Denis Naughten (Roscommon-South Leitrim, Independent) | Oireachtas source

I want to speak on Financial Resolution No. 4 and the changes to agricultural relief.

Farm families have suffered a 22% drop in income this year. Taking into account the changes to tax and PRSI that affect everyone in the economy, it will put major pressure on families throughout the country and, in particular, farm families. On top of that, there were further announcements on the suckler cow welfare scheme, the sheep grassland payment and the disadvantaged area scheme. These announcements affect farmers in the west disproportionately. The farm assist scheme will have an affect on household income. The resolution before us will take €21 million out of the pockets of farmers. There is an EU calculation on how VAT is paid to farmers but my understanding is that the rate is based not on the value of VAT that has been paid in the previous three years but on the rate of VAT over the previous three years. There is a significant difference because farmers do not receive a refund of the VAT they have paid, only in respect of the average rate over the previous three years.

A further difficulty is that agricultural inflation is increasing. As a result, farmers are being short changed. Preliminary estimates for agricultural price indices for 2012 show energy costs have increased by 8.6% and feedstuffs by 5.5%, well in excess of the rate of refund proposed of 4.8%. The resolution before us means that if a farmer goes to the mart and sells an animal after 1 January for €1,000, he will receive €4 less per head as a result. While the basis of this is to ensure it is not intended as an aid or assistance to the farming sector, it is supposed to be fair compensation for VAT incurred by farmers. The way the system is structured, it is not based on the value of VAT paid over the previous three years by the agricultural community. It does not take into account the difficulties caused by the increase in agricultural inputs and the fact that the returns farmers receive for produce has decreased this year. The rate of return to the farmers, as a percentage of VAT, has also decreased.

We have an unregulated supermarket sector putting further pressure on farm gate prices and farmers are losing out on the double. I ask the Government to look at this again because farmers are being short changed. The structure of the system means farmers are not getting a true and accurate return with regard to the amount of VAT they pay.

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