Senior Department of Finance officials have signalled that issues regarding the regime for livestock VAT may be pushing non-VAT-registered farmers away from selling stock through marts.

Budget 2026 created a VAT discrepancy equivalent to 0.3% of the value of livestock sold by non-VAT-registered farmers through marts.

The issue has been flagged by Government’s tax strategy group as an anomaly for which there is “scope” to resolve through Budget 2027 measures.

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The irregularity stems from the rate set in Budget 2026 for topping up non-VAT-registered farmers’ sales to refund them for VAT incurred on producing the livestock.

Rebate rate

The addition rate fell from 5.1% in 2025 to 4.5% this year, below the VAT rate of 4.8% levied on livestock sales at marts.

Historically, the rebate rate was set above the VAT level on livestock mart sales.

“Due to the business model operated by livestock auction marts, farmers who opt to remain unregistered for VAT will suffer the difference between these two rates - ie 0.3% when they sell through livestock marts,” the Department of Finance-led tax group has said in a new paper.

“This means they may now prefer to engage in direct sales to other farmers or sales to factories.

“While the individual difference on any one sale is currently marginal, where a farmer is making multiple sales there may be a sufficient difference to drive sales to channels other than marts.”

The group claimed that the flat rate addition “will ultimately account for this difference”, but acknowledged “it may present a barrier to livestock sales for some farmers, especially those who do not want to sell privately”.

Scope

“There is scope to reduce the livestock rate down to match the flat rate payment,” the advisory group on tax policy signalled.

The paper gives no indication as to whether next year’s flat addition rate for VAT will be higher or lower than the 4.5% at play for 2026, saying that a figure is unlikely to be on hand before September.

It did give a “very tentative estimate” of the cost to the exchequer of reducing the VAT levied on livestock at around €660,000 per 0.1% reduction, leaving the overall cost of taking the current rate down the flat rate addition of approximately €2m.