Latest news with #Donohoe
The Journal
a day ago
- Business
- The Journal
Department of Finance clarifies hospitality VAT cut would cost less than €1bn mooted by Minister
A SPOKESPERSON FOR the Minister for Finance has clarified that the cost of reducing the VAT rate for hospitality would be less than the €1bn figure mooted by the minister earlier this week. At €1bn, the cost would equate to two-thirds of the total €1.5bn available to the government for tax cuts in this year's Budget. On Tuesday, during a press conference on the Summer Economic Statement, Minister for Finance Paschal Donohoe told reporters that the one-year cost for reducing the hospitality VAT rate to 9% for restaurants and hotels would be between €950mn and €1bn. However, later in the press conference, he said he would need to clarify if that figure did include hotels. A spokesperson for the minister told The Journal today that, based on CSO data, the total one-year cost for restaurants and hotels is actually €810mn. Advertisement This is split €675mn for restaurants and cafes and €135mn for hotels. The cost for hairdressers would be an additional €40mn. Meanwhile, the Tax Strategy Papers published this afternoon by the government highlight that it is possible to change the VAT rate for one of these groups without changing the other. However, it said the principle of fiscal neutrality requires universal application within the same sector. This means that if accommodation stayed at 13.5% it would have to include all accommodation services, including B&Bs and small hotels. While the Minister for Enterprise Peter Burke has again stressed today that he is in favour of reducing the VAT rate, Donohoe stressed earlier this week that no decisions have yet been made. 'The exact component of what the tax package will be and the other tax measures that will be in it, I can't answer that question until Budget day,' Donohoe said. Readers like you are keeping these stories free for everyone... A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation. Learn More Support The Journal
The Journal
a day ago
- Business
- The Journal
Signals from Government that 9% Hospitality VAT cut in Budget may not go ahead
DESPITE PREVIOUS COMMITMENTS from the government, ministers this week have been signalling that a cut to the VAT rate for the hospitality sector may not go ahead in this year's Budget. Just last month, Tánaiste Simon Harris said the government had made a 'solemn' commitment to reduce the VAT rate for the hospitality sector to 9%, but this week the government has been sending mixed signals on how it will proceed. VAT for the tourism and hospitality sectors was reduced to 9% during the Covid-19 pandemic at a cost of €1.2bn to the exchequer. The previous 13.5% rate was reinstated last August, despite the sector's opposition. Speaking to RTÉ Radio 1 this morning, Junior Minister in the Department of Justice Niall Collins said the VAT cut was not a 'done deal'. The Fianna Fáil TD said his personal preference would be for targeted interventions across a number of sectors instead of a broad cut to VAT in hospitality. Collins added that it would be an 'enormous cost in one jump' to move from 13.5% to 9% and stressed that it was 'simply not the case' that two thirds of the tax package in this year's Budget would be used for the hospitality VAT reduction. Earlier this week, Minister for Finance Paschal Donohoe and Minister for Public Expenditure Jack Chambers published the Summer Economic Statement, which sets out the parameters for the forthcoming Budget. At the press conference on Tuesday, Donohoe said it would cost between €950mn to €1bn to lower the VAT rate for food and accommodation hospitality for one full year. This would equate to two-thirds of the €1.5bn tax package available in this year's Budget. Advertisement He told reporters that he has always been clear that if the government greenlights this measure there will need to be 'trade-offs' in terms of other measures that the won't be delivered. 'The exact component of what the tax package will be and the other tax measures that will be in it, I can't answer that question until Budget day,' Donohoe said. However, speaking last month , Donohoe said a cut in the VAT rate for hospitality 'is a shared priority across government'. Meanwhile, yesterday, Minister for Enterprise Peter Burke defended the plans to cut the VAT rate. He stressed the importance of the hospitality sector to the economy and the 200,000 people who are employed in it, arguing that the VAT reduction is a 'jobs measure' that will sustain employment in that sector. 'It is a viability measure, they are under significant pressure,' he said, noting that regulatory requirements like sick pay and wage improvements have reduced margins in the sector. Many in the industry have pointed to the VAT rate being reinstated to 13.5% after the Covid-19 pandemic as a significant strain on their businesses. However, others, like trade union SIPTU, argue that a reduction in the VAT rate equates to the government placing the interests of business above those of workers . SIPTU Deputy General Secretary, Greg Ennis argued that the government has also made commitments to workers to improve things like sick pay and to move further towards a living wage — moves they have since shelved. 