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The Journal
an hour 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... 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Irish Examiner
3 hours 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
a day 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
RTÉ News
a day ago
- Business
- RTÉ News
Hospitality boost in Budget to shrink workers' tax cuts
The big winner from next year's Budget is going to be the hospitality industry. 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.
Irish Examiner
a day ago
- Business
- Irish Examiner
Funding of €2bn for Metrolink in NDP will provide 'certainty' on delivering rail line, minister says
Providing €2bn in funding to the Metrolink project will provide 'certainty' on delivering the multi-billion euro underground rail line, public expenditure minister Jack Chambers has said. The Metro, due to connect Dublin city centre to Dublin Airport, has received standalone funding within the Government's revised National Development Plan. Other projects have not been provided with funding yet, with Government ministers expected to set out their priorities in advance of October's budget. 'By providing separate capital allocation and trajectory for Metro and the strategic water projects, that gives funding certainty and gives investors certainty around working with the Irish Government and the Irish people on delivering Metro,' Mr Chambers said. 'This is a project which we expect to draw down, in the best-case scenario, if the planning comes through, in the latter end of this decade. 'Then there'll be further commitments out into the 2030s as it's delivered. I think it's looking at that longer horizon and its funding profile, and that's why we have it separated out from the specific transport vote.' Finance minister Paschal Donohoe declined to give a specific cost estimate for the project, saying the Government would not say before procurement was completed. Mr Donohoe said if he did, it would 'influence the value' the Government would be able to get for the project. 'It's the biggest single public transport project we'll ever do and probably the biggest capital project of any kind that we'll be completing across the 2020s and the 2030s,' Mr Donohoe said. Meanwhile, Taoiseach Micheál Martin described the previous Government's policy of a two-to-one ratio of spending on public transport compared to roads as being 'unworkable'. 'In terms of the so-called 2:1 ratio, I've never been of the view that it is realistic because of the timelines of projects,' Mr Martin said. He highlighted the Metro as an example. 'When the big, heavy money gets to be spent on the Metro, you'll be looking at 3:1 public transport versus roads,' Mr Martin said. Read More
