Latest news with #tax cuts
BreakingNews.ie
8 hours ago
- Business
- BreakingNews.ie
Plan to cut hospitality VAT to 9% to cost up to €1 billion for a year
A plan to cut VAT for hospitality to 9 per cent is predicted to cost up to €1 billion for a year, which is around two-thirds of the €1.5 billion tax package. The Government said that Budget 2026 will bring in €1.5 billion of tax cuts; however, the size of the package could reduce if there is a 'deterioration in the tariff landscape'. Advertisement Announcing the Summer Economic Statement, which sets out the Government's spending and tax cuts plans, Minister for Finance Paschal Donohoe said that increasing the tax package is not the 'right thing to do'. The Budget Day package, set to be announced on October 7th, will be €9.4 billion. This will comprise spending of €7.9 billion and taxation measures amounting to €1.5 billion. Overall spending across current capital will increase by 7.3 per cent for next year. Advertisement If the Government commits to its pledge to cut the VAT rate for hospitality, it will cost around €1 billion, Mr Donohoe said on Tuesday. 'Our Budget Day decisions could change depending on the economic environment we find ourselves in during the summer and beyond,' he added. 'It would not be right to grow the scale of our tax package with everything that we are confronting at the moment. 'Our economy, just by seeing income grow, generates between €1.3 and €1.5 billion each year. Advertisement 'If we were to have a bigger tax package than that, I don't believe it would be the right thing to do, given all we are confronting, but the exact component of what the tax package would be and the other tax measures that would be in it, I can't answer that question until Budget Day. 'I mean the Summer Economic Statement lays out the amount of money that will be available. It never lays out the detail of any one measure.' Mr Donohoe warned that the figures published on Tuesday are based on 'a no-tariff scenario' imposed by the United States. The statement does not set out how the budget will be affected by any change in tariffs, but states that the Government will 'recalibrate its fiscal strategy', adding that it will reduce the size of the package. Advertisement Mr Donohoe published the figures alongside Minister for Public Expenditure Jack Chambers. 'Our Budget Day decisions could change depending on the economic environment we find ourselves in during the summer and beyond,' he said. He said all they can see is 'change and risk' around the uncertainty of trade, investment and politics. 'Of course, none of this is positive for the economy of the world, and by extension, therefore, for Ireland,' Mr Donohoe added. Advertisement 'This is most evident in the debates and negotiations that are underway with regard to trade, which is why us, within the European Union and the (EU) Commission on our behalf, will be redoubling our efforts to negotiate a better deal with regard to trade between the EU between now and August 1. 'Because of all of this, it's very clear that we're at a moment of significant transition to the economy of the world, and even for the economy. But notwithstanding all of this, our economy continues to grow. 'In the first quarter of 2025, our economy grew by almost 3 per cent after a year of strong growth in 2024, and where that strong performance is most evident is in the number of people at work in our country.' Mr Donohoe said it is 'very likely' that negotiations between the EU and the US will reach a conclusion in the coming weeks. However, he said the Government's intention is to be 'flexible' in its approach to Budget Day. 'Our overwhelming priority is to maintain our public capital investment, in particular the figures that will be outlined by Minister Chambers,' Mr Donohoe added. 'However, should economic or budget conditions change, we will amend other elements of budget policy to ensure we get the balance right. 'Minister Chambers and I, in consultation with the party leaders, will continue to assess that balance in the weeks ahead. 'I emphasise that point because Minister Chambers and I are very much aware that we are publishing this statement and committing to a National Development Plan at a moment of uncertainty. 'We know an antidote to some of that uncertainty is certainty regarding our investment plans, and that is what is being outlined here today. We can do so because our economy is resilient.' Mr Chambers said the Government is having to navigate 'serious economic uncertainty'. 'If there's a serious economic deterioration, we absolutely will have to revisit what we're setting out today to be responsible and agile in the context of changing our global position, and we agree on that,' he added. '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.' He added: 'While capital expenditure will increase by €2 billion in line with the National Development Plan review, this will result in total available current expenditure of €97.5 billion, and capital expenditure of €19.1 billion in 2026. 'It will be against this backdrop that budget negotiations will commence with the individual departments in the coming weeks. 'The expenditure ceilings for 2026 will facilitate a budget that will provide for enhanced public service delivery and increased capital investment in critical infrastructure under the new and renewed National Development Plan. 'At the same time, given the profound global economic uncertainty, it's crucial we moderate current spending and provide permanent and sustainable investment, as well as focusing on addressing our infrastructure deficits.'
