Proposal to introduce VAT on fertiliser could add €35m to Government coffers
Study estimates a reduction in usage of around 33,000t per year
A study from the ESRI also says eliminating the zero-VAT rate on fertiliser for big farmers could help reduce carbon emissions which, although small, could have a positive effective on the environment.
If the zero-VAT rate on fertiliser was abolished for farmers, they would be more likely to spread less.
In total, across the three types of fertiliser it estimates a reduction of around 33,000t per year.
It also says applying VAT to a previously unrated good will also have the effect of boosting revenues for the exchequer. This analysis suggests that there will be a tax revenue gain of €35.14m each year.
The ESRI said this change could disproportionally affect small, struggling farmers, who are likely to be low-intensity users of fertiliser.
Perhaps an appropriate solution in Ireland would be to charge a normal rate of VAT on fertiliser, thus removing the effective subsidy, but to refund this on the basis of farm size and type.
Thus farmers would only be refunded for using the correct amount of nitrogen used, penalising them for excess usage and rewarding them if they use a lower amount than their allocation
The ERSI said both environmental and economic benefits can be accrued by making fertiliser subject to the standard rate of VAT.