Farmer exposes multi-million euro tax loophole
Finance Minister takes action on 'tax evasion' after EU intervention
The poultry sector is the subject of a major tax probe following an investigation by the EU Commission.
The move came following a complaint lodged to the Commission by Ireland Midlands-North-West MEP Marian Harkin on behalf of Cavan chicken farmer Alo Mohan.
Finance Minister Michael Noonan has admitted to the European Parliament that "VAT avoidance schemes were being developed and probably [were] in place, particularly in the poultry sector".
Mr Noonan has proposed changes in the Finance Bill to prevent "tax evasion in the poultry industry that gave competitive advantage to those who used it rather than those who didn't".
Mr Mohan, a Nuffield scholar and former IFA poultry committee chair, contends that he lost out on €25,000 per year because did not participate in various VAT arrangements, including reclaiming VAT on inputs for farmers that were unregistered for VAT.
Unregistered farmers are not normally able to avail of a VAT refund on expenses, and are compensated for this with a 5.4pc flat rate addition on their sales.
Ms Harkin said: "This matter needs to be dealt with definitively in order to ensure we have a thriving competitive industry that pays the producers for their service and is not reliant on tax avoidance schemes.
"Most people in the industry knew what was going on here and everybody I spoke to told me the same thing but a blind eye was turned by some.
"We informed the Revenue over two and a half years ago, yet it has taken until now and an investigation by the European Commission to move this matter forward," she said.
Mr Mohan ceased trading with his processor late last year, and has failed to find a new purchaser for his birds since then.
Ms Harkin said: "This is a law-abiding man concerned only with doing the right thing and yet his family business of 60 years is no longer trading."
Mr Mohan maintained the practice was not widespread in the poultry sector, but he admitted the set-up was likely in other highly integrated areas of the livestock sector.
"It has massive implications for the whole Irish livestock sector and, if allowed to continue, would completely undermine the ability of honest family farms to stay in business," he said.
Despite the controversy surrounding the VAT schemes in the poultry sector, the IFA is lobbying politicians to stall any change to the laws that would close off the loopholes.
While a policy document from the organisation admits that protecting the integrity of the flat-rate VAT scheme for farmers is "critical", it adds that "there is a concern in the poultry sector that some structures within this sector could be affected" and that affected farmers "will need time to review their structures".
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