Japan Times
5 days ago
- Business
- Japan Times
Japanese markets brace for triple whammy if opposition wins big
Japan faces the possibility of market instability should this weekend's election lead to a dramatic change in the political landscape, particularly if opposition parties gain influence and push for aggressive tax cuts. 'It's possible Japan might experience its own triple whammy of market turmoil, perhaps a Japanese version of the 'Trump crisis' that occurred in April,' said Hideo Kumano, an economist at Dai-Ichi Life Research Institute, referring to a simultaneous fall of stocks, currencies and bonds. Some analysts suggest the possibility of market disruption similar to the crisis triggered by economic measures proposed by then-U.K. Prime Minister Liz Truss in 2022. The Upper House election will take place on July 20, and polls indicate that the LDP-Komeito coalition could lose its majority as parties both to the left and right of it gain ground. The coalition lost its majority in the Lower House late last year. Should the coalition lose big this weekend, Japan could enter a period of uncertainty in which the political fate of Prime Minister Shigeru Ishiba is unresolved and small parties are wooed to join the coalition, or at least work with it, to make governing possible. Campaigning has been unusually dramatic going into the election. Issues related to the role of foreigners in Japan have entered the political conversation, especially with the rise of Sanseito and its "Japanese First" agenda. Relatively controversial platforms have added to the sense of instability and suggest that the mood post-election could remain unsettled. In the event of a power vacuum or power-sharing arrangements with smaller parties, tariff negotiations with the United States could be affected right away. A 25% "reciprocal" tariff is set to kick in on Aug. 1 on most Japanese goods bound for the United States if the two countries are unable to come up with a compromise agreement before then. The loss of the majority and unclear leadership could make last-minute talks difficult and a breakthrough less likely. If no progress is achieved, most Japanese goods will be subject to the full reciprocal tariff —up from the current 10% — while an existing 25% tariff on autos and 50% tariffs on steel and aluminum will remain. Analysts said that these high duties could have significant implications for the economy and for the Bank of Japan and interest rates, which could in turn affect the currency. 'The timing to reach a tariff agreement between Japan and the U.S. and details of the deal will be unclear, so the BOJ will be forced to consider delaying its next rate hike,' Kohei Okazaki, chief market economist at Nomura Securities, wrote recently. If opposition parties gain seats, the government will likely be under intense pressure to introduce expensive policies to help households make ends meet. One possible option being pushed by opposition parties is cutting the consumption tax — currently set at 10% for most products and 8% for food items. 'There is no doubt' Japan will be under additional fiscal strain after the election, Kumano said. Even if the LDP and Komeito manage to maintain the majority, it's likely that they will come up with new economic measures to counter the economic costs of U.S. tariffs, Kumano said. An election poster board in Shinjuku. The LDP-Komeito coalition may lose its Upper House majority following this weekend's election. | Nico Phillips Japanese markets were rattled in recent weeks as tariff negotiations dragged on and as it became clear that the election could lead to a minority government. The yen weakened against the dollar, while stocks are off from recent highs. The yield on 30-year Japanese government bonds surged to a record 3.2% on Tuesday, and the yield on 20-year Japanese government bonds hit their highest level since November 1999. Bond prices move inversely to yields. 'It seems the market has already priced in the possibility of the LDP-Komeito losing its majority,' said Noriatsu Tanji, chief bond strategist at Mizuho Securities. But it's possible that the market has yet to fully price in the worst-case scenario, so volatility could be high after the election, he added. Tanji said he believes cutting the consumption tax rate alone would not pose a serious risk to Japan's fiscal sustainability, but added that the market's perception of Japan's fiscal health is driven by the prevailing mood rather than detailed discussions. It's similar to how a healthy bank might face a run if a rumor about it spreads, Tanji said, adding that markets could be volatile due to the prevailing mood. He added that the exchange rate is more strongly influenced by U.S. factors, so Japan's fiscal expansion alone would not lead to a plunge in the yen. 'I believe the U.S. Federal Reserve will start cutting rates from September, so the yen will be persistently under a certain level of upward pressure,' he said.
