The poultry industry in Ireland is facing a major tax avoidance investigation, which could have implications for hundreds of jobs in the region.
Minister for Finance Michael Noonan last week informed the European Parliament that the Irish Government has moved to tie up a potential multi-million euro loophole that has allegedly been exploited through “VAT avoidance schemes” in the sector.
The Finance Bill contains provisions that would exclude a sector from claiming a special 5.4% agricultural rebate on their sales, known as the flat rate addition (FRA).
FRA is available to farmers who do not register for VAT because of the complicated process of reclaiming it.
But Minister Noonan has now admitted to the Economic and Monetary Affairs Committee in the European Parliament, under questioning from North-West Independent MEP Marian Harkin, that there are issues at hand, which could significantly impact the exchequer.
“Earlier this year it was brought to my attention that there were VAT avoidance schemes being developed and probably in place, particularly around the poultry industry,” the Minister stated.
MEP Harkin described the scheme in her question as “a mechanism to claim excess VAT by manipulating the flat rate system” and the Minister responded that the scheme provided a “competitive advantage to those who were using this, at the expense of the legitimate traders who weren’t using this VAT avoidance scheme”.
Minister Noonan continued: “I have announced it and I have put it in the Finance Bill. The Finance Bill is up for discussion at present and I hope I’ll have the support of a majority of parliament to enact this measure.”
MEP Harkin and former IFA Poultry Committee Chairman Alo Mohan from Redhills informed Revenue about their concerns as far back as two years ago and lodged a complaint with the EU Commission last June.
Mr Mohan, a Nuffield Scholar who ceased trading as a chicken farmer last year, is now calling for a full investigation into the matter, and with specific examination into how the poultry industry could be undermined by the operation of such schemes.
In a statement to The Anglo-Celt, MEP Harkin said: “I am really pleased that the poultry farmer, Alo Mohan, has now been vindicated.”
She said that because he refused to be part of this scheme, “he has lost approximately €25,000 per annum”. The MEP added that Mr Mohan was a “man concerned only with doing the right thing and yet his family business of 60 years is no longer trading”.
“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.
“We informed 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.”
Despite the controversy, farming representatives have been quick to challenge the Minister’s proposed changes to the flat rate scheme for farmers not registered for VAT. The IFA wants the measure delayed until 2018 so chicken farmers can review their structures.
In this region, Fianna Fáil Senator Robbie Gallagher said that “farmers will need time to ensure that their business models are compliant with this new legislation. The time-frame is very tight – as it is due to come into operation on the 1st January next.
“I have been contacted by a number of poultry farmers concerned about the impact of these new changes. The poultry sector in Monaghan and Cavan is already under pressure as a result of the fallout from the Brexit vote, and the subsequent collapse of sterling. This new measure, if brought in, in January, could further squeeze these producers, and lead to job losses in the industry.”
He added that the poultry sector is a key industry in this region, employing hundreds of people and generating much-needed investment for the Border area. “Anything which threatens this sector, and especially the smaller players in it, is a cause for concern.”