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Irish Times
2 days ago
- Business
- Irish Times
Swings and roundabouts: hospitality VAT reduction means little or no income tax cuts in budget
Budget season kicks off earlier these days and the holding of the National Economic Dialogue (NED) this week – where interest groups put their case - has sounded the starting gun ahead of October's package. Over recent years governments have favoured using scarce resources for extra spending over lower taxes. And this is set to continue. This means less wherewithal for tax cuts – and here the promised return of the VAT rate for the hospitality sector to 9 per cent looms large. Costing over €750 million a year, it would eat up most of the spare cash for tax reductions. And this will be a big political issue. Because the trade off for this is likely to be much less by way of an income tax package for households. READ MORE The VAT move would leave less cash for what are referred to as income tax 'cuts' – but are really adjustments to the income tax system to take account of inflation. If income tax bands and credits are not adjusted for inflation each year, then taxpayers end up seeing a bit more of their income taken in tax – for example with due to a higher proportion of their income being payable at the higher 40 per cent rate. It is what is called 'fiscal drag' in the jargon and is one of the most powerful hidden tax increases available to any government. Just by doing nothing, the tax burden creeps higher. [ Earning a decent income but still scraping by? Your situation may be about to get worse Opens in new window ] Central Bank researchers found that the average income tax rate on all incomes increased from 24 per cent in 2021 to 24.9 per cent last year in 2023. Much of this is due to more people having higher paid jobs but, according to the bank, fiscal drag – the lack of full indexation of the income tax system for inflation is also factor. Some tax relief has been given in recent budgets, but not always enough to take account of wage inflation. And, as things stand, this may continue into 2026. The mood music is interesting. At the NED, Tánaiste Simon Harris spoke of the " solemn commitment' the coalition has given to reduce the hospitality rate back to 9 per cent. The lower rate had applied from 2011 to 2019, when it was increased back to 13.5 per cent. The rate was then cut for all hospitality business on November 1st, 2020 in response to the challenges faced by these sectors during the Covid-19 pandemic. Bobby Healy on why Manna drone delivery could be the 'biggest technology company in the world for its space' Listen | 67:08 The expiry date was extended a few times, but the rate finally returned to 13.5 per cent on September 1st, 2023. Department of Finance officials finally thought they had won the battle – but then the general election came along and a big lobbying campaign from the sector. The subsequent Programme for Government said: 'The Government will bring forward measures to support SMEs (small and medium enterprises), in particular the retail and hospitality sectors, acknowledging the increased cost pressures on these sectors and this will entail changes to VAT, PRSI and other measures.' [ Income tax, USC and rent tax credits: What budget changes are now in effect for 2025? Opens in new window ] While the return to 9 per cent was not mentioned specifically, we were told that the two big parties had agreed that the rate would be returned to this level for 'food-based hospitality'. This means that cafes and restaurants would get the lower rate, but hotels would not – at least in relation to their accommodation services. Splitting in this way may not be easy – the Revenue Commissioners, according to previous Dáil debates, cautioned about 'administrative and operational difficulties'. What happens, for example, to a small Bed & Breakfast which charges one amount for an overnight stay and 'the full Irish?' How is the VAT rate apportioned? Nonetheless, according to Harris, the die is cast. The problem is that even restricting the cut to food-based hospitality will be costly and take up the vast bulk of any likely tax package. Food-based hospitality may be main VAT beneficiary. Department of Finance officials estimated last year that the annual cost of cutting the 13.5 per cent rate to 9 per cent was €764 million, while restricting the cost to food-based items would cost €545 million. The Department, wanting to stop the return, warned against it in last year's pre-budget advisory papers , saying it would represent an " enormous fiscal transfer of taxpayer's money to the sector which the evidence available at present does not support.' Apart from the cost, the Department said that recovery in consumer spending should benefit the sector, where employment had already returned to above pre-pandemic levels. Ireland's VAT rate was not out of line, they argued, as '14 EU countries have a VAT rate of 12 per cent or higher on food services'. The sector's case is also well known – its representatives point to a large number of closures and the financial pressure on SMEs from official measures including a rising minimum wage, and – from next year – pensions auto enrolment, though some extra impositions have been delayed. But the political choices for the Government are stark enough. The total package for reducing tax in the budget may not exceed €1 billion by much, if at all. The VAT package would thus consume a significant amount of this. Other SMEs may wonder why they are being left out. And households may see a very restrained income tax package, which is unlikely to keep pace with wage inflation. As Minister for Finance Pachal Donohoe said somewhat delphically at the NED: 'If we decide that we are going to make a particular set of decisions and