Donohoe announces €1.5bn in tax cuts for Budget 2026 but says figures are based on ‘a no-tariff scenario'
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Irish Examiner
43 minutes ago
- Irish Examiner
Government may delay hospitality Vat cut to mid-2026 amid budget tradeoffs
The Government is considering whether to delay a Vat rate cut for the hospitality sector until July 2026. Signals from within Government suggest there may be a delay to the rate cut, rather than introducing it at the beginning of next year. One senior Government source said delaying the Vat reduction from 13.5% to 9% was 'strongly mooted' ahead of the Summer Economic Statement. Given finance minister Paschal Donohoe's estimate that the rate cut would cost between €950m and €1bn per year, there would be significant extra funds available for other tax cuts in October's budget. The overall tax package in the October 7 budget is €1.5bn, with concerns raised earlier this week that workers could lose out due to the high cost of the VAT cut. On Tuesday, Mr Donohoe warned that if VAT cuts were introduced for the hospitality sector, there would be 'tradeoffs' and 'consequences.' While the cuts may be delayed, sources in Fine Gael said no decisions have been made ahead of the budget, with 'various options' still on the table. One Fine Gael minister said the rate cuts should be implemented on January 1, alongside other tax measures. This comes as Fianna Fáil junior minister Niall Collins pushed back on the proposal to cut VAT rates across the board, saying he would prefer targeted measures for businesses. Mr Collins questioned whether consumers would benefit from the cut, noting they did not during the previous Government's VAT reduction during the covid-19 pandemic. Speaking to RTÉ Radio, Mr Collins said the Vat cut was not a 'done deal' and that the Government is still going through the budgetary process. 'I think that we have to have targeted interventions in a number of sectors. I do recognise that the hospitality sector is under pressure, that there are some jobs within the hospitality sector that are under pressure and we need to support,' Mr Collins said. 'I would like to see more targeted measures.' He added that an 'across the board' VAT cut would not be targeted. Read More EU agrees €93bn worth of counter tariffs against the US if trade talks fail
Irish Examiner
2 hours ago
- Irish Examiner
EU agrees €93bn worth of counter tariffs against the US if trade talks fail
EU member states have agreed to introduce €93bn worth of counter tariffs against the US, if the two sides fail to reach a deal by August 1. The counter-tariff measures are set to come into effect on August 7, if a deal is not reached. Tánaiste and foreign affairs minister Simon Harris said the Government was continuing to back EU Trade Commissioner Maroš Šefčovič in his negotiations with the US. 'However, throughout the negotiations, we have been clear that while we would engage in good faith with the US, it was also necessary to prepare rebalancing measures should negotiations not be successful,' Mr Harris said. He denied the counter tariff proposals were escalatory, saying it was a 'continuation of our calm, measured preparation'. 'While we were successful in removing some key Irish sensitivities following intensive consultation with the European Commission, this package of rebalancing measures, if implemented, would have an adverse effect on European and Irish business,' Mr Harris said. However let me be clear, while we do not wish to see this list ever come into effect, the EU must prepare for all eventualities and must be enabled to negotiate with the United States from a position of strength. 'That is why it is now long past time for a deal.' The package itself is a consolidation of two separate tariff packages — one in response to US steel and aluminium valued at €21bn, while the second was compiled earlier this summer. US president Donald Trump has threatened to introduce 30% tariffs on all EU goods from August 1.
Extra.ie
2 hours ago
- Extra.ie
State spending watchdog hits out at 'poor budgeting' by Government
The State's spending watchdog has accused the Government of 'poor planning and budgeting' in its spending plans. The Irish Fiscal Advisory Council (IFAC) has repeatedly warned about the dangers of relying on windfalls from large amounts of corporation tax. On Tuesday, Minister for Finance Paschal Donohoe unveiled the Summer Economic Statement (SES), which sets out €9.4billion in spending plans for Budget 2026. On Tuesday, Minister for Finance Paschal Donohoe unveiled the Summer Economic Statement (SES), which sets out €9.4billion in spending plans for Budget 2026. Pic: Leah Farrell/ The IFAC, which was established after the financial crisis to monitor Government budgetary planning, yesterday released its analysis of the SES. It shows that despite the economy performing well, the country would have a budget deficit of almost €11billion if windfall corporation tax receipts were excluded. The SES pledged a total budgetary package of €9.4billion, an increase of €1.1billion from last year's Budget. Some €1.5billion is being committed to tax cuts, with about €1billion of this being spent on reducing the VAT rate for the hospitality sector. Pic: Shutterstock Some €1.5billion is being committed to tax cuts, with about €1billion of this being spent on reducing the VAT rate for the hospitality sector. The remaining €7.9billion will be spent on increases in spending, up 7.3% on last year. The projections are based on the unlikely scenario of no tariffs being imposed following the conclusion of negotiations between the EU and the US in the coming weeks. The SES said that if there is a 'deterioration in the tariff landscape', the Government will 'recalibrate its fiscal strategy'. But the IFAC said that this runs contrary to 'standard economic advice' against reducing the level of spending. It wrote: 'The SES states that if there is a deterioration in the tariff landscape, the Budget 2026 package would be smaller. This is exactly the opposite of standard economic advice. 'Countercyclical policy means giving more support when the economy is weak and less when it is strong.' The IFAC, which is chaired by economist Professor Séamus Coffey, wrote that overspends were 'inevitable' and estimated that spending would increase by €1billion more than planned for in the SES. The watchdog's analysis shows that spending is set to double between 2025 and 2026 and that it expected the figures outlined to increase. 'Budget 2025 had planned a €3billion increase in spending,' it said. 'Yesterday [Tuesday], this was revised up by €3.3billion, meaning the actual 2025 increase will be more than double the original plan. Based on spending data for the first six months of the year, this upward revision is likely insufficient. Analysis by the council suggests current spending is likely to be around €1billion higher than the SES figures.' The IFAC predicts 'this year's spending overrun is likely to carry into next year' and that this needs to be accounted for by the Government to avoid budgetary overruns. 'If this is not acknowledged before Budget Day, further spending overruns next year are almost inevitable,' the report said. The IFAC wrote bluntly that 'this all points to poor planning and budgeting'. The body also criticised the Government for being too 'short-term' in its economic outlook. 'The Government has yet to outline a fiscal framework. It has not set a limit for what it sees as a sustainable pace of net spending growth,' the report stated. The spending watchdog called on the Government to publish a medium-term fiscal-structural plan, which it committed to doing alongside the SES in the Programme for Government.
