Micheál Martin (Cork South Central, Fianna Fail)
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77. To ask the Minister for Finance if his attention has been drawn to allegations from a person (details supplied) regarding tax loopholes in the poultry sector that allow or allowed co-op members to avail of VAT rebates even if not registered; the actions that were taken by his Department following notification of same; if the loopholes have been corrected; if they apply to other sectors; and if he will make a statement on the matter. [40443/17]

Micheál Martin (Cork South Central, Fianna Fail)
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78. To ask the Minister for Finance if the Revenue Commissioners were requested to investigate VAT loopholes in the poultry sector further to comments made by his predecessor at the economic and monetary affairs committee in 2016; and if he will make a statement on the matter. [40444/17]

Micheál Martin (Cork South Central, Fianna Fail)
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79. To ask the Minister for Finance if the European Commission was in contact with him regarding a tax loophole in the poultry sector that put co-op members at a competitive advantage; and if he will make a statement on the matter. [40445/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 77 to 79, inclusive, together.

The Deputy will be aware that the Revenue Commissioners advised my Department that a business model had emerged in the poultry sector that could result in a systematic excess of flat rate addition payments to farmers over VAT incurred on their inputs.

While the business structures and contractual arrangements employed in the sector were lawful they are not acceptable if they result in a systematic overcompensation of farmers for the VAT borne on their input costs.  Accordingly, when this matter was brought to the attention of my predecessor a provision was introduced in Finance Act 2016 that enables me to exclude, by Ministerial Order, any specified agricultural sector where the business structures or models employed result in a systematic excess of flat-rate addition payments over input costs borne by flat-rate farmers within that sector. If it proves necessary to do so, I fully intend to make any order required to exclude any sector from the flat rate scheme. 

I am advised by Revenue that they have engaged with all relevant players in the poultry sector to establish the detail and extent of such structures and contractual arrangements and to establish if they plan to unwind any structures and arrangements that could give rise to overcompensation of farmers for the VAT borne on their input costs. I also understand that following undertakings to change important elements of the business model employed in the sector, Revenue will now evaluate if systematic overcompensation of flat rate farmers in the sector could still arise, which is still a risk given the nature of some of the contractual arrangements that are a feature of the sector. If Revenue’s evaluation finds that there is still an excess of flat rate addition payments to farmers in the sector over the VAT borne on their input costs, they will prepare a report for my office as provided for in Section 86A of the VAT Consolidation Act, 2010 (inserted by Section 47 of Finance Act 2016).

In relation to other agricultural sectors, I am advised by Revenue that they are conscious of the risks and are actively looking for indications of the emergence of similar structures and contractual arrangements in other agricultural sectors and have discussed this matter with the Irish Farmers Association.

With regard to your question in relation to the European Commission, Ireland responded to a number of questions raised by the Commission on the application of the Flat-Rate Scheme for Farmers in the agricultural sector in Ireland. The Commission closed this file in February 2017.