The reduction in the flat rate of VAT in last year’s budget has cost farmers €61.5m, the Minister for Finance Simon Harris has admitted.

The flat-rate addition for non-VAT registered farmers was cut in Budget 2026 from 5.1% to 4.5%, with the new rate effective from 1 January this year.

In response to a written Dáil question from Sinn Féin’s Martin Kenny, Minister Harris admitted that the move had provided a windfall for Government.

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“I can confirm that the gain to the Exchequer, when the rate reduced from 5.1% to 4.5%, was estimated to be €61.5m. I can confirm that the estimated cost of an increase in the rate to 5.1%, would be of a similar amount,” Minister Harris said.

Deputy Kenny, who is Sinn Féin’s spokesperson on agriculture and food, said the additional cost to farmers from the rate change was “very concerning”.

Financial struggle

“This is money that is being taken out of farmers' pockets at a time when farmers are struggling financially with increased input costs this year such as fertiliser and meal, plus the skyrocketing cost of fuel in the last few months,” Kenny said.

“This has angered a lot of farmers, particularly at marts around the country, where farmers who are selling livestock can see on their sales receipt that they are paying VAT,” the Sinn Féin deputy said.

“While VAT has always been charged at the livestock rate of 4.8%, this would usually be offset by a VAT credit at the flat rate, which was 5.1% last year.

"However, as the flat rate has gone below the livestock rate, farmers are now paying VAT on sales for the first time in years,” he added.

“This is of huge concern to farmers, and I would hope that the Minister for Finance would examine this in this year’s budget and hopefully bring the rate back up or at least above the livestock rate,” Deputy Kenny said.

In his reply, Minister Harris blamed changes to the VAT flat-rate on EU rules.

“Under the EU VAT directive, the flat rate addition is calculated using macro-economic statistics for the preceding three years. Member states are not allowed to fix a rate independently,” he said.