Hospitality boost in Budget to shrink workers' tax cuts
That will happen at the expense of income taxpayers.
The cost of reducing VAT from 13.5% to 9% for restaurants, bars and cafés is going to be up to €1bn in a full year, Minister for Finance Paschal Donohoe said.
That will be out of a package of tax cuts of €1.5bn, according to the Summer Economic Statement, which was published by the Government earlier.
In other words, two-thirds of the capacity for reducing taxation could be absorbed by the hospitality industry.
Mr Donohoe said when the Coalition made the commitment to cut the rate of VAT it meant there would be "tradeoffs and consequences" and "there are other things we are unable to do".
He warned the threat of US tariffs meant that it would "not be right to grow the tax package given all we are confronting".
In Budget 2025, the average worker benefited by around €1,000 from reduced taxes.
That was based on a package of €1.4bn.
When the Government proceeds with the VAT reduction for the hospitality industry, it would leave €500m for tax cuts elsewhere.
On that basis, ordinary workers won't enjoy a similar reduction in taxation next year as they did in 2025.
Trimming VAT for hospitality was a commitment which was originally made during the General Election in November last year and it was included in the Programme for Government in January this year.
It would be difficult to renege on such a clear political promise.
Another important element of the Summer Economic Statement is that it is predicated on zero tariffs being imposed on exports from Ireland to the US.
Currently many sectors are free from tariffs including pharmaceuticals and computer chips.
But other areas such as food and drink exports have been hit with duties of 10%.
While the deadline for a deal on tariffs is 1 August, the issue has been long fingered twice by US President Donald Trump who has variously suggested tariffs of 20%, 30% and even 50% on EU goods.
There is a very clear caveat in the Summer Economic Statement, that if the trade war between the US and EU worsens, the Government will have to revisit the tax package.
It means the coming weeks and possibly months will be critical in determining the shape of the Budget.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
RTÉ News
2 hours ago
- RTÉ News
PayPal to create 100 jobs at new AI and fraud centre in Dublin
Payments company PayPal has announced the creation of 100 new data science roles at its Dublin office. The expansion is linked to the establishment of a new AI and fraud data science centre. PayPal said it is continuing to evolve its Dublin site beyond its roots as a customer service hub into a centre for innovation. The new roles will span a range of disciplines, including AI engineering, data science, software development, risk modeling, and cybersecurity. The positions will support areas such as loss prevention and enhancing customer experiences. "As we shape the next generation of digital payments, the talent and innovation coming from Ireland will play a critical role," said Aaron J Webster, Global Chief Risk Officer at PayPal. "This expansion reflects both our confidence in the local ecosystem and our ambition to build an AI-driven, data-powered future that embeds trust and safety in every transaction," Mr Webster said. The job expansion by PayPal is being supported by the Government through IDA Ireland. "The creation of 100 highly skilled roles in cutting-edge fields like AI and data science reinforces our status as a global hub for innovation, and I would like to commend PayPal for its ongoing partnership with IDA Ireland," said Peter Burke, Minister for Enterprise, Tourism and Employment. Michael Lohan, CEO of IDA Ireland welcomed the job announcement. "This is a testament to Ireland's enduring appeal as a location for high-value investments," Mr Lohan said. Last year, PayPal cut 290 jobs at its Irish operation. In March 2023, the company announced 62 redundancies in Dundalk and Dublin, and the closure of its Dundalk office.
Irish Examiner
2 hours ago
- Irish Examiner
Government urged to clarify military intelligence powers in new phone tapping legislation
An oversight judge on phone tapping said it was 'imperative' the Government urgently clarified in law the roles and powers of military intelligence in safeguarding the security of the State. In his 2025 report, Mr Justice Tony O'Connor said the Defence Forces recently built a new high-security facility for the Irish Military Intelligence Service (IMIS). The service moved into the building last March, but the service is still awaiting Government measures to modernise and legislate for its national security remit. Mr O'Connor is the designated judge for the Interception of Postal Packets and Telecommunications Messages Act 1993 and Communications (Retention of Data) Act 2011, as amended by the 2022 act. In his report to the Taoiseach for May 1, 2024, to April 1, 2025, Judge O'Connor repeated his calls for online communication, including encrypted services to be included in the laws. This includes Gmail, Outlook, Microsoft Teams, FaceTime, Facebook Messenger and WhatsApp. The interception legislation is now 32 years old and successive governments have promised updated laws, with the current administration telling the Dáil a draft bill is due later this year. An Garda Síochána and the Defence Forces utilise powers of interception, the former for the investigation of serious crime and State security and the latter for State security only. Other agencies, such as Revenue and Fiosrú (formerly Gsoc), have powers under the 2011 act on communication (not content) data. The role of designated judges have now been taken over by the new independent examiner of security. Mr O'Connor, like designated judges before him, does not provide statistical data on the number of phone interceptions, with Mr O'Connor maintaining he sees 'little merit' in doing so. The High Court judge said applications from the gardaí were 'low' and were 'down in numbers', adding all were granted by the minister for justice. 'The number of authorisations granted pursuant to section 4 [serious offence investigations] were not significantly higher than those made under section 5 [security of the State],' the judge said. In his previous, 2024 report, he said the number of interceptions 'relative to the State's population size appear low'. He said the existing and anticipated developments on communication known to An Garda Síochána 'should be accommodated' in the new legislation. Mr Justice O'Connor said military intelligence moved to a 'new bespoke secured facility' last March. 'The new facility is a welcome development and affords a modern and professional aspect,' he said. 'The new building is purpose-built to top secret clearances and security specifications.' He said the old Irish Military Intelligence Service building, which they had used since the 1980s, was transferred to new Joint Cyber Defence Command in May. Judge O'Connor pointed out military intelligence uses the acts only in matters relating to the security of the State and the integrity of its institutions. It is for intelligence purposes only. The report said the use of the 1993 and 2011 acts for military intelligence 'was limited' over the last 11 months, but added the 'significance and value of those provisions for the PDF should not be underestimated'. He said he supported the 'urgent call' made by the Commission on the Defence Forces in its February 2022 report for clarification of the role, functions and powers of military intelligence in new legislation. 'There is an imperative to clarify the role, functions and powers of the IMIS in underpinning legislation,' he said. Read More National Development Plan allocates almost €4bn for defence and justice capital spends
