A proposed tax cut for the hospitality sector could mean the Government cannot afford to cut income tax for workers, a financial journalist has warned.
All budgets involve trade offs and more money for one group, naturally, means less for another group.
Minister for Finance Paschal Donohoe has estimated the cost of returning the VAT rate for the entire hospitality sector to 9% as coming in at around €1 billion.
On Newstalk Breakfast, Irish Independent Personal Finances Editor Charles Weston said it could be difficult to implement if hotels are not included in the cut.
“If you just do pubs and restaurants and reduce the VAT for them, you could be talking about €675 million,” he said.
“But it’s all very messy.
“If, for example, you leave out hotels - what about the hotels that offer you an all in package of BnB and you might have a meal included there?
“How do you account for that?”
Finance Minister Jack Chambers and Public Expenditure Minister Paschal Donohoe. Picture by: PA Images / Alamy.com. While restaurant owners were delighted to hear the tax cut was going ahead, Mr Weston warned it might be less good news for their customers.
“If, as we’ve been hearing all week, if this goes through, that’s less money then for tax income cuts,” he said.
“That’s the way the Government has framed it anyway.”
Mr Weston described it as a “messy one”.
“There’s little enough money for income tax cuts already,” he said.
“If the money that they’re allocating for income tax cuts, if some of that is used for a VAT cut for one particular sector - that’s the hospitality sector, that’s going to be very controversial.
“That’s why they’re talking about pushing out the promise they made to restaurants to this time next year before they implement this.”
An elderly pensioner holding a leather wallet. Picture by: Alamy.com. He continued that rising wages mean that unless income tax thresholds rise, people start to pay more tax simply through fiscal drag.
“You earn a bit more but if they don’t adjust the tax bands and increasing the tax credits, if they don’t adjust those, you end up paying more tax,” he explained.
“Because the extra few bob you earn, more of it is taxed at the 40% rate.”
Main image: A bill in a restaurant. Picture by: Alamy.com.
