BUSINESSES SATISFIED IN GENERAL BUT HOSPITALITY IS EXPECTING A VAT BLOW
AS has been the consistent track record for the Coalition Government, spending increases in Budget 2023 far exceed cuts to taxation.
For next year, the overall budgetary package amounts to €6.9billion, made up of taxation reductions of €1.1billion and additional public spending of €5.8billion.
However, there is also the one-off cost-of-living package for households and businesses, which amounts to €4.1billion. That means the ratio of spending to tax cuts in Budget 2023 has reached an all-time high under Paschal Donohoe, of nine to one.
Whatever about alterations to tax bands and tax credits, which will boost take-home pay for income earners next year, there will be no reduction in the overall tax burden on the economy. The Department of Finance expects the tax take to grow by €5.4billion in 2023, not least due to the Government piling more tax pressure on businesses in hospitality and tourism.
Value Added Tax receipts are projected to increase by 5.9% next year, and excise duty receipts by 9.6%. At the end of February 2023, the temporary reduction in excise on petrol and diesel will cease, as will the reduction of VAT on electricity and gas. From the start of March, VAT for the hospitality and tourism sectors will reset from 9% to 13.5%, even as various arms of Government are paying out energy subsidies and supports to the very firms that will be called on to pay more tax.
The 9% VAT rate for hospitality and tourism enterprises was reintroduced in Budget 2021, due to Covid lockdowns having decimated trade. The reduction from the 13.5% rate was supposed to be for the November 2020 to December 2021 period, but it was extended in Budget 2022 and again in May 2022. The Department of Finance has long been determined that hotels and restaurants should collect and pay more tax, and once more the officials have got their way.
The main business novelty in Budget 2023 is the Temporary Business Energy Support Scheme (TBESS), to be administered by Revenue. The scheme, with an estimated cost of €1billion, will be backdated to September and run to February 2023 before being reviewed.
It will be open to businesses that are taxcompliant and that have experienced a significant increase in the cost of their natural gas and electricity. The TBESS will operate on a self-assessment basis, and businesses will have to register for it.
The Minister said the scheme would operate by comparing the average unit price for the relevant energy bills in 2021 and 2022. If the increase is more than 50%, the businesses would become eligible for monthly financial support equating to 40% of the increase in the bill amount or €10,000, whichever is lower.
The scheme has been designed in compliance with the EU temporary state aid framework, but the European Commission will have to give its approval before any payments can be made.
‘This is a significant intervention by the Government in the Irish economy to protect employment,’ Donohoe said. ‘We must weaken the ability of a shock to income becoming a loss of jobs. This new policy will help employers with their rising bills, and help to save their businesses.’
Public Expenditure and Reform Minister Michael McGrath also announced a €200million Ukraine Enterprise Crisis
Scheme to support firms operating in manufacturing and export sectors affected by the war in Ukraine.
One strand of the scheme will provide up to €2million in grant aid for energy-intensive companies affected by increases in gas and electricity costs. It will be administered through Enterprise
Ireland, IDA and Údarás na Gaeltachta, and eligible businesses will have to produce an energy efficiency plan to reduce their energy costs.
Separately, to assist the wider business sector with liquidity and to invest in energy efficiency, there is the €1.2billion State-backed Ukraine Credit Guarantee Scheme. This will provide low-cost working capital to SMEs, primary producers and businesses with under 500 employees, amounting to up to €1million, on a six-year term, with no collateral required for loans up to €250,000.
Also new is the Growth & Sustainability Loan Scheme, which will make up to €500million in low-cost investment loans of up to 10 years available to SMEs, including farmers and fishers and small mid-caps, with no collateral required for loans up to €500,000. A minimum of 30% of the lending volume will be targeted at environmental sustainability, according to the Department of Enterprise.
Budget 2023 has also made additional €4million in funding available to the Local Enterprise Office network to include a new grant for microenterprises for energy efficiency. Tánaiste and Enterprise Minister Leo Varadkar said the Small Firms Investment in Energy Efficiency Scheme will provide a grant to companies to encourage capital investment in projects to reduce carbon emissions.
Not so happy with Budget 2023 are manufacturers of concrete products, who will be subject to the Defective Concrete Products Levy from April 2023. Paschal Donohoe expects the new tax to raise €80million a year and surveyors estimate it will add €3,000 to €4,000 to the overall cost of an average three-bed semi.