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Irish Examiner
6 hours ago
- Business
- Irish Examiner
Reducing Vat rate a blunt and costly policy instrument for hospitality
Less than a week on from its publication, one of the fundamental assumptions underpinning the summer economic statement has changed with the agreement of the EU-US trade deal. This will have implications for October's budget and a potential reduction in the overall budgetary package outlined by the Government just a week ago. Of the total budget package detailed in the summer economic statement, €1.5bn has been allocated to a "tax package". The Government identifies the narrowness of Ireland's tax base as a cause of concern in the summer economic statement, noting that income tax, corporation tax, and revenue make up the bulk of Ireland's tax base. At a time of heightened global economic uncertainty, increased tariffs for Irish exporters, a growing and ageing population, increasing demand for and pressure on services, a further narrowing of Ireland's tax base in the budget would seem at odds with the programme for government commitment to maintain a broad tax base "to guard against the need for counter-cyclical fiscal policy in the event of a downturn" and prepare for demographic change. Much of the subsequent discussion on the so-called "tax package" has been the commitment in the programme for government to support the hospitality sector through changes to Vat and its implications in terms of the space available for any income tax changes in the budget. According to the Department of Finance, a reduction in the Vat rate for the hospitality sector to 9% would cost almost €900m a year This discussion fails to look at the broader context, the impact to date of "tax packages" introduced by the previous government from 2020-2025, and the precariousness of Ireland's tax base. Looking at budgetary policy of the last government, income gaps have opened up between working households, and the gap between people and households at the bottom and middle of the income distribution and those at the top has grown. This has been driven by the skewed nature of income tax reduction choices which prioritised higher earners and provided relatively little to low income workers paying income tax at the standard rate. This was further compounded by the concentration of temporary cost-of-living measures among lower income households, supports that will fade away. The tax packages contained in those budgets are permanent, costly, and have not reached those working households who have been most impacted by rising costs. Ireland's tax base is narrow, dominated by three revenue streams, and our over exposure in terms of corporation tax is a major concern Rather than looking at how to build a broad and sustainable tax base, recent discussion has focused on the "tax package", the cost of the aforementioned Vat reduction for the hospitality sector, which would narrow Ireland's tax base further, and how much this would leave for an "income tax package" which — if modelled on previous budgetary policy — will see the income gaps between working households grow further. Softening demand Looking at Vat, it accounted for 23% of Ireland's total tax revenue last year. At present, the hospitality sector is subject to the reduced 13.5% Vat rate. The sector was subject to the lower rate of 9% from 2011 to 2018, and again from late 2020 to mid-2023 at an estimated cost of €3.6bn. The sector has identified high energy costs, softening demand, labour market challenges, increased cost of inputs, and a lack of hotel capacity as the main challenges facing the industry and the rationale for a return to the 9% VAT rate. However, a recent Department of Finance examination of the Vat reduction for the hospitality sector since 2011 concluded that the reduction was not always passed on to customers in the form of lower prices, it was highly regressive in that it benefitted higher income households more than lower income households, and it was very costly. It is clear that parts of the hospitality sector are under significant pressure, but other parts of it are doing very well Reducing the Vat rate is a very blunt and costly policy instrument. It will not lower energy costs, it will not increase demand, nor will it address the challenge of full employment or produce more hotel capacity — the very issues that the sector itself has identified as major challenges. The Government and the sector must look at other available sustainable measures to support the industry, including measures used in other EU member states to support hospitality and tourism. Calls for new tax breaks, or the return of old ones, are a feature of most periods of economic and social recovery. However, their provision involves great cost to the State and the unequal allocation of these resources to small groups of beneficiaries. Few of these initiatives have proven to be worthwhile in the past — in particular the opportunity cost of using the revenue in a better way is frequently overlooked. As the first of the kites are flown in advance of Budget 2026, the Government should turn its attention to those who have been most impacted by persistent rising prices, and use the resources available to ensure that vulnerable households are protected