investments, that means there are other things that we will not do.' With uncertainties rising, Donohoe and Minister for Public Expenditure Jack Chambers have both underlined the need for caution. [ Some 1.1 million earners in Ireland do not pay income tax or USC, tax institute claims Opens in new window ] They are likely to spell out to colleagues the trade-offs from the VAT cut, particularly in terms of scope for income tax measures. Trade-offs do not imply that a particular policy is " right or wrong' but focus on what is called the opportunity cost – the price of not being able to use the money elsewhere. The VAT cut is unlikely to provide much to consumers, bar perhaps holding down the rate of inflation they face while eating and drinking out. On the flip side, it will limit the cash for adjustments in income tax bands and credits at a time when many budgets of lower and middle income households are tight. Fiscal drag will take its toll. And households will also feel the pinch from the ending of the once-off universal supports in energy credits and double child benefit - assuming that the Government holds to its indications that these will not be repeated. It is impossible to know how the world will look when the budget is presented in October. But whatever happens the first budget of the new administration, coming after last year's pre-budget giveaway, is going to be far from easy to agree on. Prepare for summer sparks in the Cabinet.
Irish Daily Mirror
5 days ago
- Business
- Irish Daily Mirror
Tough Budget 2026 decisions ahead with tax cuts for workers on chopping block
Finance Minister Paschal Donohoe and Public Expenditure Minister Jack Chambers have warned that tough decisions will need to be made during the Budget 2026 process. It came amid indications that a reduced VAT rate for hospitality will take precedence over tax cuts for workers. Tánaiste Simon Harris, meanwhile, warned that there is a "dark cloud on the horizon", and suggested US tariffs could impact budget decisions. The National Economic Dialogue was held in Dublin Castle on Monday, marking the start of the budgetary process. It brought together stakeholders and senior Government ministers to discuss Budget 2026, which is due to be unveiled in October. It comes ahead of the publication of the Summer Economic Statement next month. This sets the parameters of the budget and how much money will be allocated. A new National Development Plan will also be unveiled by Minister Chambers next month. Government sources told the Irish Mirror that Budget 2026 will be "much different" to the generous budgets that have been the norm in recent years. They warned that it will be much tighter given concerns about the ongoing uncertainty over US President Donald Trump's tariff regime. It also comes amid a backdrop of concern over the increasing public spending. Speaking at the NED, Minister Donohoe stated that there will have to be a "safe and sensible" budget. He also indicated that reducing the VAT rate for hospitality from 13.5 per cent to 9 per cent could take precedence over tax cuts for workers. He said: "We made it very clear in the general election that choices have to be made and choices have to be made in how we use the country's money. "There are commitments that I know all parties and Government are committed to delivering from the VAT perspective. "But as we make decisions in relation to that, that means there are other things that we can't do. "I am confident that if we are in a position of stability within our public finances in the time ahead, the commitments that we have laid out in the Programme for Government that we can deliver them. "But I think and I know that our first priority leading up to this budget is to look at how we can support jobs, invest in infrastructure and keep our public finances safe. "Decisions always have to be made. Minister Chambers is in the middle of an enormously difficult process with regard to the National Development Plan, where the demands that he has to manage are always ahead of the resources that are available. "The same applies to taxation. If we decide that we are going to make a particular set of decisions and investments in tax, that means there are other things that we will not do." When it was put to Minister Donohoe that the priority in Budget 2026 will be on VAT and hospitality rather than on tax cuts for workers, the Fine Gael TD said that the VAT rate was a "shared priority across Government". He said there is a need to "invest in our future" and "keep and grow jobs in Ireland" as he noted there had been "big changes to the cost of doing business" for those in the hospitality sector. The Tánaiste, meanwhile, said the National Economic Dialogue on Monday marked 23 days until the end of Trump's 90-day tariff pause and what Mr Harris described as a "very high level of tariffs". He warned that the Summer Economic Statement and indeed the budget "will be framed with the best possible information available to us at the time in terms of any economic challenge caused by trade and tariffs". He argued that the final tariffs are still unknown and pharmaceuticals could still be hit. Mr Harris added: "What is absolutely clear, though, is you would want to continue a budgetary strategy in October that is sensible in planning for a variety of eventualities." When asked about the prospect of tax cuts for workers being shelved, Mr Harris said no decision had been made, but the Government made "very clear and specific commitments in certain areas, and those commitments have to be paid for." This included, he said, reduced VAT rates for hospitality. He added: "The country's in a healthy economic space. That'll be one of the messages of the National Economic Dialogue, but with dark clouds on the horizon. Therefore, we have to manage that situation."
