Jack Wall (Kildare South, Labour)
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Question 150: To ask the Minister for Finance if a person (details supplied) in County Kildare is due a tax rebate; and if he will make a statement on the matter. [16579/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have been advised by the Revenue Commissioners that the tax liability of the person concerned has been reviewed and that a refund will issue next week.

James Bannon (Longford-Westmeath, Fine Gael)
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Question 152: To ask the Minister for Finance his plans to reduce VAT on tractors which stands at 21.5% in the Republic of Ireland as opposed to 15% in Northern Ireland, leading to farmers purchasing tractors in the North and the UK which potentially will result in 99% of tractor businesses here being closed by the end of 2009; and if he will make a statement on the matter. [16622/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. In many cases, new tractors are subject to Irish VAT irrespective of where they are purchased, and as such VAT would not be a factor that would influence a farmer in purchasing tractors outside the State. A new tractor purchased in the UK by an Irish VAT-registered farmer is treated as an intra-community acquisition and is subject to Irish VAT. The VAT registered farmer must account for VAT at 21.5% and is entitled to an input credit for the VAT if the tractor is used in his farming business.

If a farmer is not registered for VAT, he is obliged to register if he makes purchases totalling more than €41,000 from other EU Member States in any year. In these circumstances the farmer must also account for Irish VAT but may not be entitled to a corresponding input credit. If a farmer is not registered for VAT and his purchases from other EU Member States do not exceed €41,000 in any year, he will be subject to UK VAT on a new tractor purchased in Northern Ireland, however because of the cost of new tractors, this is unlikely to arise. With regard to second-hand tractors being imported from the UK, such vehicles are subject to UK VAT.

It would not be possible to reduce the VAT rate applicable to farm machinery without reducing the rate on all goods and services to which the standard VAT rate of 21.5% applies. A 1% reduction in the standard rate of VAT would cost €390 million in a full year.

I am conscious of the difficulties being encountered by the farm machinery business, however, given the current Exchequer deficit position, the budget 2009 policy decision of increasing the standard VAT rate continues to be necessary in order to support the public finances. We are borrowing to fund day to day public services which is unsustainable as future generations will be required to pay higher taxes unless we correct our public finances.

Regarding the differential in VAT rates resulting from the temporary reduction in the UK standard VAT rate from 17.5% to 15% up to the end of 2009, the VAT rate is not the only factor in the differentials North and South of the border. The weakening of sterling has had, and is having, a far more significant impact on relative prices than any VAT changes in this regard.

As a small open economy, many of our standard rated goods are imported, and cutting the VAT rate could benefit the economies from which we import more than our own. In other words, while, it might help the consumer, it would not be the most effective way of helping our own economy.