'Without the Government reaffirming and meeting its commitments for improvements for workers in the private sector and a cost-of-living package, the cut in the VAT rate in Budget 2026 will amount to another kick in the teeth to them and their families,' said Ennis. He added that the government has 'gone too far' in placing the interests of business above those of workers. Readers like you are keeping these stories free for everyone... A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation. Learn More Support The Journal
The Journal
2 days ago
- Business
- The Journal
Minister defends VAT cut for hospitality as government accused of breaking promises to workers
ENTERPRISE MINISTER PETER Burke has defended plans to cut VAT for the hospitality sector at a cost of €1 billion. Speaking yesterday at Government Buildings, when outlining the government's Summer Economic Statement, Finance Minister Paschal Donohoe outlined that there will be a €9.4 billion Budget 2026 package , of which €1.5 billion is set aside for tax cuts. Donohoe, and other senior members of government, including the Tánaiste and Taoiseach said last month that all government parties have committed to delivering changes to VAT for the hospitality sector. VAT for the tourism and hospitality sectors was reduced to 9% during the Covid-19 pandemic at a cost of €1.2bn to the exchequer. The previous 13.5% rate was reinstated last August, despite the sector's opposition. When asked how much it is estimated to cost for the measure to be re-introduced, Donohoe said yesterday it will cost €1bn for a VAT reduction from 13.5% to 9% for restaurants and cafes, meaning there would not be much left for further tax reductions for others. He told reporters that he has always been clear that if the government greenlights this measure there will need to be 'trade-offs' in terms of other measures that the won't be delivered. Protecting 200,000 workers Speaking on RTÉ Radio One this morning, the enterprise minister defended the VAT reduction, stating that the tourism sector is a very important part of the economy. 'At this point in time, over 200,000 people are employed in it. It's a €9 billion sector. And it's so important to try and keep that sector sustainable,' said Burke. Advertisement Over the last number of years a very significant number of independent small food outlets and coffee shops have come under pressure, he explained, stating that many restaurants are closing their doors. The minister said that the VAT reduction is a 'jobs measure' that will sustain the employment in that sector. 'It is a viability measure, they are under significant pressure. We've had a lot of additionality from government, part of it over the last three years, in terms of regulatory requirements in the trajectory to a living wage and sick pay in so many areas that have put significant pressure on the sector and have reduced their margins. 'I've been in coffee shops and indeed restaurants where I've seen their margins diminish and some making a very significant loss that they weren't the prior year, considering in many cases their trade and turnover has sustained,' said Burke. Restaurants and cafes are struggling with higher business costs and in some cases reduced demand exacerbated by the increased cost of living, with many in the industry perceiving the reinstated higher VAT rate as a significant pressure on their businesses . Department of Finance says VAT cut is 'unjustified' However, despite the government being determined to bring in the measure, Department of Finance advisory papers published earlier this month in advance of the next Budget, officials said that there are a 'number of reasons' why going back to 9% 'remains unjustified'. It listed the cost to the state, the resilience of the domestic economy, and Ireland's current position as being 'not significantly out of line with other EU countries in relation to the application of VAT in this sector' as among the reasons. 'The cost is very significant,' it said. The news that workers might not feel many benefits in the budget this October has resulted in SIPTU Deputy General Secretary, Greg Ennis stating that private sector workers have been short-changed by government. In a statement this afternoon, he accused the government of 'broken commitments' on pensions, increased sick days and measures to offset the cost of living crisis while announcing tax breaks for business in its summer economic statement. Related Reads Analysis: Delaying details of big projects stinks of distraction ahead of the budget Tax measures and €9.4bn budget package not set in stone until we know US tariff outcome Cutting VAT on hospitality 'unjustified' and too expensive, says Department of Finance He said SIPTU representatives have written to the the enterprise minister seeking an urgent meeting. Ennis said failure to introduce meaningful measures to offset the cost of living crisis is being done at the same time as government promises to provide a VAT reduction to the hospitality sector which will cost the State an estimated €1 billion. 