asked the Minister for Finance the cost of abolishing VAT on agricultural machinery in terms of Exchequer loss.
Written Answers. - VAT on Agricultural Machinery.
385.
It is estimated that VAT on sales of agricultural machinery in 1983 amounted to £19 million. VAT-registered farmers can, of course, take a credit in their VAT returns for the VAT charged to them on agricultural machinery. Compensation for unregistered farmers in respect of VAT on agricultural machinery and other farm inputs is provided through the VAT system by means of a flat-rate percentage addition to prices, when selling agricultural output to VAT-registered persons.
The removal of VAT from agricultural machinery combined with a consequential reduction in the flat-rate compensation would not lead to any Exchequer loss in respect of purchases of agricultural machinery by farmers. There would, however, be a loss of about £2 million per year in respect of agricultural machinery used by unregistered persons other than farmers.
The obligations of EEC membership impose constraints on the introduction of additional VAT zero ratings.