Yahoo
14-07-2025
- Business
- Yahoo
Commentary: It's a bad time to rely on the social safety net
Whether Americans want it or not, President Trump and his fellow Republicans are making historic cuts to the nation's safety net programs. It's the biggest test in decades of whether the 'nanny state' really is bloated, as critics insist, or is too essential to get rid of. The experiment will inflict pain on millions. The huge tax bill Trump recently signed contains numerous provisions that will remake the economy by favoring certain industries and classes of workers over others, stimulating spending for a while — and adding at least $4 trillion to the national debt. The two political parties and their supporters will dicker for months over whether the tax cuts help ordinary workers or favor the wealthy too much. Read more: What is the US debt ceiling, and how does it impact you? There's been less focus on various ways the tax law and other actions by the Trump administration will dismantle social welfare, yet those changes could end up more consequential than the tax cuts. Federally funded healthcare and food aid are both set to undergo the biggest cuts in the history of those programs. The changes will come in spurts, and it won't always be apparent that federal policy is to blame. The end result, however, will be a sharp reversal of modern trends, with the nation's social safety net shrinking rather than expanding. The number of Americans lacking health insurance is set to rise by 16 million through 2034. Cuts to food aid will hit another 16 million or so. Some Americans, susceptible to both, will endure an unfortunate double whammy. While these are deliberate policy options chosen by Trump and his fellow Republicans, they'll hit Democratic, Republican, and Independent voters more or less the same. The biggest changes come from the tax law. To offset trillions in lost revenue from keeping tax rates low and enacting new tax cuts, Congress made major changes to Medicaid, the health program for the poor, that will ultimately result in lower coverage rates. The law makes it harder for adults to qualify for coverage, for instance, and to keep coverage once they qualify. The Congressional Budget Office estimates all these changes combined will reduce the number of people covered by Medicaid by 7.8 million by 2034. Other changes in the law will make it harder to qualify for coverage under the Affordable Care Act, at the same time the Trump administration is making its own administrative changes to the ACA and dialing back coverage even more. The Republican-controlled Congress is also likely to let a set of temporary healthcare subsidies expire this year, making ACA policies more expensive for some 4 million people, in some cases prohibitively so. All these changes combined would lower ACA coverage by 8.2 million, according to the CBO. That would add 16 million Americans to the uninsured rolls, raising the uninsured rate from a near-record low of 7.9% now to 9.2% in 2028. KFF forecasts that the uninsured rate would jump the most in Florida, Georgia, Mississippi, Louisiana, and Texas — which all have Republican governors. In Florida, as one example, nearly 1 million people are likely to lose coverage. Healthcare cuts in the tax-cut law will reduce government spending by about $1 trillion during the next 10 years. The reduction in food aid will be small by comparison, trimming $114 billion over a decade. But that will still have widespread effects. The Urban Institute estimates that around 5.3 million families will lose food assistance worth at least $25 per month. At about three people per family, that's 16 million mouths getting a little less. There's never been a cutback of that magnitude in food conservatives argue that welfare programs have gotten out of hand, making some cutbacks necessary. They've long lobbied for work requirements, tighter eligibility standards, and other measures to ensure that aid programs are not abused and are limited to those who need them most. Yet even some Republicans balked at the cuts Trump was pushing for in the tax bill. Two Republican senators voted against the bill because of Medicaid cuts. Republican Sen. Lisa Murkowski voted for the bill, but only after negotiating special exemptions on some Medicaid cuts for her own state. One particular concern for some Republican legislators is the fate of rural hospitals reliant on Medicaid funds to keep their doors open. More rural hospitals have closed than opened during the last 10 years, and many remain unprofitable. The final tax bill included a $50 billion rural hospital fund to offset losses from Medicaid cutbacks. But that probably isn't enough, which means Congress may have to provide more money for these care centers or face voter wrath. Ordinary Americans will notice these changes piecemeal. Some will face higher premiums when they try to renew a policy under the ACA this year or next. In some cases, the cost could jump so much that coverage will become unaffordable. Medicaid enrollees will notice new paperwork requirements to prove they have a job or otherwise qualify. There will be more frequent check-ins and people who can't keep up with the red tape will lose coverage. Some rural hospitals will inevitably close, while others will cut back or eliminate services such as mental health or disability care. There will be more paperwork and tougher cutoff points to qualify for food aid, as well. Voters will have their say. In 2018, they revolted against a new Republican tax cut law by giving Democrats control of the House of Representatives in a 'blue wave' election. And that law included no major benefit cuts, just tax breaks voters thought favored the wealthy over everybody else. Are Americans more prepared for austerity now? There's no reason to think so. High inflation of the past few years has hammered purchasing power and affordability remains a top voter concern. If Republicans cutting the safety net know something the rest of us don't, maybe they should start explaining. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices.
