‘City tax’ suggested after hotels fail to pass on Vat savings

The Government is to be advised to consider introducing a city tax after large hotels failed to pass on lower Vat rate benefits to customers, write Juno McEnroe, Stephen Rogers and Elaine Loughlin .

A special budget report has also suggested sugar tax-like levies should be considered in sectors to reduce Ireland’s carbon emissions and therefore avoid hefty EU fines. The measures are recommended in the Oireachtas Budgetary Oversight Committee draft report which will be published this week.

Ahead of the budget this year the committee looked at everything from corporation tax, to housing supports, the Government’s fiscal space and existing tax regimes.

One conclusion notes the lowered Vat rate of 9% for the hospitality sector is not benefiting customers.

“The committee notes with concern that there is limited evidence that large urban hotels are passing on the benefits of the Vat reduction to its customers, which goes against the original intent of this measure,” it said.

A review of the measure is proposed and the committee recommends “the department review the Vat on Tourism measure with a view to possibly implementing other tax measures to target profit-taking in some regions, for example a city tax,” the report seen by the Irish Examiner says.

Finance Minister Paschal Donohoe says he will make a decision on the special Vat rate during next week’s budget.

Outgoing Siptu president Jack O’Connor last night also backed scrapping the special Vat rate. In a speech in Cork at the trade union’s conference, he said: “There is absolutely no justification to go on gifting bad employers in the hospitality sector, a direct subsidy of €500m from the taxpayer through concessionary Vat rates which would build more than 2,500 local authority houses.

“They won’t even go into the joint labour committees to negotiate a living wage for their employees, who are among the lowest paid in the country. At the very least such a generous subvention, at the expense of the taxpayers, should be accompanied by a conditional requirement to act in a socially responsible way.”

Elsewhere, the Budget report suggests a vacant site tax for properties be introduced next week and a special sugar, tax-like levy to reduce carbon emissions.

Opposition parties will also launch their own budget plans, including Sinn Féin today, Labour tomorrow as well as Fianna Fáil and Solidarity-People Before Profit on Thursday.

Children’s Minister Katherine Zappone is pushing for the budget to include more childcare supports.

“I would be looking for some increased investment in childcare, I am fully aware of the fact that there is a limitation in relation to the amount of resources that are available but I know that this is a primary commitment of government in order to build the childcare sector so that it is more affordable for families.”

This article first appeared in the Irish Examiner

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