'This morning on national radio, the Taoiseach, Micheál Martin, stated that there was a prior commitment to the hospitality sector on a VAT reduction. However, what about the government's prior commitments to workers with regard to increasing statutory occupational sick pay from five to seven days in 2025, progression towards a living wage in 2026, which has now been shelved until at least 2029, and the abolition of subminimum wages for young workers,' he said. 'Kick in the teeth' for workers 'Without the Government reaffirming and meeting its commitments for improvements for workers in the private sector and a cost-of-living package, the cut in the VAT rate in Budget 2026 will amount to another kick in the teeth to them and their families,' said Ennis. He went on to state that the government has 'gone too far' in placing the interests of business above those of workers. When asked today if customers will see the VAT reduction passed on to customers and if there will be a reduction in prices for those dining out, Burke said: 'So critically it's very difficult to ask everyone to pass it on but we need to ensure that we keep the jobs in the first place and that's the prism I look through when I have a sustainability piece like this.' The government focus now, in the midst of global uncertainty, is to protect jobs, said the minister. Readers like you are keeping these stories free for everyone... A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation. Learn More Support The Journal
Irish Examiner
2 days ago
- Business
- Irish Examiner
Flat-rate Vat removal to cost average broiler farm €12,000 a year
Removal of flat-rate Vat may cost the average poultry broiler farmer more than €12,000 per year. The Revenue Commissioners have said overcompensation of all flat-rate farmers involved in chicken production amounted to about €7 million in 2017. Revenue considers that the yearly overcompensation is approximate to the level identified in 2017, and it continued since then. The average overcompensation is around €12,500 per year, if the 560 or so poultry breeding, hatching and rearing farms in Ireland are included. The flat-rate scheme compensates farmers, that are not Vat-registered, for the Vat incurred by them on input costs used in the course of their farming activities. This is achieved through the addition of a flat-rate percentage (currently 5.1%) to the price charged by the farmer for their supplies to Vat-registered persons (such as a meat-processing business, in the case of poultry). The flat-rate scheme also reduces farmers' administrative burden of registration and returns. The scheme is provided for under EU legislation. However, a key element is that it should not lead to farmers being overcompensated for Vat incurred by them on their business costs. Following an investigation in 2018, Revenue determined that there was a significant amount of overcompensation in the poultry sector. The matter was re-examined over the last 18 months, and it has been determined that overcompensation is still occurring. This resulted in finance minister Paschal Donohoe's recent decision to remove the sector from the scheme. From September 1, 2025, farmers in the poultry (broiler) sector will not be able to charge the flat-rate addition on the sale of their goods and services. Instead they will be required to register for Vat, if the level of their poultry broiler business is above the relevant Vat registration threshold in order to claim back Vat on their inputs (but farmers can register for Vat even if they are operating below this threshold). The Vat registration thresholds are €42,500 for services and €85,000 for goods. Minister Donohoe said he is required to have regard for the welfare of all farmers who avail of the scheme (more than 85% of Irish farmers avail of the flat-rate scheme). "As the EU Vat Directive does not permit overcompensation, failure to take this action could undermine the integrity of the scheme as a whole". I understand the concern this will cause amongst impacted farmers, and want to emphasise that every effort was made to find a resolution for our poultry sector. However, this matter has come to a head and must be addressed. "I have asked Revenue to provide the appropriate level of assistance and guidance on this matter to the affected farmers. In this regard, queries can be directed to businesstaxesregistrations@ IFA Poultry Chair Nigel Sweetnam said the decision to exclude a single sector is unprecedented. He said most broiler poultry farmers also