statement gives a lot of clarification and I really appreciate that. The meeting with the farming organisations was very worthwhile. I hope we can get full clarity on what is and is not refundable.
I will begin with the issue of slurry bags. This was the first issue that was brought to my attention in March 2023. I see from the opening statement that slurry bags are still excluded. I find that very hard to comprehend because small to medium-sized farmers mostly use lagoons which usually hold 80,000 gallons to 100,000 gallons of slurry. When such a lagoon is used on a farm, the prospect of being able to move it to another location is very remote. It would be extremely difficult to do so. I cannot understand how that can be classified as a moveable object. It was the first item that was brought to my attention as regards the VAT refund.
Calf feeders were the second item that was brought to my attention. Salespeople who promoted the sale of these products at the ploughing match did so on the basis that the VAT on them was refundable. Suddenly there were refusals of VAT reclaims with regard to automatic calf feeders. Previously, calf feeders were refundable. There was a grant under TAMS and farmers were doing their sums on it. The fact that VAT was reclaimable and there was a grant under TAMS definitely promoted the use of automatic calf feeders. It has been stated here that if cubicle mats are bolted to the floor, they are refundable. When a calf feeder is installed, it is most definitely bolted to the floor and becomes a fixture in a building. I do not see any mention of automatic calf feeders in the opening statement. Will Mr. Egan address that particular item when I finish?
Another thing that concerns me is meal bins of 10 tonnes in size. There are a lot of farmers on a smaller scale who would not buy a bin of 10 tonnes. When one puts in a bin it is very much secured - it has to be, for safety reasons. Regardless of whether a bin is 5 tonnes, 6 tonnes or 10 tonnes in size when it is put in place, it is put into a concrete base of a certain strength. The manufacturer of the bin will insist on seeing the strength of the concrete the bin is being put into. The bin is then bolted to that concrete. I cannot understand why there is a size limit for a meal bin. Regardless of whether the bin size is 5 tonnes, 6 tonnes, 10 tonnes, 12 tonnes or 14 tonnes, it has to be made very secure.
Mr. Egan said that the items which do not meet the conditions of the order "include heat and health monitoring systems and slurry bags". I understand that health monitoring systems can include collars on cows' necks or boluses that go into their stomachs. Can I have clarification on what Mr. Egan means by heat monitoring systems? Is he speaking about water heaters? What exactly is he referring to there?
I have been presented with refusals on milk tanks. Again, can I have clarification on this item? If the building has to be modified for the installation of milk tanks, will it qualify for the refund? That clarification is welcome.
I see in the opening statement that if there is a new build, the equipment will qualify as well. There is a lot of clarification in Mr. Egan's opening statement. I have received a significant number of representations about the VAT refund. This number has increased as the year has gone on. Previously, I could count on one hand the number of representations I received on the issue. For whatever reason, the volume of refusals increased dramatically at the back end of 2023 and into the spring of this year.
I welcome the opening statement and the clarification. It mentions farmers registering for VAT. If my understanding is correct, approximately 86% of farmers are not registered for VAT and approximately 14% are registered. From my understanding, tillage farmers and farmers who might do some level of contracting are the ones who predominantly register for VAT. Farmers receive a VAT refund on the product they sell. Unregistered farmers get a refund which changes year by year in the budget.
There is a very complicated formula for calculating that, and it can vary up and down. It has dropped in the past two budgets. It peaked at 5.2% and is now 4.8% or 5%. That is, I suppose, a separate matter, and that is a formula that has stood the test of time.
I very much welcome the witnesses coming here today. Mr. Egan, you said 96% of claims were approved for payment. If that is the case, I must have got the other 4% across my desk. I have definitely got a large number of them in recent months, and I am sure other public representatives here will supplement what I am saying in that regard.
Those are my initial observations, questions and remarks. Much of it was commentary, but I think I posed a few questions to the witnesses. Before we go to the rest of the members, Mr. Egan might address them.
Mr. Chad Egan:
I am happy to do so. I just want to make sure I have captured all the questions. They were about the slurry bags, the calf feeders, the bins, the heat and health monitoring system and the milk tanks. If I missed one, I am happy to be reminded of it.
The slurry bags come in different sizes. I know the Cathaoirleach is talking about the larger ones. Our approach is that we have to look at what the refund order says. The wording it uses is "construction, extension, alteration or reconstruction of a [farm] building or structure". We would have to consider that type of large slurry bag - I know the one the Cathaoirleach is talking about - as a structure or a building, and we do not believe it is a building or a structure. That is our interpretation. That is the view we have taken. We understand there is the grant we prepared or the cement or maybe some piping, but, from our interpretation of the order, we do not believe it would fall within the requirements. We also understand that they can be moved. I know there are different opinions on that. They are marketed as being able to be moved and reused. We can only apply the legislation as it is written.
Jackie Cahill (Tipperary, Fianna Fail)
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I beg to differ on the ability to move a slurry bag. When it is used once and you have 80,000 to 100,000 gallons of slurry in it, I do not know how you could move it to another location.
Mr. Chad Egan:
They are emptied, but our understanding is that they can be reused. Essentially, we have to look at the wording we have in the legislation. It is about whether we could consider it to be a structure, and we just do not see the slurry bags - of any size but particularly larger ones - as structures for the purposes of a refund order.
The industry has raised the calf feeders with us as well. The Cathaoirleach mentioned TAMS. The order is not linked to TAMS; it is a separate matter. We do not base our decisions on what TAMS allows or does not allow. The calf feeders are bolted on. There are different sizes as well. With these types of things, the key thing is whether we would consider it a fixture. We have to be mindful of the wording of the order, which refers to the construction of a farm building or structure. Fixtures can come within the order but they have to be permanently installed. That is the test we have. If they can be removed easily, and we believe they can be, they are not fixtures. If they cannot be removed easily and cause damage to the building or the structure or to themselves when they are removed, generally they would be allowable. We would not class these items as fixtures in that case. The sector has asked us to look at this, so it is something we are considering as part of the updated guidance because we know there is a view out there that they should be allowable. As part of our process of updating the guidance, we will clarify whether or not we have changed our position on that.
The bins are interesting because they come in different sizes. When I mention 10-tonne bins, I am talking about the large silos attached to the ground. We consider them to be structures. That is why they are let in. The other, smaller bins are movable. We would not consider them to be structures. That is why we do not let them in. However, the sector has raised this with us. The Irish Creamery Milk Suppliers Association has raised it with us, so we are looking at it to see whether that size is appropriate. As part of this process of reviewing and updating our guidance, we are looking at whether that size requirement is too high, but this type of item would have to be considered a structure. The smaller ones then would have to be considered a fixture, but we do not think they are at the moment.
As regards the heat and health monitoring system, my understanding is that these come in combination, that there is a collar around the-----
Jackie Cahill (Tipperary, Fianna Fail)
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Mr. Egan means heat as regards an animal being in heat rather than heating water. Sorry. I misunderstood. There are collars that have to be put on animals, and I accept that these and be put on and taken off. There are also boluses used for that, which are put into the cows' stomachs. They are most definitely permanent fixtures which do the same job.
