End of VAT scheme a blow for struggling retailers
:: Tax back grant scheme for companies in Budget pipeline
SHOPPERS and retailers look set to lose out on a VAT cut brought in to cushion the impact of the Covid-19 pandemic.
The scheme saw a reduction in VAT from 23pc to 21pc on goods and services, which included petrol, toys, alcohol, computers and cosmetics.
Supermarket chains Lidl and Aldi were among some of the businesses to pass the 2pc tax saving directly on to their customers.
It had been hoped the reduction would be retained beyond February 28, having been introduced at the start of September.
However, the Irish Independent has learned that the scheme is unlikely to be extended amid discussions ahead of next week’s Budget.
The Government is examining a new tax-back grant scheme for businesses who have been hit by the pandemic.
Tánaiste Leo Varadkar revealed to his Fine Gael colleagues last night that Revenue officials were examining a tax-back mechanism whereby businesses would get some of the tax they had paid in recent years returned to them in the form of grant aid.
Meanwhile, Finance Minister Paschal Donohoe will draw down the €1.5bn in the State’s so-called Rainy Day Fund to boost Budget spending.
THE cut in the standard rate of VAT to 21pc is unlikely to be extended beyond the end of February under plans being discussed ahead of Tuesday’s Budget announcement.
The move will come as a blow to businesses and consumers after VAT on goods and services – including petrol, toys, alcohol, computers, consultancy, cosmetics, furniture, hardware and many other items – was reduced from 23pc in the July Stimulus to stimulate consumer demand in the Covid-hit economy.
The Government is examining a new tax back grant scheme for businesses that have been hit by the pandemic.
Tánaiste Leo Varadkar revealed to his Fine Gael colleagues last night that Revenue officials are examining a tax back mechanism where businesses would get some of the tax they have paid in recent years returned to them in the form of grant aid.
Enhancing the wage subsidy scheme for businesses whose turnover has fallen by 70pc or more is also being looked at, he told a parliamentary party meeting.
A Government source said the temporary VAT reduction which came into effect in September and is due to expire on February 28 was unlikely to be extended. The measure was introduced as a last-minute compromise in the July Stimulus after the Green Party vetoed a proposed cut in capital gains tax wanted by Fianna Fáil and Fine Gael.
Mr Varadkar also cast doubt on a cut in the 13.5pc VAT rate for the tourism and hospitality industry which the sector has been lobbying for.
He told the party meeting a low VAT rate is not much good to businesses if they have no business. Mr Varadkar said the Budget would focus on sectors mandated to stay closed or which are effectively closed as a result of Covid restrictions, including hotels, restaurants, events and live events.
Meanwhile, Finance Minister
Paschal Donohoe will draw down the €1.5bn in the State’s so called Rainy Day Fund to boost budget spending.
Sinn Féin, in their prebudget submission will propose €1.5bn in new spending on health measures, including a “robust, proactive and publicly-owned” testing and tracing service at a cost of €150m.
It comes alongside a proposal to create 1,100 extra hospital beds at a cost of €667m and an extra 100 ICU beds at a cost of €207m in 2021 with a commitment to 50 critical care beds each year for the next four years.
The party’s health spokesman David Cullinane is proposing to hire 2,500 health staff next year at a cost of €150m.
Sinn Féin’s pre-budget submission will also propose to invest €40m towards rebooting cancer care services; a reduction in the drugs payment scheme threshold from €124 to €100; medical cards for those with a terminal illness; and reducing prescription charges by 50c.
Labour will today propose a €5bn economic stimulus next year in its pre-budget submission. The party’s finance spokesman Ged Nash will outline a new short time work scheme to replace the €2.25bn employee wage subsidy scheme known as ObairGearr.
Modelled on the German Kurzarbiet scheme, it would look to save thousands of jobs but reskill and train employees at the same time.
The party wants to restore the Pandemic Unemployment Payment, increase the fuel allowance to €40 per week and extend its payment by four weeks.
Labour would also create a new home retrofit incentive to allow for tax relief for those who get energy efficiency work done to their homes.