Michael McDowell (Dublin South East, Progressive Democrats)

I move:

(1) THAT the level of the turnover from taxable supplies below which persons shall not, unless they otherwise elect, be taxable persons be increased to €35,000 from €27,500 in respect of a person's supply of services, and to €70,000 from €55,000 in respect of a person's supply of goods and that, accordingly——

(a) section 8 of the Value-Added Tax Act 1972 (No. 22 of 1972) be amended by substituting "€35,000" for "€27,500" (inserted by the Finance Act 2006 (No. 6 of 2006)) and "€70,000" for "€55,000" (as so inserted) in subsections (3), (3A) and (9) wherever they occur, and

(b) the Sixth Schedule to the Value-Added Tax Act 1972 be amended by substituting "€35,000" for "€27,500" (inserted by the Finance Act 2006) in paragraphs (viib) and (viic).

(2) THAT this Resolution shall have effect as on and from 1 March 2007.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

Resolution No. 4 provides for an increase in the VAT registration thresholds for small businesses from €27,000 to €35,000 for services and from €55,000 to €70,000 for goods. The resolution provides that the new thresholds will take effect from 1 March next year. This change will cost €35 million in 2007 and €53 million in a full year. As a result, it is anticipated that 8,000 businesses could be removed from the VAT net in the year. This measure will also remove the administrative burden for small businesses and for Revenue. The existence of registration thresholds allows certain small businesses to remain outside the VAT net and helps small, new businesses to develop. The measure will also reduce the administrative burden for Revenue. The changes represent an increase of over 27% in the VAT registration thresholds.

Resolution No. 5 provides for an increase from 4.8% to 5.2% in the flat rate farmers' refund. This was last changed in 2005 when it was increased from 4.4% to 4.8%. The new rate of 5.2% will take effect from 1 January 2007. The flat rate scheme is a simplified and practical method of applying VAT recoupability to farming. It compensates unregistered farmers on an overall basis for the VAT charged on their purchases of goods and services. This is achieved without applying the normal VAT rules on registration, record keeping, invoices and returns. As required by EU law, the Revenue Commissioners have calculated the flat rate on the basis of macroeconomic data for the last three years. The revised flat rate for 2007 takes into account a number of changes in the method of calculating the refund following consultation with the farming bodies. These consultations are ongoing. The increase in the flat rate will cost €13.5 million in 2007 and €16 million in a full year. The livestock rate, which has traditionally been at the same rate as the flat rate, is being maintained at 4.8%. The livestock rate is charged by VAT registered farmers and other businesses on the supply of livestock and live greyhounds and the hire of horses. Under EU law we are permitted to maintain the livestock rate below 5%. I commend both resolutions to the House.

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