Mr. Chad Egan:
If I may move on to the milk tanks, we allow them where there is a new build of a milk parlour as part of that but, outside of that, if it is a replacement, we do not allow it. We have taken the view that they are not fixtures but we have taken quite a flexible approach to our consideration of a milk parlour being built. It requires a milk tank, so that is the reasoning behind it. The industry has asked us to look at that, so we are considering that again as part of our review and update of the guidance.
Jackie Cahill (Tipperary, Fianna Fail)
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I will let the other members in. I might have more to say before we finish. Next is Senator Lombard and then Deputy Fitzmaurice.
Tim Lombard (Fine Gael)
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It is great to have the Revenue before us. I apologise for being late. I was stuck in a meeting in another Department.
Mr. Egan says Revenue has not changed its interpretation of the law of this refund order. That is a very bold statement to make. Does he think it is a fair statement, that the Revenue has not changed its interpretation of issues regarding bull tanks, meal bins, all the way through? Is he happy to stand over his statement that no application has been made since the mid-seventies? That is a different interpretation as to what is being proposed at the moment.
In 2002, I put in a 3.5-tonne meal bin, bolted it to the ground, put it up and got the VAT back in six weeks. Today I would not get that done under the interpretation that is put before the Oireachtas that only a 10-tonne meal bin would qualify. Is that a different interpretation or was I wrong in 2002?
Tim Lombard (Fine Gael)
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How then can the Revenue make a statement about 10-tonne meal bins and applications it has received? If I were to ask members of the public to write in to me about how many 8-, 9- or 6-tonne bins have been granted, I would say it would be quite significant. Would that not be fair?
Tim Lombard (Fine Gael)
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That would be a different interpretation then.
Tim Lombard (Fine Gael)
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That would be a different interpretation of the order.
Tim Lombard (Fine Gael)
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If there is an order that has been there since before my time-----
Tim Lombard (Fine Gael)
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Since 1972, and if Revenue were granting VAT reclaim on 3.5-tonne meal bins, which I have referred to, in 2002, then surely it is a different interpretation.
Tim Lombard (Fine Gael)
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There is assessment by the Revenue Commissioners afterwards.
Mr. Chad Egan:
Self-assessment is where the taxpayer makes a judgment based on the legislation. He or she may take advice on the refund claim, and then Revenue processes that. I cannot speak to the specifics of the Senator's claim because I do not have the details of it, and taxpayer confidentiality applies, but I am pretty happy that we have been quite consistent with our approach. Our approach has also been explained to representative groups before. Claims may get through that maybe should not have been allowed and processed-----
Tim Lombard (Fine Gael)
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From 1972 on, the majority of meal bins have been smaller than 10 tonnes.
It is only in the past eight or nine years that 10-tonne meal bins have been coming into the system.
Tim Lombard (Fine Gael)
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I think the majority of us with meal bins attached to milking parlours have them bolted to the ground for safety purposes. I could mention a dozen providers of such products.
Talking to the industry, there is significant concern about how we can move it forward. The Chairman detailed the issues in the industry. There is unbelievable fear and paralysis at the moment. We do not know what we can do because we do not know what we can claim. We do not know how we can progress this industry. We have issues with climate change and with ensuring we meet our pollution control targets. The farming community does not know what is claimable and, as I said, items that could be claimed previously cannot be claimed today. That is a different interpretation.
Mr. Chad Egan:
If people have raised with the Senator cases where they have been refused refunds for items for which they previously received refunds, I ask him to share those with us. We would be happy to know of those instances because refunds should not be repaid if they are not allowable under the order.
Tim Lombard (Fine Gael)
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The change in interpretation is the issue. There is a view among farmers that in the last six to eight months there has been a definitive change in interpretation in Revenue. How can we move this forward? I do not want to misquote Mr. Egan. In his opening statement, he stated there would be a review or statement on how to move forward. Does Revenue have a timeline for when it will bring forward interpretations of what is appropriate? From speaking to meal bin companies, they are not doing any work. They will do maintenance and that is as far as they will go. No one will put in a new bin.
I take exception as regards the 10-tonne meal bin issue. In 1972, there was not a 10-tonne meal bin in Ireland. They did not exist. Every farmer in my parish got rebates. Maybe every farmer in the parish was wrong but I do not think they were. We have a significant issue as regards getting clarity. The first line is that there has been a change in policy. Otherwise, none of the applications made since 1972 would have been acceptable. That is the key issue here.
I am looking for clarity on timelines and a definitive definition of what is applicable. Mr. Egan's definition of milk tanks has been helpful to some degree. If I am correct, he stated it has to be a new build that incorporates a building tank. I do not want to misquote him but that is roughly what he said. Many farmers in my part of the world installed replacement tanks and probably got rebates. That clarification is helpful regarding the industry moving forward.
I think there has been a change in interpretation. We need to be fair to people here because otherwise everyone has been wrong for the past 30 years. I will put my question to Mr. Egan again. Has there been a change in interpretation, not of the Act but within Revenue, of this issue?
Mr. Chad Egan:
I do not believe there has been any change. As I am responsible for interpreting the refund order, I would know. Has there been any such change, I would have issued an instruction and it would have been published. I am very happy to say there has not been a change. Based on the statistics we generated, 96% of claims have been approved in the last three years. Our approval and rejection rates have been consistent. Nothing from our statistics or what we have looked at internally has indicated a change. The Senator has raised examples from 20 or 50 years ago. I cannot speak to those examples but I can say that when we looked at the statistics, the position has been very consistent.
Ms Davena Lyons:
If I may jump in, we have engaged with industry representatives in the last couple of months and Mr. Egan's section has engaged with them continuously over the years. We have listened to the sector's concerns on the need for clarity. In the next couple of weeks, we expect that guidance to issue on our website. The document is dynamic because new products will potentially come on the market and we will have to consider everything as it arises in future. The document will list what is and is not in scope, which Mr. Egan covered. It will provide a good bit of clarity.
We analysed activity over the last couple of years. The opening statement referred to an approval rate of 96%. More than 37,000 claims were submitted to us last year and we paid out €88 million to customers. Our first objective in Revenue is to support farmers by getting money back out for eligible claims as soon as we can and to work with claimants on a one-on-one basis if there are elements of the claim that we need to consider. Over the past five years, about €450 million has been paid out. The statistics show strong engagement with customers. A few years ago, we received 21,000 claims. In 2024, that figure is up at 37,000 claims and the value of what is going out the door has increased from €50 million to €88 million. We see positive engagement with the sector. We are trying to take its concerns on board and consider where we go with it.
As regards the guidelines, when submitting a claim farmers will have to ask themselves whether it aligns with the order. We have to administer in line with the order. The question is whether the outlay of the farmer constitutes the construction, extension, alteration or reconstruction of a farm building or structure. It is within that remit we work. Then there is the question of whether any of the machinery installed as part of that work necessitates that it is permanently installed in the farm building to the extent that its removal would significantly damage either the equipment or the building. If it is wholly used for the purpose of the sector, that is a given. Those are the question. We will set out specific products that fall within the remit of the order. Our overall objective here is to support the sector by getting out money for eligible claims.
