Independents in spat on VAT

Alliance TDs ‘driving FG mad with bonkers demands’

FINANCE Minister Paschal Donohoe will continue to meet with the Independent Alliance ministers this week to settle a Budget row over the hospitality VAT break.

The Independent Alliance wants Mr Donohoe to retain the 9% VAT rate for hotels and restaurants and its TDs are digging in on the matter. However, the Irish Mail on Sunday understands that Mr Donohoe has told the Independent Alliance ministers that he intends to increase the rate to bring it near parity with other goods and services.

There is anger among Fine Gael ministers about the Independent Alliance’s stance.

‘To come in with a firm stance on VAT at this late stage, when it has such an influence on Paschal’s available fiscal space, is bonkers,’ said a Cabinet source. ‘They’re driving everybody mad.’

Mr Donohoe is keen to raise the VAT rate, in a move that would give him an extra €500m that he could funnel into social welfare hikes and income tax cuts.

Mr Donohoe has also told the ministers that if he was not to reinstate the VAT rate he would have to raise the money across ‘six or seven different areas’.

He also told Independent Alliance ministers Shane Ross, Finian McGrath, John Halligan and Kevin Boxer Moran that he would have to increase diesel prices more than he wants.

The Taoiseach announced a range of Budget plans aimed at putting more money into people’s pockets despite warnings against a giveaway budget.

At the Fine Gael Presidential Dinner at the Clayton Burlington Hotel in Dublin, Leo Varadkar gave a preview of a range of measures aimed at giving more money to middle income earners, pensioners and those on social welfare.

The most significant announced is the reduction of income tax for middle income earners.

‘People on very modest incomes, earning €40,000 or €50,000 a year, pay the highest rate of income tax. I don’t think that’s fair,’ he said.

Mr Varadkar also said he felt the self-employed were being discriminated against under the current tax rules.

Pensioners and those on social welfare can also expect to have more money in their pockets each week after Budget Day although they too will have to wait to find out how much of an increase they are getting.

The emergence on Friday of an additional €1bn in corporation tax will provide greater scope for a bigger Budget-day package.

The MoS has learned that Social Welfare payments will go up by €5 across the board in the Budget. These increases will not come into force until March 2019. The National Treatment Purchase Fund will increase by just €10m, but there is already €55m in the fund.

Fianna Fáil will claim credit for securing a 0.25 percentage point reduction in the 4.75% rate of USC applied to income between €19,000 and €70,000.

A new Affordable Housing Scheme could also see homes come on the market in Dublin for €240,000. Fianna Fáil will also claim credit for this as part of the Confidence and Supply Agreement. There will also be a two percentage point reduction in Dirt on savings and a doubling of the gambling tax to 2pc.

There will be an increase in the fuel allowance. The old age pension will be increased by at least €5, but this is likely not to be introduced until March of next year.

Children’s Minister, Katherine Zappone is also lobbying for increased childcare support for certain workers is possible, too.

Donohoe keen to raise hospitality VAT rate