have suckler, beef, dairy, or sheep enterprises, and this complexity will make compliance with the new Vat rules more difficult, as the farmers must separate their farm enterprises for Vat purposes. The change could possibly be the first of many in Vat for farmers. Accountants say no clear intention in Vat modernisation has been published by Revenue, but it is likely that all farmers could eventually fall into the Vat net over a number of years. Following a complaint about the poultry sector, Revenue undertook a comprehensive review in 2018 to establish if there was evidence of overcompensation. This review, provided to the minister for finance in 2019, established that there was a very significant overcompensation. Due to other factors, including Brexit and the covid-19 pandemic, this matter was not further considered until July 2023. Officials in the Department of Finance and Revenue said additional information provided by the sector indicated that while the overcompensation had reduced from the initial Revenue report, it was still quite significant. Together with the CSO, they investigated the possibility of creating a sector-specific flat-rate percentage for the poultry broiler sector. Unfortunately this was not possible, but if it is developed in the future, the sector could be reinstated within the flat-rate addition scheme. The poultry broiler sector has about 430 chicken farms, and 32 duck and 100 turkey farms and produces 170,000 tonnes of poultry meat. Read More Is it the thin end of the wedge for flat rate Vat compensation scheme?
The Irish Sun
3 days ago
- Business
- The Irish Sun
Blow for millions of Irish workers after tax break decision as coalition blasted over new €100bn splurge details blunder
HARD-PRESSED workers are in line for little to no income tax breaks in the upcoming Budget amid concerns about the impact of Donald Trump's tariffs. The Advertisement 5 Finance Minister Paschal Donohoe has a €1.5billion tax package to play with Credit: Niall Carson/PA Wire 5 Minister Jack Chambers issued a warning about the impact of tariffs Credit: Niall Carson/PA Wire 5 Coalition leaders announced a €100billion building plan for the future of the country Credit: Niall Carson/PA Wire The Summer Economic Statement fires the starting gun on Ireland pulled in bumper On the back of this, the Government is planning to spend €116billion in next year's Budget – an increase of €9.4billion on last year that the coalition leaders will now chop up on new measures. Finance Minister Advertisement Read more in Money Just last month, the Government committed to slashing the VAT rate for restaurants and cafes from 13.5 per cent to nine per cent – a move that will cost €1billion. This will leave just €500million for other tax cuts including the rent tax credit, the help to buy scheme and income tax changes. And that's before the impact of Donald Trump's tariffs are baked into the Budget, with the Finance Minister warning that they will have to cut back their Budget plans if a In last year's Budget before the general election, the Coalition spent more than €1.5billion slashing income taxes and the USC which boosted the average worker by around €1,000. Advertisement Most read in the Irish Sun With the Government committed to cutting the VAT rate for the hospitality sector at a cost of €1billion – it looks like workers will be left with little to no boost in their pay packet in the upcoming Budget despite the ongoing Challenged on this at today's announcement, Minister Donohoe told the Irish Sun: "It would not be right to grow the scale of our tax package with everything that we are confronting at the moment." Finance Minister Paschal Donohoe breaks down Trump tariff impacts on Irish He said the Irish economy generates between €1.3 and €1.5billion each year through income growth. Minister Donohoe added: 'If we were to have a bigger tax package than that, I don't think it would be the right thing to do given all we are confronting. Advertisement 'But the exact component of what the tax package and the other tax measures that will be in it, I can't answer that question until Budget day.' The Irish Sun pointed out that the Government is willing to commit to VAT cuts for hospitality businesses before the Budget but will not discuss whether workers will be given a break. TRADE-OFFS Minister Donohoe replied: 'I'm answering directly the question regarding what are the trade-offs in relation to this. 