Tim Lombard (Fine Gael)
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A new online portal has been put in place in the past year or so? How efficient is it in getting claims out? What is the timeline for getting payments out to the so-called customer, to use Revenue's terminology? I have spoken to people who made claims last December and are still waiting on payments. What is the preferred or target timeline for paying out claims?
Ms Davena Lyons:
We moved to an online system in 2019. That is the Revenue online system or e-repayment system. Some 99% of claims come in through that system but we also facilitate a paper-based system for people who are not e-enabled. Insofar as submitting on the system goes, we ask that people complete the form online and submit supporting documentation, setting out the details and nature of the claim. Revenue has a risk-assessment process in place for claims. If a claim is not selected for risk assessment, the claimant will get the payment out of the door and in their bank account within five days. That is the length of time involved where the claim is not assessed for risk assessment. Sometimes a claim is selected for risk assessment. The benefit of a claimant submitting the documentation in advance when uploading the claim is that the team can often look at the claim without having direct contact and make the payment out the door. Sometimes interaction with the claimant is required and we need to contact the farmer for explanation.
We looked back at this in preparation for today. A significant amount of documentation is submitted in various forms and it is sometimes not easily readable.
Therefore, we need some clarification on what it is. Sometimes, we look at other risk assessments and we need some clarification in that regard. Overall, speaking generally, we have a processing time of two weeks. However, we have certain peaks in the year when we get more claims. Realistically, if someone came to us in January or February this year or before Christmas, there was a six-week backlog to get through the majority of the claims. We now have that waiting time down to approximately two weeks.
Tim Lombard (Fine Gael)
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That happens because farmers need the cash flow in February. They have no milk cheque for February. They submit their documentation in December because they will not have a bob in February. That is how they survive the system. As a result of delays that came into the system, people got very agitated. They were getting part-payments on some of their claims or a percentage of the claim. What percentage of applications go for additional analysis? What percentage move forward?
Tim Lombard (Fine Gael)
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Going back to my original point, we can argue as to whether there is a change of focus regarding the actual legislation itself. For farmers who made a claim since 1972 and who are now hearing that a 3-tonne meal bin does not qualify, should they be fearful of the Revenue Commissioners? Should they be concerned that there will be a review of claims they submitted 25 years ago, five years ago or five months ago? Some farmers listening to this discussion will be thinking about how they got a claim on a calf feeder, a bull tank or a meal bin and wondering what they should do. Will Revenue be knocking on their door next week and reviewing their file? Where does Revenue stand on those issues?
Tim Lombard (Fine Gael)
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Let us say claims from five years ago.
Tim Lombard (Fine Gael)
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Does Mr. Egan see why people listening to this discussion might be fearful that there could be an issue regarding what they claimed and what potentially was not claimable? There is a slight change in focus, although we disagree on the terminology. Grants were made previously that might not fit into the criteria that have been announced. The worry for some farmers will be that the Revenue Commissioners could come calling on them.
Mr. Chad Egan:
They absolutely should not have those concerns. We will not be knocking on their doors. We understand the issues raised by the Senator. We are focused on trying to provide clarity and ensuring the guidance is as comprehensive as possible. We want to make sure people, especially farmers who are making claims and making financial decisions, know what is covered. We appreciate that there has been modernisation and technology has changed. All of these products evolve. The best example I have is the slurry scraper. Scraping used to be done manually, with the slurry pulled along the floor. Those devices would still be allowed but there are also robotic scrapers now, which are machines on wheels. We have an appreciation of that. There is no issue with the claims that would have been made in the 1970s and 1980s. We know there has been an evolution in products, with some of them now being more mobile and not fixed. There should be absolutely no concern about us going back over old claims.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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I thank all the witnesses for their attendance. Who have they engaged and met with to educate themselves about this situation? Did they engage with Teagasc?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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Did they visit any farms?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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That needs to be done urgently. This issue has been dragging on for seven to eight months. Farmers have been left in a quagmire, with no definite answers forthcoming. Whatever about a good decision or a bad decision, no decision is the worst of the lot. Farmers are left waiting for money. I know farmers who have not even heard back from Revenue. That is not a great situation.
If I put up a new shed, will I get back the VAT I pay?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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A hay barn or whatever.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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Okay. If I put down bolts and put the shed up on those bolts, it is a permanent structure. If I put up my meal bin in the same way, what is the difference? They are both bolted.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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What is a meal bin?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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Is a 10-tonne meal bin a structure?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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In effect, that is discriminating against small farmers. If Mr. Egan was a small farmer and knew anything about farming 40 or 50 acres, he would know that the reason for buying a meal bin is to keep rats away from the place. Second, he would know that farmers are putting 3 tonnes into small meal bins. Some people have meal bins that take 1 tonne or 780 kg because that is good farming practice. The only difference between a 10-tonne structure and a 3-tonne structure is that the base is not as big in the second case. If someone bothered to go out and look, that person would see that the system for putting the structure in is the dead same in both cases. I do not know how Mr. Egan can come in here and say to me that a 10-tonne bin qualifies but a 3-tonne bin does not. My God, the witnesses need to go out on site and look at what farmers are doing. Are they trying to promote ranchers with this focus on 10-tonne bins? I do not see small farmers having 10-tonne bins. They all have bins taking 2, 3, 4 or, at the most, 5 tonnes. I urge the witnesses to go out urgently and look at what is happening on farms.
Can VAT be claimed back on robot milking machines?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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That is good to know. What about mats for slats?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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A mat cannot be cemented.
Jackie Cahill (Tipperary, Fianna Fail)
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I think Ms Ruddle is referring to a cubicle mat. What Deputy Fitzmaurice is talking about is a mat that is put onto a slat on welfare grounds.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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It is bolted down.
Jackie Cahill (Tipperary, Fianna Fail)
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Yes, it is a different thing. Mr. Egan referred to cubicle mats in his opening statement. Rubbers on slats mostly go on for welfare reasons. There is also a very strong view now that they control and reduce emissions from the slurry when it is being agitated.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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I am trying to establish whether the witnesses understand the situation for farmers. This is why it is so important that they engage with either Teagasc or the farmer organisations and go out to farms to see for themselves what is there. If the mats are put on the slats, they are bolted down. If a farmer wants to take them up, it will rip the slat or the mat. The second point is that no two sheds will ever be the same. There are not two sheds in this country where I could take the mat from one and put it in the other. There will be half an inch or an inch of a difference. Where the manure goes down in one shed, it will not go down in the other. I am seeking clarity for farmers. Can they claim VAT back on mats on slats that are bolted down?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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That is grand. There is one thing I cannot get my head around. The witnesses indicated that if a meal tank is built on a new build, the VAT can be reclaimed, but it cannot be reclaimed on other than a new build. What is the thinking behind that? If I have a big door where I have the tank, whether it is an old place or a new place, the tank has to go into it. You build the building and then you put in the tank. I am trying to understand the thinking behind this. Will the witnesses give an explanation?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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Mr. Egan should be mindful of one thing. Revenue deals with this day in, day out. You get a small farmer who has 40 or 50 acres and you might have another farmer who owns 400 or 500 acres. The second one might need a big bin, but the person with the 40 or 50 acres, in fairness, is entitled to get the VAT back. Such farmers make up most of rural Ireland.