Irish Examiner
2 hours ago
- Irish Examiner
Natural resource endowments more a curse than blessing for developing nations
The world's superpowers have developed a seemingly insatiable appetite for the critical minerals that are essential to the ongoing energy and digital transitions, including rare earth metals (for semiconductors), cobalt (for batteries), and uranium (for nuclear reactors). The International Energy Agency forecasts that demand for these minerals will more than quadruple by 2040 for use in clean-energy technologies alone. However, in their race to control these vital resources, China, Europe, and the US risk causing serious harm to the countries that possess them. As it stands, China is leading the pack — having gained ownership or control over an estimated 60-80% of the critical minerals that are needed for industry (such as for magnets) and the green transition. This control extends across the supply chain: China is heavily invested in mining across Africa, Central Asia, and Latin America, and has been building up its processing capabilities. For Western powers, China's quasi-monopoly over critical minerals looks like an economic and national-security threat. This fear is not unfounded. In December 2024, China restricted exports of critical minerals to the US in retaliation for US restrictions on exports of advanced microchips to China. Since then, US president Donald Trump has forced Ukraine to relinquish a significant share of its critical minerals to the US in what he presents as repayment for American support in its fight against Russia. Trump also wants US sovereignty over mineral-rich Greenland, to the dismay of Denmark. He has suggested that Canada, with all its natural resources, become America's 51st state. The EU, for its part, has sought its own mining contracts such as in the Democratic Republic of the Congo (DRC) — touted as the 'Saudi Arabia of critical minerals.' From the Scramble for Africa in the 19th century to Western attempts to claim Middle Eastern oil in the 20th century, such resource grabs are hardly new They reflect a fundamental asymmetry: Less industrialised developing economies tend to consume fewer resources than they produce, whereas the opposite is true for developed economies and, nowadays, China. In principle, this asymmetry creates ideal conditions for mutually beneficial agreements: Industrialised economies get the resources they desire and non-industrialised economies get a windfall, which they can use to bolster their own development. However, in reality, vast natural-resource endowments have proven to be more of a curse than a blessing, with resource-rich countries often developing more slowly than their resource-poor counterparts. A key reason for this is that developed economies have more economic clout, advanced technology, and military might — all of which they bring to bear to acquire the resources they seek. For example, European imperial powers used steam-engine technology to help them explore and exploit Africa for resources such as copper, tin, rubber, timber, diamonds, and gold in the 19th century. Fair compensation This — together with more advanced weaponry and other technologies — meant that, far from offering local communities fair compensation for their valuable resources, European powers could subjugate those communities and use their labour to extract and transport what they wanted. However, even countries that are exporting their resources for a profit have often struggled to make progress on development, not only because of imbalanced deals with more powerful resource importers, but also because their governments have often mismanaged the associated bonanzas. It does not help that resource-rich countries and regions often grapple with internal and external conflicts. Consider the mineral-rich provinces of the DRC, such as Katanga and North Kivu, which have long suffered from violence and lawlessness, fuelled by neighbors such as Rwanda and Uganda. Today, the advance of the Rwanda-backed M23 rebels is fuelling bloodshed in eastern Congo, and creating an opportunity for outside powers to gain access to critical minerals. The DRC-Rwanda peace agreement brokered by the Trump administration promises precisely such access to the US in exchange for security guarantees. The resource curse is not inescapable, especially for countries with strong outward-facing institutions to manage the economy's external relations, including its resource sector's ability to attract investment and generate revenues for the state, and inward-facing institutions to govern how those revenues are used. If a country is to translate its resource endowments into economic development and improvements in human well-being, both have a critical role to play Outward-facing institutions must negotiate fair and transparent mining contracts with multinational corporations and strengthen local governments' ability to do the same. Such contracts should include local-content requirements, which keep more high-value-added processing activities at home, increase local employment, and strengthen the capacity of local suppliers and contractors. Since acquiring a 15% stake in De Beers, Botswana has sought to ensure that diamond cutting — not just mining — occurs domestically, which requires inward-facing institutions to deliver adequate investment in these capabilities. Inward-facing institutions must also manage risks raised by resource extraction, from health and environmental damage (deforestation, biodiversity loss, pollution) to labour rights violations (including child labour). Unfortunately, as it stands, many mineral-rich countries are falling far short, leading some to advocate boycotts of critical minerals coming from conflict zones or countries using forced labour. While such boycotts are unlikely to sway these governments, they could convince multinationals and foreign states to demand better enforcement of environmental and social standards from countries they deal with. Ultimately, it is up to mineral-rich countries to defend their interests and make the most of their endowments. This starts with strengthening institutions. Rabah Arezki, a former vice president at the African Development Bank, is director of research at the French National Center for Scientific Research and a senior fellow at Harvard Kennedy School. Rick van der Ploeg is a professor of economics at the University of Oxford and professor of environmental economics at the University of Amsterdam. Project Syndicate, 2025 Read More Government must stand firm on Israel's illegal occupation and genocide in Gaza Strip
