Revenue probing tax 'loopholes' in the farming sector

Revenue has begun "actively" probing to see if tax loopholes in the poultry sector are in operation elsewhere in the farming sector.

Tax officials warned they were "conscious of the risks" that VAT loopholes could be used in the beef and lamb sectors.

Last year, then Finance Minister Michael Noonan admitted to the European Parliament that "VAT avoidance schemes were being developed and probably [were] in place, particularly in the poultry sector."

His comments came after poultry producer Alo Mohan raised issues which were then highlighted by Midlands North-West MEP Marian Harkin to the European Commission.

The ICSA has called on the Minister for Finance to clarify if the VAT loophole uncovered in the chicken sector is also being used in the beef sector.

The ICSA's beef chair Edmond Phelan said the use of the loophole made chicken more competitive than it would otherwise have been.

"The losers are the chicken farmers who did not participate and farmers who produce other meats such as beef and lamb without the advantage of VAT manipulation," he said.

Mr Mohan, who was a former IFA poultry committee chair, contended that he lost out on €25,000 per year because he did not participate in VAT arrangements, including reclaiming VAT on inputs for farmers that were unregistered for VAT.

Farmers not registered for VAT are normally unable to avail of VAT refunds but are compensated with a 5.4pc flat-rate addition on their sales.

Vigilant

Mr Phelan said it would not be as straightforward to apply to bigger enterprises such as feedlots in the beef sector but we need to be "vigilant". "While there is no evidence of anything amiss, it would be amazing if other sectors did not examine the possibilities," he said.

MEP Marian Harkin said the initial complaint on this issue was made four years ago.

"It is not that farmers were getting rich on it," she said. "This system was put in place in lieu of proper pricing structures so who was making the killing here, and why have Revenue allowed this to go on for so long?

"If this is going on or anything like this in the beef sector - then the small suckler farmers in the west of Ireland simply can't compete with this," she added.

Revenue said it was meeting interested parties to establish the extent of the arrangements and if they will be discontinued. It stated it was "actively looking" for signs of similar arrangements in other sectors and had discussed it with the IFA.

The IFA refused to comment on the meeting.

Revenue stated taxpayers are entitled to structure their businesses in the most tax efficient manner allowed by law.

The loophole was addressed in the 2016 Finance Act after complaints in 2015 that the flat-rate scheme for farmers and the normal VAT scheme was being "exploited to generate an excessive level of VAT recovery in the agricultural sector".

It means the Finance Minister can now exclude a sector from the flat-rate scheme.

"There is evidence that the business structures and contractual arrangements in place in the poultry sector would be likely to give rise to overcompensation of flat-rate farmers for the non-recoverable VAT on their input costs," a spokesman stated.