and supported through adequate social welfare rates, and that growing income gaps between working households are closed. It must deliver on the commitment to progressive budgets and build a broad and sustainable revenue base that can meet the needs of a growing and ageing population This requires developing progressive policies and measures in a fair taxation system, and working with the hospitality sector to identify sustainable ways to fund the maintenance of the hospitality and tourism industry. A reduction in Vat for the hospitality sector is costly and it won't address the challenges the sector faces. It didn't address these core issues in the 124 months that it was applied between 2011 and 2023, and there is no evidence to suggest that it will do so if applied again in Budget 2026. Michelle Murphy is a research and policy analyst at Social Justice Ireland
Filipino Times
a day ago
- Business
- Filipino Times
Senate to probe online gambling as senators push for total ban
The Senate is poised to launch an inquiry into the controversial surge of online gambling in the country, as several lawmakers push for a total ban citing its growing social and economic toll. In a privilege speech, Senator Juan Miguel 'Migz' Zubiri raised alarm over the rising number of Filipinos falling into gambling addiction—an issue he said was notably absent from President Ferdinand Marcos Jr.'s State of the Nation Address. Zubiri described online gambling as an 'epidemic' that has led to financial ruin and even loss of lives, particularly among vulnerable individuals already burdened by economic hardship. 'Mr. President, please give us guidance on how we can stop this epidemic from engulfing our nation and our people,' Zubiri urged. Senator Erwin Tulfo, chairperson of the Senate committee on games and amusement, announced that a hearing will be held next week to look into the matter. He backed Zubiri's call for a complete ban and said the committee would gather input from various sectors, including relevant government agencies and lawmakers. 'We will request a cost-benefit analysis from agencies such as the Department of Finance and PAGCOR to evaluate the lost revenues, employment implications, and social costs,' Tulfo said. Senator Ronald 'Bato' Dela Rosa, vice chair of the committee, said the Senate's position should be firmly rooted in data to strengthen its policy direction. Several other senators have also expressed support for stricter regulations, if not an outright ban, to address the growing threat posed by online gambling.
GMA Network
2 days ago
- Business
- GMA Network
DOF, DEPDev, DILG ink joint investment facilitation accord
The Department of Finance, the Department of Economy, Planning, and Development, and the Department of the Interior and Local Government have formed an inter-agency partnership to streamline and harmonize investment facilitation efforts in the country. In a statement on Wednesday, the Board of Investments said the three executive departments signed the Joint Memorandum Circular institutionalizing the Investment Facilitation Network (INFA-Net). The JMC was signed by Finance Secretary Ralph Recto, Economic Planning Secretary Arsenio Balisacan, and Interior Secretary Juanito Victor Remulla. The BOI said the inter-agency accord 'operationalizes whole-of-government collaboration in facilitating investments' in line with major policy directives, including Executive Order No. 18 on Green Lanes for Strategic Investments, EO No. 32 on streamlining permits for telecommunications and internet infrastructure, and EO No. 59 on streamlining permits for infrastructure flagship projects. The JMC, likewise, reinforces the agencies' collective commitment to simplify processes, strengthen coordination, and enhance support for strategic and high-impact investments in the Philippines, according to the investments promotion agency. The BOI said the joint circular aligns with President Ferdinand 'Bongbong' Marcos Jr.'s mandate on fostering a more agile, investor-focused government that acts in unison to deliver sustainable and inclusive economic growth. The agency said the accord reflects the government agencies' shared commitment to break down barriers, reduce red tape, and to send a strong message that the Philippines is open for business. —AOL, GMA Integrated News
RTÉ News
4 days ago
- Business
- RTÉ News
GDP shrank by 1% in Q2, preliminary CSO estimate shows
A preliminary estimate from the Central Statistics Office shows that gross domestic product fell 1% in the second quarter from the previous three months but was 12.5% higher than the same time a year ago. The Department of Finance prefers to rely on other data and caution against using GDP to gauge economic growth, as the latter is routinely distorted by foreign multinationals. But GDP is still used to calculate Ireland's share of activity across the euro zone. Irish GDP jumped 7.4% quarter-on-quarter in the first three months of the year and 20% year-on-year due to a surge in pharmaceutical exports to the US ahead of threatened tariffs, inflating the average growth rate across the euro zone. Today's preliminary results are subject to revisions in the Quarterly National Accounts release, which will be published in early September when additional data sources are available to the CSO.