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Business Standard
09-06-2025
- Sport
- Business Standard
NED vs IND FIH Pro League 2025 LIVE UPDATES: India 1-2 Netherlands in 2nd half
NED vs IND FIH Pro League 2025 LIVE: Centurion Abhishek breaks the deadlock on the day as India go ahead in the 20th minute of the tie. The Dutch have equalised just 4 minutes later to make it 1-1 Shashwat Nishant New Delhi 7:03 PM NED vs IND FIH Pro League LIVE UPDATES: 2nd half begins! The 2nd half begins as the Dutch begin the final half an hour on the day. All to play for with the score at 1-1. 6:52 PM NED vs IND FIH Pro League LIVE UPDATES: All square at half-time! Both teams go into the dressing room with the score at 1-1 after the first half. All to play for still. 6:51 PM NED vs IND FIH Pro League LIVE UPDATES: Abhishek limping off now! Abhishek is in discomfort and is carried off the pitch now. Just over 1 minute left in the 1st half. 6:47 PM NED vs IND FIH Pro League LIVE UPDATES: Jugraj hit in the face! Jugraj is bleeding as he gets struck with the stick. An unintentional hit but game stops for now. 6:41 PM NED vs IND FIH Pro League LIVE UPDATES: Van Dam equalises for the Dutch! Van Dam gets the equaliser for Netherlands as he taps in the assist from his skipper to make it 1-1 in the 24th minute. 6:36 PM NED vs IND FIH Pro League LIVE UPDATES: Abhishek breaks the deadlock! Abhishek gets the opening goal with a power hit from close range into the roof of the net. 6:32 PM NED vs IND FIH Pro League LIVE UPDATES: 2nd quarter begins! The 2nd quarter begins with India kicking it off. 6:25 PM NED vs IND FIH Pro League LIVE UPDATES: Disruptive play so far! The play so far has been interuppted with small fouls with both sides getting free hits in the middle of the pitch. Both teams not giving too much space to each other so far.
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Business Standard
09-06-2025
- Sport
- Business Standard
NED vs IND FIH Pro League 2025 LIVE UPDATES: India 1-1 Netherlands in 1st half
NED vs IND FIH Pro League 2025 LIVE: Centurion Abhishek breaks the deadlock on the day as India go ahead in the 20th minute of the tie. NED vs IND FIH Pro League 2025 LIVE: The Indian men's hockey team take on the Netherlands once again in the European leg of the FIH Pro League today, aiming to bounce back after a close defeat in their opening match. The first quarter ended 0-0 with both sides getting half chances but not able to convert them into the breakthrough. Harmanpreet's men did however, look aggressive on the attack with Abhishek getting a shot from outside the box just wide of the goal. In Saturday's fixture, India started on a strong note, with captain Harmanpreet Singh converting a penalty corner to give his side a 1-0 lead. However, the reigning Olympic champions Netherlands mounted a determined comeback. Thijs van Dam emerged as the match-winner for the Dutch, scoring twice, including the decisive goal in the 58th minute, to hand India a 2-1 loss. Although the result didn't go in their favor, the Indian squad showed positive signs, especially during the early phases of the game. With seven matches remaining in the tournament, the team has a promising opportunity to improve their standing. Currently placed fourth with 15 points, India will be looking to capitalize on Monday's encounter to get back on track. The upcoming match offers a key chance for both redemption and momentum as the tournament progresses. Netherlands squad: Boris Aardenburg, Lars Balk, Teun Beins, Koen Bijen, Justen Blok, Menno Boeren, Timo Boers, Daan Bonhof, Hidde Brink, Thierry Brinkman, Miles Bukkens, Boris Burkhardt, Jorrit Croon, Max de Bie, Jonas de Geus, Joep de Mol, Derck de Vilder, Luke Dommershuijzen, Tjep Hoedemakers, Olivier Hortensius, David Huussen, Guus Jansen, Jip Janssen, Tim Knapper, Derk Meijer, Floris Middendorp, Terrance Pieters, Pepijn Reijenga, Tijmen Reijenga, Sheldon Schouten, Duco Telgenkamp, Joep Troost, Jasper Tukkers, Bram van Battum, Thijs van Dam, Pepijn