Jackie Cahill (Tipperary, Fianna Fail)
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Let Mr. Egan answer. I will let the Deputy back in, if possible.
Mr. Chad Egan:
We can only apply the legislation as it is written. The legislation refers to the construction or alteration of a farm building or structure. For milk tanks, expenditure is allowed where it is part of a new-build milk parlour project. It is seen to be as part of the construction of the farm building, which is the milk parlour. The replacement item is not viewed as a structure or the construction of a building. That is why we do not allow for milk tanks by themselves. This matter has been raised with us by the industry. We are looking at it as part of our process of reviewing the guidance. We are aware of the different opinions out there, and we are considering it as part of our current approach. That may answer the question.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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If Ms Lyons gives me a her details, I will contact her. If we, as TDs, ring Revenue, we will be told that we have to go back to the person involved. They do not give us anything. Is not that right?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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It is an issue with Revenue. If we get permission to make representations on behalf of someone who has a problem and we talk to Revenue, we will be informed that it can only talk to the person - who has the relevant tax or VAT number - in question. Every other Department that we talk to, such as agriculture or health, sends back replies and talks to us. Why is that the case?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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I will do that, but I am asking another question. Once a constituent comes to a TD and signs a GDPR permission, the TD becomes part of the process once he or she TD sends in a query. If there is an appeal, the TD would be part of the process. However, Revenue informs us that it cannot talk to anyone only the person concerned. Why is that the case, even though we have consent from people?
Mr. Chad Egan:
We have strict rules in terms of who we can talk to about a taxpayer's affairs. Usually, it is the taxpayer or a tax agent representing him or her. The tax agent will be linked to the taxpayer. They will be on record and they will have a number. We apply that quite strictly, for obvious reasons, in order to protect taxpayer confidentiality. We have another process whereby someone can send a representation to the Chairman of the Revenue Commissioners. That is another way to raise a matter. Then it is normally dealt with by the people involved in that case. There are quite strict rules. Everyone can understand the reasons we are restricted and limited as to whom we can discuss a person's tax details with.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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I have one final question because I want to let other members in. The officials are saying that a change is not coming. However, there has been change. At one time, if you had a shed and you put in a tank, you would get the VAT back. That does not happen now. There has a change somewhere along the line. Off the top of my head, the change happened in September or around that time.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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Maybe a bit earlier. We are now almost halfway into the new year and we are still wobbling, over and back, trying to decide what is what. When will there be a definitive list for farmers? The problem, which Senator Lombard mentioned, is there are many farmers who will not buy something because they do not know whether they can get the VAT back. Maybe they can in a month's time, but what is happening is we are having a lull in many sectors for the simple reason that a large number of people are sitting on the fence until they see what is going to happen. That is not good for an industry involving engineering, etc.
The Revenue gets in the VAT. If I am a welder, I make a gate. I charge Johnny down the road the VAT for doing so and I send in the details of the VAT paid. Is it fair to say that the Revenue is not giving it or anything extra to the farmer and that it is money that, to be frank, is going round in a circle?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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It would have been paid already.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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It is not that it is costing Revenue money as such. Someone in the circle to which I refer paid the money. My opinion is that the person who made the meal bin was paid the price plus the VAT by the farmer. VAT details are sent in every two months. Whatever the person paid out in VAT other than that, he or she put one against the other and the farmer went to claim it back. I would encourage the officials to go out to a farm where there are mats and meal bins - the 3-tonne ones. It is possible to carry a small meal bin around on a front-loader. Small farms rely on them. They do not use the large bins. What we have to try to do in the agriculture sector is keep everyone with us.
If there is one outcome from today, it should be that the officials make a decision shortly. There is a lull in the industry at present because people do not know what is happening. That is my final ask.
Claire Kerrane (Roscommon-Galway, Sinn Fein)
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I thank the officials for coming in and for their opening statement. I have a couple of quick questions. A great deal has been raised already.
On the percentage provided in respect of the number of claims that have been received, it was stated that 96% were approved for payment in the years outlined. Can the officials give us any details hey have in respect of the numbers who were refused in the years 2021 to 2023, inclusive, or any figures - not percentages - they have in that regard?
Ms Davena Lyons:
If we look at 2023, we had just over 37,000 claims. Some 1,472 of those were refused in full. The value of those full refusals was €3.2 million. In the same year, we approved €88 million. That is where that proportion of the 96% is coming from.
If I go back over the past five years, in 2019, which was pre Covid, we refused €6.3 million and let €71.1 million out the door. The amount of money going out the door has gone up over the past five years. It has been consistent over the past three years, at €85 million, €89 million and €88 million, respectively.
The value refused on the full refusal was €3.8 million in 2021, €2.7 million in 2022 and €3.2 million in 2023. For each of the past three years, approximately 37,000 claims came in to us.
Claire Kerrane (Roscommon-Galway, Sinn Fein)
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Going back to 2019, which is a good year to pick because it was pre Covid, Ms Lyons said that the value refused was €6.3 million. Does she have the number of refusals for 2019?
Claire Kerrane (Roscommon-Galway, Sinn Fein)
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So, last year there were over 1,400 refusals and these were worth €3.2 million. The representatives from the Office of the Revenue Commissioners, given what they said earlier, are very confident that none of the 1,400 refusals were made in respect of something on which VAT would have been got back previously. Was there no change regarding anything refused in 2023? Was anything refused in 2023 for which there would have been a return two, three, four or five years previously?
Ms Davena Lyons:
We are confident that what we have refused is ineligible under the order. When a taxpayer submits a claim on our Revenue Online system, there is a declaration process for the claim that must be signed. From the date the VAT is incurred, there is a self-review period for the customer to re-examine the expenditure. We reviewed the processes in advance of coming here today and are confident that we are consistent in our approach, that the approach is aligned with the order, as Mr. Egan has set out, and that this has not changed.
Claire Kerrane (Roscommon-Galway, Sinn Fein)
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Are the representatives not totally perplexed about where all this has come from? They have met and engaged with representatives of the farm organisations, which I welcome, but if nothing has changed, where is all this coming from? The IFA and other groups have said that there has been a change in the interpretation and that it happened overnight.
Ms Davena Lyons:
When I go back on our statistics, even on a month-by-month basis, not just for 2023 but also for the preceding years, namely 2021 and 2022, I note they are fairly consistent across the board. We are engaging with the industry because of the concerns it has raised. The guidance we are working on is about giving immediate clarity to the sector. This will be a positive step forward for the sector. We have a dedicated telephone line, myAccount and MyEnquiries, on which the claimant, the customer, can engage with us one on one and work through what is allowable and what is not. We are absolutely ready to engage with customers and do so on a day-to-day basis as well as engaging with the sector.