Yahoo
14-07-2025
- Business
- Yahoo
Ottawa's 'substantial' borrowing not expected to hit nation's AAA credit ratings: Desjardins
Canada's AAA sovereign credit ratings from two top agencies are safe from Prime Minister Mark Carney's spending promises and tax cuts, according to a new analysis by Desjardins Group. Since the federal election in April, Carney's Liberal government has announced tax-and-spend plans at a 'torrid pace,' Desjardins deputy chief economist Randall Bartlett wrote in a report published on Monday. Carney's election platform included $130 billion in new spending over the next four years. So far, economic relief measures for Canadians have included a personal income tax cut, which took effect on Canada Day, a GST break for certain new home buyers, and cancellation of the capital gains inclusion rate hike. At the same time, Ottawa plans to raise defence spending to two per cent of GDP this fiscal year, which will increase to five per cent by 2035. The government is also due to spend billions on a plan to double the number of homes built annually. 'With the myriad new spending measures and tax cuts announced since the 2025 federal election, investors are rightly asking: what would this substantial increase in borrowing mean for the Government of Canada's credit rating?,' Bartlett wrote. 'The likely substantial increase in borrowing ahead probably doesn't mean much for the Government of Canada's top‑notch credit rating, at least in the near term.' Canada holds AAA ratings on its sovereign debt from Standard & Poor's (S&P) and Moody's Ratings. Fitch Ratings reaffirmed its AA+ on Canada's long-term debt last July. The agency cut Canada from AAA in 2020, citing pandemic-related borrowing. Desjardins analyzed the methodologies used by these agencies, noting such ratings consider both Canada's debt, and its ability to service these obligations, as well as the country's rank relative to other nations. 'Canada's gross general government debt is currently middle of the pack among comparable advanced economies, and is forecast to stay there. So is net general government debt when public pension assets are removed, and it's best in class when they aren't,' Bartlett wrote. 'Meaningfully higher defence spending may erode this advantage, but not as much as it would if other countries weren't also massively expanding their defence budgets.' Carney says his government will table a budget in the fall. Last month, the Parliamentary Budget Officer estimated the deficit will be $46 billion for the 2024-2025 fiscal year. BMO Capital Markets warns Canadians should brace for a bigger figure. 'All told, it wouldn't be surprising to see the federal deficit jump towards $80 billion,' senior economist Robert Kavcic wrote in a research note last week. 'Canada's fiscal picture is getting cloudy given that the current government did not table a post-election budget, and the costed platform has been rearranged by the evolving economic outlook and shifting policy priorities,' he added. 'While the underlying theme of the platform still generally holds, the near-term fiscal projections likely won't.' Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on X @jefflagerquist. Download the Yahoo Finance app, available for Apple and Android.
