EVALUATION OF PUBLIC POLICIES IN THE AGRICULTURAL SECTOR: IS THE VAT SCHEME FOR AGRICULTURAL PRODUCTS OPTIMAL?

Abstract

The discussion on the evaluation of the Value Added Tax (VAT) compensation

scheme for agricultural products involves the interaction between fiscal and agricultural policy.

There is an ongoing debate regarding the performance and achievements of the agricultural sector.

Evidence shows that farmers are not VAT-registered but bear the VAT burden on agricultural inputs.

The compensation scheme aims to alleviate this burden by applying a fixed compensation rate at the

point of sale of agricultural products. This study adopts an analytical and descriptive approach,

drawing on the practices applied in European Union member states, while also examining the legal

framework and the implications of the scheme through an illustrative example of a small-scale

farmer in Albania. The paper analyzes the alignment between the level of compensation and the

actual fiscal burden borne by farmers and assesses its effects along the agri-food value chain. The

findings indicate that the scheme does not ensure full fiscal neutrality and may result in under- or

overcompensation. These effects vary by regional conditions and the specific characteristics of

agricultural producers.