Claire Kerrane (Roscommon-Galway, Sinn Fein)
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I appreciate that Ms Lyons has referred to immediate clarity. That is exactly what is needed. Seeing the updated guidance as quickly as possible is really important. It is needed immediately. From the witnesses’ understanding, given that they have engaged, met some of the farmer organisations and reviewed matters in preparation for this evening, what is their read on what has happened all of a sudden, such that farmers and farm organisations are raising issues and saying quite clearly that the way in which the Revenue Commissioners are interpreting has changed? What is their understanding of where this is coming from?
Mr. Chad Egan:
From our systems, we cannot pinpoint an exact claim that has driven this. We are aware that there has been modernisation in that new products have evolved. There are different types of scrapers, for example. We cannot pinpoint something from our internal discussions that would suggest a reason for the issues raised. From talking to those in the sector, we believe there are areas in which we can provide greater clarity and regarding which those in the sector have different perspectives on what should be allowed. With a system of self-assessment, taxpayers are entitled to interpret the order in the manner they feel is right and make their claims on that basis. We are taking on board the issues they have raised with us. We have been able to give clarity on some expenditure items we do not allow, as I mentioned in my opening statement, and we are looking into some items based on feedback from the sector.
Deputy Fitzmaurice referred to the size of feeders, for example, and the tonnage that currently applies. We hope to have something published this month, once we get the final pieces together and the submissions from the sector and after the farm visit. I hope we can offer as much clarity as we can at that point, but that will not end it. After publication, we expect to have ongoing engagement with the sector. We have said this to it. We have always had engagement. Where there are particular items the sector wants us to consider, we will be happy to do so on an ongoing basis to ensure there is at least alignment or an understanding of what our approach is to the refund order so those concerned can make specific decisions themselves on what claims they wish to make.
Claire Kerrane (Roscommon-Galway, Sinn Fein)
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I thank the delegates.
Paul Daly (Fianna Fail)
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I had to leave to go to vote. If I ask a question that has been asked already, I apologise. There may be repetition for that reason. If the witnesses have already covered my questions, they should let me know and I will look at the transcript tomorrow or whenever it is available.
I want to follow on from Deputy Kerrane. I want clarification. Statistically, nothing might have changed, but we would not be here this evening if something had not changed. We never got representations from farmers about VAT reclaims before last July, August or September, or whenever this started. Therefore, something has changed. The legislation did not change, nor did the guidelines according to which the Revenue Commissioners work, but I believe the Revenue Commissioners’ interpretation has changed. That is what is causing the problem. Having listened to the discussion since I came back, I believe the Revenue Commissioners are splitting hairs in their interpretation. In my opinion, a milk tank is a milk tank, whether it is built into a new shed or put into an old shed. We are splitting hairs. It seems to be a case of getting the farmer at all costs. If I have to knock down a wall or widen a door to make a milk tank fit into an old shed, is that not construction? Would it fit the bill then?
The same applies to a meal bin. A meal bin is a meal bin, and the vast majority of them, even the small ones, are bolted down onto concrete with anchor bolts, as are portal frame sheds. If I am building a shed, I put down a concrete slab, put down pads in the corners with a slightly stronger foundation under them, drill holes and put the anchor bolts down through the base plates of the girders, thereby bolting the shed to the concrete. If I am putting a meal bin beside the shed or across the yard from it, I do the very same thing, irrespective of the size of the meal bin. It would be anchor-bolted down. There is the odd exception in that there are very small meal bins that you can transport around your farm on a tractor or whatever; however, they are still meal bins. A meal bin is a meal bin. I genuinely believe we are splitting hairs here and that the Revenue Commissioners are creating problems for the farming community and themselves through the change in their interpretation.
I seek clarification on what was said to Deputy Kerrane about nothing having changed. Was anybody refused a VAT return on a milk tank, calf feeder or scraper prior to last summer? Many have been refused since then, which represents a change.
Mr. Egan referred to scrapers. I am referring to the ones with the tracks and chains that are bolted to the ground. Such a scraper is a fixture, thereby attracting a VAT refund. The new modern robotic one is a machine, so you do not get the VAT back. Basically, the Revenue Commissioners are trying to stop advancement, including advancement for health and safety. There is nothing as dangerous in a shed as the little tracks, into which people walking around can stick a toe. If, for health and safety reasons or to modernise and become a little more efficient, a farmer decides to remove the tracks and install a robotic scraper instead, the Revenue Commissioners tell him it is the wrong way to go because it will cost 23% more. That is very wrong. We should be encouraging advancement, mechanisation and modernisation, whether something is bolted to the ground or mobile.
Paul Daly (Fianna Fail)
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Why did this start only last summer? Why did we never hear from a farmer with regard to a VAT rebate until last summer? Something changed.
Paul Daly (Fianna Fail)
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To make it simple, if I had bought a milk tank in October 2021 and was putting it into my existing shed, would I have got the VAT back? If I bought the same milk tank in October 2023 and was putting it into an existing shed, would I have got the VAT back? I would have in 2021 but I would not in 2023. This is what changed. I ask the witnesses to tell me this is not a change.
Paul Daly (Fianna Fail)
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When did that changed? I would have got the VAT back for the old build if I had done that in 2021 or 2022.
Jackie Cahill (Tipperary, Fianna Fail)
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With respect, Mr. Egan, the question being asked is if people who bought tanks in 2021 allowed to reclaim the VAT cost paid, whereas those who bought a milk tank that went into the system in 2023 were refused a VAT refund. Surely this is a change in the interpretation.
Paul Daly (Fianna Fail)
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Mr. Egan is saying the refund was paid out but perhaps it should not have been, so there was a change. Mr. Egan was wrong beforehand. We will accept that it is right not to pay it now. It has changed.
Paul Daly (Fianna Fail)
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We are here to try to get solutions to problems, but if we do not accept there is a problem, we are going to find it very hard to get a solution.
Ms Davena Lyons:
I might just jump in here. We are not saying that all these fixtures were never allowable. We would have always said that certain ones were allowable if they were part of the build. It would have been possible to have got that equipment through. Again, and I am not sure if the Senator was in the room when we spoke about it, this is done a self-assessment basis. We have a risk appraisal system in Revenue for this scheme, as we do for all taxes and all claims come to us.
Paul Daly (Fianna Fail)
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I am sorry for interrupting, but just for the sake of clarity, is that risk appraisal Revenue's balance sheet? Is the Revenue looking at how much is coming in and how much is being paid out, and if it finds itself paying out more than is coming in, it does something about it?