van der Heijden, Casper van der Veen, Steijn van Heijningen, Lucas Veen, Maurits Visser, Floris Wortelboer Netherlands vs India FIH Pro League 2025 Live: Start time The Netherlands vs India FIH Pro League match on 9 June will begin at 6:00 PM IST. Netherlands vs India FIH Pro League 2025 Live telecast: The match on 9 June will be telecast live on the Star Sports Network in India. Netherlands vs India FIH Pro League 2025 Live streaming: The match will be streamed live on the JioHotstar apps and websites in India. Stay tuned here for all the live updates of the Netherlands vs India FIH Pro League 2025 match. 6:41 PM NED vs IND FIH Pro League LIVE UPDATES: Van Dam equalises for the Dutch! Van Dam gets the equaliser for Netherlands as he taps in the assist from his skipper to make it 1-1 in the 24th minute. 6:36 PM NED vs IND FIH Pro League LIVE UPDATES: Abhishek breaks the deadlock! Abhishek gets the opening goal with a power hit from close range into the roof of the net. 6:32 PM NED vs IND FIH Pro League LIVE UPDATES: 2nd quarter begins! The 2nd quarter begins with India kicking it off. 6:29 PM NED vs IND FIH Pro League LIVE UPDATES: All square after the first 15! The 1st quarter ends at 0-0 with both sides getting half chances but not able to convert it into a breakthrough 6:25 PM NED vs IND FIH Pro League LIVE UPDATES: Disruptive play so far! The play so far has been interuppted with small fouls with both sides getting free hits in the middle of the pitch. Both teams not giving too much space to each other so far. 6:19 PM NED vs IND FIH Pro League LIVE UPDATES: Pieters misses a chance! Pieters deflection off the shot from outside the box goes wide of the goal. Both sides getting chances now. 6:18 PM NED vs IND FIH Pro League LIVE UPDATES: Abhishek shoots it just wide! The centurion Abhishek tried to shoot from outside the penalty area and is just wide from the goal. 6:17 PM NED vs IND FIH Pro League LIVE UPDATES: India slowing down the attack! India are passing the ball around and looking for gaps patiently for now. 6:13 PM NED vs IND FIH Pro League LIVE UPDATES: Action begins! Netherlands kick off the tie with India attacking from left to right in the 1st quarter. 6:08 PM NED vs IND FIH Pro League LIVE UPDATES: National anthems underway! The national anthems have begun with both teams about to start the tie. 5:47 PM NED vs IND FIH Pro League LIVE UPDATES: India standings! India are currently placed on 4th spot with 15 points from 9 games so far. A win today could see them jump to the top spot of the table with Netherlands on 17 points for now. 5:36 PM NED vs IND FIH Pro League LIVE UPDATES: Action to begin soon! We are less than half an hour away from the action to begin as the anticipation rises ahead of a rematch between the two sides today. Crucial points in store for the winner as well. 5:13 PM NED vs IND FIH Pro League LIVE UPDATES: WC qualification on the line! With seven matches still remaining in the tournament, India holds the fourth spot on the points table with 15 points. With qualification for the FIH Hockey World Cup 2026 on the line, the team will be determined to perform strongly in the upcoming games and secure as many points as possible against tough competition.
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Business Standard
07-06-2025
- Sport
- Business Standard
NED vs IND FIH Pro League 2025 LIVE UPDATES: India eye winning start in Europe; kickoff at 7:30 PM
NED vs IND FIH Pro League 2025 Updates: Harmanpreet Singh and company will try to improve their standing on the points table with a win over the Netherlands. 6:30 PM India vs Netherlands Hockey LIVE UPDATES: Welcome to the live blog Welcome to the live blog of the FIH Pro League 2025 match between India and the Netherlands. This is Men in Blues' first match in the European leg, and they will have the chance to secure the position at the top of the table with a win over the hosts today. But can Harmanpreet and his men pull this off? Stay tuned to find out. Connect with us on WhatsApp