Irish Times
4 days ago
- Business
- Irish Times
Spending on infrastructure makes sense, cutting VAT on hospitality is quite mad
Looking at the performance of the economy over the last 18 months, things look pretty good, as long as you aren't looking for somewhere to live. On to an already buoyant economy, last year's election budget ploughed in more money, equivalent to more than 1 per cent of national income. With full employment, this served to further drive up domestic demand, and also house prices. It hasn't made us much better off, even if it proved popular and garnered a few votes. As election budgets go, it could have been worse. The election budget of 1977 was the biggest culprit in the economic misery of the 1980s, and the election budget of 2007 pushed the economy and house prices to new heights, leaving it even further to fall in the ensuing financial crisis. By these standards last year's election splurge, while ill-conceived, was much less damaging. This year, with no election in sight, it should be time for wiser counsels to prevail in government. While we are seeing continuing growth in the economy, the Department of Finance provides a much more sombre assessment of what is to come due to US president Donald Trump 's wrecking ball. READ MORE Tariffs and a possible trade war would directly affect Ireland, with possibly more serious consequences stemming from the damage done to the wider European Union economy. While this downbeat assessment calls for fiscal caution, instead of heeding their own advice, the Government plans to increase expenditure next year by more than 7 per cent, while national income may rise by 5 per cent. This might be acceptable if they also planned a big increase in taxes , to avoid stimulating an already fully employed economy. However, without tax increases it will add to inflationary pressures. [ What did the summer economic statement really tell us about Budget 2026? Opens in new window ] The Government also, correctly, has highlighted the huge deficit in infrastructure in Ireland stemming from the economic success of the last decade. In countries such as Germany, Italy and Greece, more older people die each year, vacating their homes, than new young households are formed. As a result, these countries don't need a big increase in housing or in related infrastructure. In contrast, with our rapidly growing population, we need to invest in more housing, water and energy, as being provided now in the updated National Development Plan (NDP). [ We need to confront the reality that the housing shortage can't be solved Opens in new window ] While the Government has the money to spend on building more infrastructure, this will work only if a range of other complementary policies are implemented. Firstly, while spending money on infrastructure makes sense, in a fully employed economy we need to redirect resources from other sectors to building and construction. For example, the plan to cut VAT on catering and accommodation is quite mad. The latest data shows that that sector is booming. Instead we need to free up resources for new building by spending less in other economic sectors. In sectors that are already thriving, it could make more sense to raise taxes than to lower them, to encourage redirection of labour to our most urgent problem, housing . David McWilliams on how 'big incentives' to build could save Dublin city Listen | 36:51 The NDP sensibly provides funding to build new wires to link homes and businesses with electricity generation. There is also funding for a long overdue metro for Dublin , and to bring water from the Shannon to Dublin to tackle the knife-edge water supply in the capital. However, these projects will get under way only if the planning and regulatory systems are dramatically reformed. It has already taken five years for planners to consider a verdict on the metro. Countries such as Spain would have built the metro in that time, instead of merely scrutinising the plans. The North-South electricity interconnector was announced 20 years ago, while planning delays on both sides of the Border mean it will be 2032 before it finally happens. Once started, the actual construction will just take months to complete, not the decades spent in planning. The need to pipe water from the Shannon to Dublin was established over a decade ago, yet it could be many more years before it is delivered under the present planning system. In the 19th century, specific legislation was enacted to build our railway system. As Michael McDowell has suggested, a similar legislative approach should be taken today to developing key infrastructure. [ There is a way to unblock Ireland's infrastructural logjam Opens in new window ] We need to enact a specific legal mandate, in the overriding national interest, to drive forward critical projects and avoid the endless round of planning applications, appeals and judicial reviews. Had we done that for the metro, it would have been finished a decade ago. But unless the planning system is reformed, I'm unlikely during my lifetime to ride the metro or drink Shannon water from my tap.