Michael Fitzmaurice (Roscommon-Galway, Independent)
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I just want to be clear on one issue. For 2020, 2021 and 2022, the farming organisations and the politicians never opened their mouths because there was never a problem. We did not just get wings and start flying since June and July last year. A problem has arisen and the farming organisations are on about it. Let us not keep denying there has been a change. If there was not a change, the farming organisations would not have raised the issue and Revenue officials would not be in here, being straight about it. We never had to have the witnesses in with us before. In all the years where there have been discussions about VAT or anything like this, we never had to have Revenue before us. Now, we do have them in. Why is this? It is because we are getting it in the ear daily from farmers. Let us not, therefore, be trying to deny something that is there. It is blatantly clear there has been a change because farmers would not be being refused if there had not been a change.
Paul Daly (Fianna Fail)
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There has been serious inflation in prices. This 23% or 13.5% VAT rate, and it is 23% for most of this stuff, is now 23% of what is now a much bigger base figure for the actual product. These numbers are going to fluctuate and change anyway. I asked a simple question. I am a farmer. I am not in dairy, but if I were and I had bought a milk tank in October 2021 and put it into my existing shed, I would have got the VAT amount back - yes or no? If I bought the same milk tank to put into the same shed in October 2023, though, I would not have got the VAT back - yes or no? I know the answers are "Yes" to the first question and "No" to the second one. Why is this the case? What changed?
If we are in denial that something has changed, we are not going to solve the problem. We are wasting time going to meet the farmers or the farm organisation bodies, because we can never get a solution to a problem that does not exist. The Revenue is in denial about something having changed and there being a problem. As the Cathaoirleach, Deputy Fitzmaurice and everybody here has said, our inboxes are full of emails from farmers and our clinics are full of farmers who have had a problem only since last summer. This did not just occur overnight. Something happened to make this happen.
Paul Daly (Fianna Fail)
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In questions to various Ministers, is it not on the record of these Houses that Revenue's interpretation has changed?
Jackie Cahill (Tipperary, Fianna Fail)
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That is not correct. I will go back to calf feeders. They was refundable without any question up to August last year and now calf feeders are being refused refunds. These are the simple facts and this must be a change in interpretation. I know umpteen men who bought calf feeders. They were advertised at the ploughing match as being eligible for a VAT refund. Every farmer who bought a calf feeder prior to September 2023 got back his VAT. After September 2023, he did not. This is, therefore, a change in the interpretation of the legislation.
Michael Fitzmaurice (Roscommon-Galway, Independent)
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Was there an EU audit-----
Jackie Cahill (Tipperary, Fianna Fail)
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Wait now. In all fairness, Senator Boyhan wants to get in.
Jackie Cahill (Tipperary, Fianna Fail)
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I will come back to Senator Daly in a second. I call Senator Boyhan.
Victor Boyhan (Independent)
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I thank the witnesses for coming in. Everybody who does business with the Revenue likes to be on the right side of the organisation. That is an important point to make. Let us be clear here that I understand this evening's meeting is to discuss VAT refunds for unregistered farmers. That is the focus of the meeting and why the witnesses were asked to be here. I want to raise four points.
With regard to the VAT refund order and the VAT refund scheme itself, in the case of a random farmer, can he claim a VAT refund on an item for reconstruction, not construction, of farm buildings? Can he offset the cost of such an item against an expense on his farm return as well as claiming the VAT refund? Do the witnesses understand the question?
Victor Boyhan (Independent)
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Yes, the reconstruction of a farm building. If a farmer were to claim a refund of an item for the reconstruction of an existing farm building, can he offset that item against an expense on his farm return, as well as claiming a VAT refund? I was asked this question by a farmer in an email today, so I just wanted to ask the witnesses about it.
Mr. Chad Egan:
For VAT purposes, yes, you can claim the VAT back on costs related to the reconstruction of a farm building. The second question is more about direct taxes and whether income taxes can be written off against them. I am not an expert on this facet of the tax code, but I think it could be treated as a capital allowance. I would be happy to get back to the Senator directly about this query.
Victor Boyhan (Independent)
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That is great. Second, the Revenue's risk assessment process was mentioned in the opening statement. This is a process that is operated as everyone would. In this risk assessment process, the Revenue has identified ineligible claims outside what it calls the scope of the scheme. Can the nature of some of these be shared? I ask the witnesses to give us an idea and a flavour of those claims they state are ineligible. I am just asking for a flavour of them to get an understanding of this.
Ms Davena Lyons:
I will cover that off. As I mentioned earlier, and I am not sure the Senator was in the room, the claim comes in on the Revenue online system. It has supporting documentation and potentially a detailed description of what it is. We have a risk assessment process built into the programme, as we do in respect of any other claim that comes into us across any of our taxes. If the risk assessment process identifies that claim for review, a Revenue staff member will look at it. This is where we start to process such claims. Based on the supporting documentation submitted, we may be able to validate the claim and say that we are happy enough with it to let it out the door.
What we need to do sometimes is to contact people for an additional explanation of something. The invoices might not be sufficiently clear on the extent of the construction or alteration. In those cases, where claims have been selected for risk review, we have the option of either fully approving them, partially approving them or fully rejecting them.
It may be a that there is an invoice. We have a couple of hundred thousand invoices on our system relating to what has been submitted. Members can imagine the variety of what is in those. For example, if there are 20 invoices in a claim and one of those is ineligible, Revenue can get the money out the door relating to the rest of the claim and have the discussion with the claimant about the other one.
Victor Boyhan (Independent)
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To clarify, does Revenue make partial payments?
Victor Boyhan (Independent)
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Will Ms Lyons give us some hard examples - not individual ones - of what sort of things?
Victor Boyhan (Independent)
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Will Ms Lyons give four random examples?
Ms Davena Lyons:
We might have a situation in which invoices are coming in on a claim that have been in a previous claim. We could have invoices coming in from a supplier where we have concerns about that transaction. We could have invoices coming in for equipment, such as robotic scrapers, something that we are saying we have a concern about its alignment with the order. There is a variety of things. There could be invoices coming in for claims that are outside the four-year period. There is a range of things that come in. On the partial payment, if we can get the majority of it out the door to the farmer as soon as we can, we will do that. If we have to reject that, it is might be because of something like the invoice not having the right name on it or it could be a partnership trading.
Victor Boyhan (Independent)
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I get the gist of it. What are the key learning for Revenue out of this? This could be accidental. There are a load of reasons; it is not necessarily deliberate fraud. When some of these audits are teased out in the Revenue risk assessment process, what can Ms Lyons say as a general rule? What is being observed here? Is it that people do not fully understand the scheme? Is it shoddy accounting? What is the general learning out of that?
Ms Davena Lyons:
They are all desk-based transactions and we turn them over as quickly as we can. It is really about clarity and communication with the taxpayer regarding what is eligible or what is the standard of the application or the invoices requirement or the structure of the invoices needed. It is not a case of us closing the door and that being the end of the conversation. It is very much about the team communicating back and forth with the taxpayer. There could be a situation where we have rejected an invoice but the person could come back in once he or she has rectified the situation and get that claim back in.
Victor Boyhan (Independent)
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Farmers and agricultural publications will be listening to this meeting. Would Ms Lyons say that the Revenue Commissioners would be proactively positive in trying to assist people to navigate the system?
