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VAT and Agriculture: Lessons from Europe

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  • Sijbren Cnossen

Abstract

Farmers are often exempted from VAT for administrative and political reasons. But this means that the VAT on their inputs cannot be ‘washed out’ through the tax deduction/credit mechanism. To compensate farmers for the uncompensated VAT on inputs, the EU has devised a flat-rate scheme that permits them to charge a presumptive rate (approximately equal to the effective VAT rate on sector-wide inputs) on their sales to taxable agro-processing firms. The flat-rate scheme is an arbitrary way of trying to achieve equal treatment. Full taxation, subject to the general threshold, appears to be the preferred choice.

Suggested Citation

  • Sijbren Cnossen, 2017. "VAT and Agriculture: Lessons from Europe," CESifo Working Paper Series 6350, CESifo.
    • Handle: RePEc:ces:ceswps:_6350
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    References listed on IDEAS

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    1. Dora Benedek & Ruud A. De Mooij & Michael Keen & Philippe Wingender, 2015. "Estimating VAT Pass Through," CESifo Working Paper Series 5531, CESifo.
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    7. Leon Bettendorf & Sijbren Cnossen, 2015. "The Long Shadow of the European VAT, Exemplified by the Dutch Experience," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(1), pages 118-139, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    VAT; agriculture; European union; flat-rate compensation scheme; reduced rates; incidence;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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