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VAT and Agriculture: Lessons from Europe

Sijbren Cnossen

No 6350, CESifo Working Paper Series from CESifo

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.

Keywords: VAT; agriculture; European union; flat-rate compensation scheme; reduced rates; incidence (search for similar items in EconPapers)
JEL-codes: H22 H25 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-pbe
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