'It is really important to be open about what the trade-offs are. Advertisement 'If you were to bring forward a tax package that was to fund a full year measure in relation to VAT the cost of that would be around €1billion and then if I was to add to that other measures that we have done in the past, we would have a tax package that is far bigger than I believe would be safe.' Instead of breaks for workers, the upcoming Budget will focus on three main areas – increase investment in Ireland, improve public services and build up the country's financial resources to guard against future shocks. SPENDING COULD BE CUT BACK Today's Budget spending plan was based on a situation where there are no trade tariffs between the US and the EU. However, with 10 per cent tariffs currently in place and US President Donald Trump threatening to hike that up to 30 per cent – it looks like the Budget spending will have to be cut back before the announcement that is due in October. Advertisement Public Expenditure Minister Jack Chambers issued a grim warning about the impact of tariffs with one third of the country's income coming from corporation taxes - €15billion of which could be wiped away. 'If we were to have a bigger tax package than that, I don't think it would be the right thing to do given all we are confronting." Paschal Donohoe He said: 'If there is a serious economic deterioration we absolutely will have to revisit what we're setting out today to be responsible and that is in the context of the changing global position. BUDGET WARNING 'So this is very much caveated by what could happen in the coming weeks and we won't make decisions that aren't sustainable or affordable for the Irish economy – that is absolutely clear.' The Budget warning came on the same day that the Coalition leaders revealed their plans to spend €100billion on building projects over the next five years – but wouldn't reveal what projects. Advertisement The Government parties have spent weeks negotiating a review of the National Development Plan which sets out what will be spent on building roads, hospitals, public transport, housing and energy infrastructure over the next five years. This includes how the Government will spend the €14billion Apple tax windfall and the billions made from the sale of the State's shares in AIB. FEW DETAILS The last NDP included a list of projects that were being funded across the country with specific details on how much each road, hospital or railway line would be allocated. However, this time around the Government have simply allocated cash to specific departments with detailed cash commitments only given to a handful of major projects. Advertisement 'If you were to bring forward a tax package that was to fund a full year measure in relation to VAT the cost of that would be around €1billion and then if I was to add to that other measures that we have done in the past, we would have a tax package that is far bigger than I believe would be safe.' Paschal Donohoe For example, some €2billion is being allocated to the Dublin Metro project – a railway line that will link the city centre with the airport and has been in the planning phase for decades and has already cost €300million. However, there were no cash promises for specific roads, hospitals or housing projects, with Coalition leaders instead claiming that these would be announced over the coming weeks by specific ministers. 'FUNDAMENTAL MESSAGE' Taoiseach He said: 'The last NDP was too big a document if I'm frank. The fundamental message today is the overall investment that is going to be allocated to infrastructure and housing. Advertisement 'It is quite unprecedented. Each minister will have to prioritise and they have work to do with their stakeholders and departments in terms of prioritising the allocation of their funding and prioritisation is going to be key.' Housing received the biggest Budget boost from the €100billion NDP review with €36billion given to Minister James Browne. DEPARTMENT ALLOCATIONS This was followed by the Department of Some €3.5billion will be used to boost the country's electricity grid and €12billion will be used to improve water infrastructure across the country, which will help build more homes. Advertisement Taoiseach Martin also confessed that the Government was now scrapping the 2:1 spending rule at the Department of Transport that saw twice as much cash spent on public transport than on roads. The rule was brought in by former Transport Minister Eamon Ryan but Martin today claimed it was 'unworkable' – despite being Taoiseach when it was introduced. COME CLEAN PLEA Opposition parties today blasted the Government's new National Development Plan for being scant on details as they called on the Coalition to come clean with where the cash was being spent. Advertisement He said: 'Ministers are scant in detail but they are now going to have to explain which Social Democrats TD Rory Hearne claimed the huge boost in funding for housing will not help solve the He said: 'No amount of money can solve the housing crisis if the government refuses to change its approach to providing social and affordable homes - today's 46-page document gives me no reason to believe that it intends to do otherwise. 'Last month's shocking Advertisement 5 Workers are in line for little to no income tax breaks in the upcoming Budget Credit: Getty Images - Getty 5 Opposition parties blasted the National Development Plan for being scant on details Credit: Getty Images - Getty
