Phil Hogan
Question:177 Mr. Hogan asked the Minister for Finance if he will reduce VAT to agricultural contractors to 10 per cent in the 1992 Budget; and if he will make a statement on the matter.
Written Answers. - VAT for Agricultural Contractors' Services.
The supply of agricultural contractors' services is generally liable to the 12.5 per cent VAT rate which applies to most services. Any rate changes which I may introduce in next year's budget must be consistent with the harmonised EC indirect tax regime which will apply after 1992. Under decisions taken by the EC Council of Economic and Finance Ministers, reduced rates, after 1992, will apply, on an optional basis, to an agreed list of specified goods and services; agricultural contractors' services are not included on this list. Ultimately, therefore, such services will have to be standard rated. In these circumstances it would obviously be inappropriate to reduce the rate applicable to agricultural contractors' services to 10 per cent. I would point out, however, that unregistered farmers are compensated for VAT they bear on their farm purchases by way of the flat-rate VAT refund, the level of which reflects the rates of VAT on those inputs. This will continue to be the case after 1992. VAT registered farmers can, of course, reclaim VAT on agricultural contractors' services directly.