Victor Boyhan (Independent)
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When is the clarity guidance documentation Ms Lyons said was being reviewed and prepared likely to be ready and published?
Victor Boyhan (Independent)
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It is really important to keep that engagement. In the next few days I am heading up to the agricultural show in Balmoral in the North. British revenue service staff attend agricultural shows and set up one-stop shops. I think Revenue may. We talk about simplification of EU regulation and rules and finance and everything else. I have always found the Revenue Commissioners to be very helpful and supportive. That is my personal experience in business with them. It is important that Revenue is out on the coal face of agriculture. This is the agriculture committee and we are talking about agriculture, food and the marine, be it fishers, marine activity, horticulture or agriculture itself. That is important. Does Revenue have any plans to up that to bring the organisation out on the ground out around the country? What are the plans in this regard? It is really important that we see the faces of Revenue. The officials have a job to do bringing in revenue for the State, laws to abide by and they want people to be compliant. However, the Revenue Commissioners also needs to assist people in the simplification and understanding of the process.
Ms Davena Lyons:
There is a Revenue stand at the National Ploughing Championships every year and there are various outreach events. I know it was in our annual report; I just cannot recall the figure off the top of my head. We did a significant number of events. I agree that visibility is important. We want to do as much communication and outreach as possible with the sector to help it along in its journey. We are very much in favour of that. We are always open to hosting a Revenue stand at specific events and having the right staff there to respond to the questions that come in on the day.
Victor Boyhan (Independent)
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I thank Ms Lyons for her assistance and help.
Paul Daly (Fianna Fail)
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I would like answers to the four questions I asked regarding the theoretical milk tank purchases in 2021 and 2023. What is the current situation if I was putting the milk tank into the old shed and I had to widen the door or make some structural changes to get it in? Is it then considered structural, although it is not a new shed? What is the difference between the meal bin being bolted to the concrete and the shed being bolted to the concrete? What is the attitude to modern technology such as the robotic scraper and the fixed scraper?
Mr. Chad Egan:
We would not generally allow the milk tank by itself but if the shed is being restructured to put in the tank, we allow that. Regarding the meal bin, we take on board what the Senator is saying in terms of there being different sizes. The sector has raised this issue with us so we are considering it. The approach we have taken is that some of them are very small and others are very large and we consider them to be silos. In our guidance we are aiming to clarify what we would consider allowable under the order. We are still awaiting submissions from the sectoral bodies on that.
Regarding the modernisation of technology, the refund order is from derogated legislation in 1972. We can only work with the legislation as it is written. We understand that there has been modernisation in a range of different products. However, from our perspective, we can only look at the expenditure and that talks about the construction, alteration and reconstruction of a farm building or structure. That is our approach. We can only take it on a case-by-case basis and consider the level of integration, particularly when it comes to fixtures and equipment. Our test is, and has been, to determine whether something is a fixture or permanently installed or whether its removal would do damage to the building or structure or to the equipment itself. We are quite consistent in that approach.
Paul Daly (Fianna Fail)
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I am still struggling, Chair. I have still not got an answer to my hypothetical question about me or some other individual buying the tank in 2021 and what changed if it was bought in 2023.
Mr. Chad Egan:
My apologies. I missed that question so I can address it now. The position has not changed. If an item was refunded and it should not have been, that is probably what might have happened if that is an example. If the Senator knows of cases where there are inconsistencies - and we have asked the IFA and the ICMSA the same question - we would be very happy to look at them. There is no problem there.
Paul Daly (Fianna Fail)
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Revenue would have a lot to look at. I find it very frustrating to have to repeat myself. The Chair mentioned this in his opening statement. From last August or September, we all became inundated. If Mr. Egan were to give me a straight answer, I or the hypothetical farmer would have got the VAT on the milk tank back without any hassle for the second-hand shed in 2021. I, or any hypothetical farmer would not have got it back in 2023, so something did change. Mr. Egan seems to be stonewalling and will not admit something changed. As Deputy Fitzmaurice, the Chair and all previous speakers have said, we never had to bring the Revenue Commissioners in here before.
We never had the representations we have had since last August and September. Something changed. The Chair gave a good example about the calf feeders. It was a fait accompli. You bought a calf feeder and got the VAT back, then it all changed. It was also a fait accompliup to 2023 that if you bought a new milk tank and were not building a new milking parlour, you got the VAT back on it. Late last summer or in early autumn, the interpretation of whether the milk tank was going into a new shed or an old shed changed. We would not even be here this evening if there was not a change.
I am frustrated and find it hard to believe that the witnesses are stonewalling and will not even admit that there was a change. I came in this evening to see if we were going to get a resolution. We have been here for two hours and still have not admitted that there is a problem in need of resolution and that things have changed. We are inundated by farmers contacting us. They know there is a change. They never rang us before. It all started at the end of summer or in early autumn last year. It never happened before. The witnesses will not even admit that anything has changed, which is worrying me. Sure as night comes after day, in my theoretical example, for the fifth time, I would have got the money back on the milk tank for the second-hand shed in 2021 and would not in 2023. That is a change to me in any man's language.
Paul Daly (Fianna Fail)
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Stats on approvals and figures can balance any book, but I am talking about a specific milk tank. Balance that one. What has changed with the item? Forget about the figures, stats, the income, and the outgoings. What has changed with a milk tank going into an existing shed since 2021 and 2022 to 2023 and 2024?
Jackie Cahill (Tipperary, Fianna Fail)
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In fairness, as Chair of this Oireachtas committee and I am disappointed with the answers. I am putting that on the official record. It is crystal clear to us as politicians that the policy of the revenue changed. The witnesses have categorically denied that that happened. They are perfectly entitled to do that. As I said, at the ploughing match, calf feeders were advertised as being VAT-refundable. People automatically got back their VAT on it. That changed in the month of September to October. That was a fundamental change in the way the revenue dealt with calf feeders. The same point is being illustrated on bulk tanks. There was a fundamental change. That is factual. I am putting it on the record that the committee is unhappy with the answer we are getting from the Revenue about the acceptance that there was a change in interpretation. I welcome that a review is going on with the farming organisations and there will be clarity about it but as a committee, with, I think, the united backing of all members, we are refusing to accept the witnesses' answer that there was not a change in interpretation. That is clear. As an Oireachtas committee, we are not accepting that answer. Factually, I and other people here know that items that were refundable changed to not being refundable in the past 12 months.
We can go back to the slurry bags that I started with. That started last March. They were previously refundable and then there was a change in status of the slurry bags. That was the first one that came to my attention, last March, 12 months ago. I do not often do this as Chair of the committee. I am putting clearly on record that we do not accept the statement from Revenue that there was not a change in interpretation.
Paul Daly (Fianna Fail)
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I have one more question, which has a one-line answer. There are meetings documented here. The witnesses said they have had two with the ICMSA and one with the IFA, and will have further meetings. At whose request were those meetings?
