Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Question 62: To ask the Minister for Finance his views on whether a farmer who puts up a wind turbine to supply power to their own farm and surplus to the grid should be able to claim back VAT refund on that permanent structure the same as on any other permanent structure they build on the farm; if he will ensure that this anomaly is sorted out; and if he will make a statement on the matter. [16702/10]

Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Question 113: To ask the Minister for Finance his views on the situation regarding VAT refunds on wind turbines for use at farm or other levels in view of the fact that VAT is refunded on any other form of fixed equipment; his further views on whether everything possible to encourage such alternatives electricity provision is working; and if he will make a statement on the matter. [17101/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 62 and 113 together.

Farmers who are registered for VAT are accountable persons for VAT in respect of all their taxable activities, whether those activities consist solely of farming or both farming and other activities such as the generation of electricity for provision to the national grid. As accountable persons for VAT, they would be entitled to claim input credit for VAT charged on the installation of an alternative energy generator, such as a wind turbine, for use in their taxable activities.

In so far as farmers who are not registered for VAT are concerned, they are not in the normal course entitled to credit for, or repayment of, VAT incurred by them on their business inputs. The Value-Added Tax (Refund of Tax) (No 25) Order, 1993 provides for refunds to unregistered farmers for tax borne on the "construction, extension, alteration or reconstruction of any building or structure which is designed for use solely or mainly for the purposes of a farming business". However, while the installation of an alternative energy generator, such as a wind turbine, may be the construction of a structure, such a structure is not "designed for use solely or mainly for the purposes of a farming business". It is designed rather to generate electricity for wherever required. Consequently, the installation of a wind turbine does not come within the scope of the VAT refund order.

With regard to encouraging the provision of alternatives electricity, the Programme for Government contains a commitment to examine the current VAT classifications with a view to reducing the rate of VAT applied to certain environmental goods and services from the standard VAT rate to the reduced VAT rate of 13.5%. However, European VAT law does not provide for a reduction or exemption in VAT on the supply of goods or services based on their environmental impact per se. In 2008 the EU Commission undertook a study of the possibility of using reduced VAT rates as a tool to support the climate change agenda. Ireland expressed support for such a study. However, at a Council of Finance Ministers meeting in March 2009 the Ministers noted that reduced VAT rates as a tool for achieving environmental policy objectives are relevant only to a certain extent.

While the scope for reducing VAT is limited, the Finance Act 2008 provided for the VAT rate applicable on the supply of miscanthus rhizomes, seeds, bulbs, roots and similar goods used for the agricultural production of bio-fuels being reduced from the standard VAT rate to the reduced rate of 13.5%. This and other measures under the Programme for Government clearly demonstrate the Government's commitment to addressing the environmental challenges which we face.

In addition, the supply of certain environmental products, such as insulation materials, wind turbine equipment, wood pellet boilers and solar panels, are chargeable at the standard VAT rate which in Ireland is 21.5%. However, the reduced VAT rate of 13.5% may be applied to such products where they are provided under a single supply and install contract where the VAT exclusive cost of the goods does not exceed two-thirds of the total VAT exclusive charge to the customer. Furthermore in the area of corporation tax, companies are entitled to 100% capital allowances on expenditure incurred on qualifying energy-efficient equipment purchased for trade purposes.