Zawya
14-07-2025
- Business
- Zawya
Japan election could further hamper BOJ's drive to raise rates
TOKYO - Japan's central bank may face political pressure to keep interest rates low for longer than it wants, as opposition parties favouring tax cuts and loose monetary policy are expected to gain influence after a July 20 election. Opinion surveys suggest Prime Minister Shigeru Ishiba's coalition may lose its majority in the upper house of parliament, forcing it to court an array of smaller parties pushing for easier fiscal and monetary policy. The governing bloc led by Ishiba's Liberal Democratic Party is already a minority in the more powerful lower house, so a stalemate in both chambers could give opposition parties outsized influence in policy decisions. Ishiba has supported the Bank of Japan's policy of gradually lifting interest rates from near zero as inflation picks up in the world's fourth-biggest economy, while trying to curb the biggest government debt burden in the industrial world. But if opposition groups gain traction with their pressure on the BOJ to avoid rate hikes and for the government to cut the sales tax, that could boost bond yields and complicate the bank's efforts to normalise monetary policy, some analysts say. The BOJ declined to comment on the potential impact of the election on monetary policy. "There's a 50% chance the ruling coalition could lose its majority in the upper house, which could lead to increased debate about cutting Japan's consumption tax rate," said Daiju Aoki, chief Japan economist at UBS SuMi Trust Wealth Management. "That would push up Japan's long-term interest rates by stoking concern over the country's finances," he said. DEBT SET TO RISE Sohei Kamiya, head of the upstart right-wing party Sanseito, has criticised the BOJ for slowing its bond buying when the economy remains weak. "The Ministry of Finance and BOJ should work hand in hand in taking aggressive steps for a few years to boost domestic demand," Kamiya told a press conference this month. Another small group, the Japan Innovation Party, wants the BOJ to go slow in raising rates to restrain the cost of interest on the government's debt. Yuichiro Tamaki, head of the Democratic Party for the People, a party seen as a strong candidate to join Ishiba's coalition, has urged the BOJ to loosen, not tighten, monetary policy to keep the yen from rising and hurting the export-reliant economy. Even if the coalition keeps its majority, Ishiba may need to ditch his hawkish fiscal tilt and boost spending to cushion the economic blow from threatened U.S. tariffs and rising costs of living. "There's a good chance the government will compile an extra budget to fund another spending package to the tune of 5 to 10 trillion yen ($35 billion-$70 billion). That would push up bond yields further," said former BOJ board member Makoto Sakurai, who expects the central bank to avoid raising rates at least until March. Japan's public debt is equal to 250% of gross domestic product, far above that of Greece at 165%. The government spends nearly a quarter of its budget to finance a 1,164-trillion-yen ($7.9-trillion) debt pile, with the cost expected to rise steadily as the BOJ exits zero-interest rates. 'NEED TO BRACE' To be sure, inflation - above the BOJ's 2% target for three years - boosts nominal tax revenues, which can help the government avoid ramping up bond issuance to fund further spending. But cutting the sales tax rate, an idea Ishiba has ruled out for now, would leave a bigger hole in Japan's finances. Once a fringe idea, cutting the 10% sales tax is now among Japan's most popular economic policy proposals. In a recent poll by the Asahi newspaper 68% of voters thought a sales tax cut was the best way to cushion the blow from rising living costs, compared with 18% who preferred cash payouts. If the sales tax is on the chopping block after the election, it is the kind of vital issue that could prod Ishiba to dissolve the lower house and call a snap election - a move that would prolong political uncertainty. If Ishiba were to step down, an LDP race to replace him could revive market attention to candidates like Sanae Takaichi, an advocate of aggressive monetary easing whom Ishiba narrowly beat in the party's leadership race last year. Unlike Ishiba, who gave a quiet nod to BOJ policy normalisation, Takaichi has said it would be "stupid" for the central bank to raise rates. All this would mean the BOJ's rate hikes, already on pause due to uncertainty over U.S. tariffs, could be put on hold even longer. "We may need to brace for a long period of political uncertainty and market volatility," said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities. "That would just give the BOJ another reason to sit on the sidelines and wait for the dust to settle." ($1 = 146.8800 yen) (Reporting by Leika Kihara; Editing by William Mallard)