Tim Lombard (Fine Gael)
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I will go back to the VAT 58 stats that have been produced here. The witnesses have stats starting from 2014 and running to 2023 and are working through them. Could I get clarification on the stats? In 2021, 2022 and 2023, the approved claims percentage was consistently 96% for the three-year period. Is that fair?
Tim Lombard (Fine Gael)
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If I am reading it correctly, in the first three months of 2024, the percentage of claims approved has dropped to 93%, 91% in February and 94% in March. February had the biggest percentage of claims being made. I was explaining why previously. That is down 5% on the previous yearly average. Why is that down by 5% on the previous yearly average?
Ms Davena Lyons:
We mentioned at the start that there is a risk assessment process around this scheme. That risk assessment process would be dynamic. If we identify a risk, we ensure that we validate the claims and ensure, if there is a risk, that it is addressed. It is really about a level playing field and aiming for consistency across the sector in our treatment of the sector. Regarding the risks that have come in with those specific claims, I cannot go into that level of detail about what they are. As I said to the other Senator, a variety of things may have come in. I think we are still saying that over 90% is the-----
Tim Lombard (Fine Gael)
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It is still five points down on the yearly average over the last three years.
Tim Lombard (Fine Gael)
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I will absolutely take Ms Lyons at her word that it fluctuates. If it fluctuates, the fluctuation would mean that, for the next nine months, Revenue would want to get 97% approval to get to the yearly average of the last three years, by my stats. Is that right?
Tim Lombard (Fine Gael)
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For the next nine months, Revenue will want to get approval rates of 97% to get the yearly average of 93% over the last three years.
Tim Lombard (Fine Gael)
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That would prove the witnesses' point that there has been no change. Statistically, it does not work.
Tim Lombard (Fine Gael)
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Surely the claims had the same content over the last three years as they will this year?
Tim Lombard (Fine Gael)
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Can I safely say that if there has been a yearly average for the last three years of 96%, when the technologies have not been changing over the period of my lifetime in farming, that the yearly average would be 96% this year? The world has not changed in a day. If we are going to get the yearly average of 96% this year, then for the next nine months, the only way you can achieve that is to have a 97% average going forward. Would Ms Lyons be confident that Revenue will have a 97% average for the next nine months so the percentage of 96% over the last three years will be consistent?
Ms Davena Lyons:
I cannot make any commitment on that. It is not a target. We work on the claims that come in that are eligible and, if it is not the full amount, we get as much of the claim out the door as is eligible. I cannot foresee what will come in over the next couple of months and what we would have to make a decision on.
Tim Lombard (Fine Gael)
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It goes back to the whole argument we were having about a change in interpretation. There are many sayings about statistics. One could argue that if there is no change in interpretation, we would be quite confident of reaching the 96%, otherwise the change in interpretation that we are having a disagreement about will not be statistically proven. Statistically, the only way that we can see it working is if the stats stay the same, at a 96% approval rate. From the figures the witnesses have given to the committee, 91% is coming through in February.
I calculate, using basic maths, that the only way to get 96% over the next period, be consistent with the last three years and prove the point that has been made, is to have 97% approval rates going forward. I totally appreciate our guests cannot guarantee me that but statistically that is the maths. Does Ms Lyons agree?
Tim Lombard (Fine Gael)
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My maths calculation is right. The only way to statistically come up with the exact same figure as the last three years is to have an approval rate, for the next nine months, of 97%.
Tim Lombard (Fine Gael)
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On the other side, it is about proving that there has been no change. As our guests have stated several times today, the statistics are the statistics. I am saying that if the statistics are the statistics then the approval rating for the next nine months must be 97% or the statistics are not the statistics.
Jackie Cahill (Tipperary, Fianna Fail)
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We have had a very robust exchange of views and I am sure that our guests realise this is a huge issue for us, as public representatives. We disagree on the statement but that is where we are at. I know that the Revenue Commissioners are in discussions with the farming organisations and will produce guidelines. We have discussed a number of issues, including the size of meal bins. I want photographic evidence that a meal bin is bolted to a concrete base to be accepted as proof of it being a fixture. I think it very wrong to discriminate against smaller operators who have bins and larger operators who install different sizes of bins to use in the mixing of rations for stock. I ask the Revenue Commissioners to examine the issue of meal bins again.
The Revenue Commissioners in one of their statements have said that modifications to a building to accommodate a milk tank will be considered, which is most welcome. They have clarified that new builds are okay.
The issue of calf feeders was a bone of contention with a lot of my constituents. Again, I ask the Revenue Commissioners to give serious consideration to costs being VAT refundable, where evidence can be shown that calf feeders are bolted to a wall in a shed where the feeders are being operated and become a fixture in a shed.
Earlier I made a strong point about slurry bags. I cannot understand how anyone can think a slurry bag can be moved from one place to another. Again, I ask the Revenue Commissioners to accept photographic evidence of what is used to make a slurry bag permanent in a place. I ask that such evidence is taken on board when determining the slurry bag is a fixture where it has been installed on a farm.
Senator Paul Daly made a point about advances in technology and I would like the Revenue Commissioners to consider the issue. Robotic scrapers are a way forward. As the Senator said, robotic scrapers are a safer mechanism in sheds than scrapers on pulleys, etc. Over the years there will be more technological advances so it would be a retrograde step if advances in technology are excluded from availing of the VAT rebate. Again, I ask the Revenue Commissioners to give consideration to robotic scrapers and see whether this new technology can be included.
Earlier we talked about heat detection and it was mentioned that collars were excluded. I said in jest that boluses are used which are a lifelong fixture in the animal. If there is an argument that a collar can be moved then a strong argument can be made that if a bolus is put in for heat detection then the cost should be VAT refundable.
I ask the Revenue Commissioners to take on board all the points that have been made here today. As I said, the Minister for Finance answers our parliamentary questions. Obviously, as legislators, we have lobbied the Minister for Finance on these matters. We, as public representatives, have conveyed our views loud and clear to him. As I said, there was disagreement between us today on certain items but I sincerely thank the delegation for engaging with us. I hope that following their discussions with the farming organisations we can bring clarity to these matters. My firm hope is that we can return to the previous interpretation of what was VAT refundable.
Briefly at the start of this meeting I mentioned the VAT rebate on the products that farmers sell. Again, it is a complex issue. If we can get this VAT refund for the rest of the farmers back on an even keel then this evening's exchange will have been worthwhile.
I hope that the strong views we have expressed here will be taken on board by the Revenue Commissioners. When the Revenue Commissioners publish their guidelines we, as a committee, will give them close consideration. I suggest we may want to arrange another engagement with representatives of the Revenue Commissioners at that stage. Everything that we expressed here today was said on behalf of the people we represent and I hope our guests took what we said in that manner.
Finally, I thank our guests for coming here today and for the information.
Victor Boyhan (Independent)
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Our guests gave a sterling account of themselves. Well done.
Jackie Cahill (Tipperary, Fianna Fail)
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I propose that we suspend the meeting in order to allow our next witnesses to come in for the next session.