Michael Ring (Mayo, Fine Gael)
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Question 108: To ask the Minister for Finance if he will extend the repayment of VAT to unregistered farmers to include VAT paid on the purchase of farm equipment such as tractors, which are used in the reclamation of land works and so on; and if he will make a statement on the matter. [11420/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Value-Added Tax (Refund of Tax) Order 1993 provides a scheme for the refund of VAT paid by farmers on the construction of farm buildings and structures, fencing, drainage and the reclamation of farmland. Refund orders are very much an exception to the general rule, and I have no plans to extend the 1993 refund scheme for farmers to cover farm equipment.

However, as a group, unregistered farmers are compensated for the VAT borne on their farming inputs in accordance with a special mechanism provided for under the EU sixth VAT directive. The operation of the flat-rate scheme minimises the cost of administration which would be necessary if farmers were obliged to register and reduces the burden of administration on farmers generally in complying with VAT law. The flat-rate scheme provides for a set percentage, known as the flat-rate addition or refund, by which unregistered farmers may increase their prices when selling to VAT registered businesses such as co-operatives, meat factories and so forth. The VAT registered business, in turn, deducts the addition as a normal business input in its periodic VAT return. The current level of the addition is 4.8%.