'Special' 9% hospitality Vat rate to be hiked in budget
The card entitles people to prescribed medications for a reduced fee, optical, aural, and GP services (including out of hours access) as well as limited dentistry.
The special Vat rate for hotels, restaurants and pubs is to be hiked as part of the upcoming budget.
A reduced 9% Vat rate was introduced to help support the hospitality sector during the pandemic, however Finance Minister Paschal Donohoe is now adamant that this emergency measure be reversed and is examining everything up to a full return to the 13.5% rate.
The move will be deeply unpopular with small and medium-sized businesses that are currently struggling with rising energy prices.
Some members of Fianna Fáil are also against any change to the Vat rate and demanded that it be retained at meeting of the parliamentary party meeting last night.
It comes after Mr Donohoe sharply rounded on hoteliers over price-gouging customers at a recent pre-budget meeting. He told hospitality representatives that the Government had provided strong supports for hotels in recent years which had got them through Covid-19.
He said he was therefore extremely disappointed that value for money for those looking to holiday in Ireland had become a serious issue so quickly after restrictions were lifted.
Meanwhile, a further half a million adults are set to be granted medical cards under plans to be included in Budget 2023.
The significant increase in eligibility for the medical card, which grants free access to GP and other medical services to cardholders, is a central plank of Health Minister Stephen Donnelly’s budget day plans.
Senior Government sources have said that the move would be achieved by lowering the financial threshold at which someone qualifies for the card.
At present, to qualify for a medical card, an individual's weekly income must be below a certain amount for their family size.
This ranges from €184 a week gross for a single adult and €266.50 for a couple with dependent children.
It is believed this proposal would be in addition to separate long-standing plans to extend free GP visit cards to children over the age of six.
Sources said the measure would fit with the goal of the budget to “bring down costs across the board”.
The Commission on Taxation report published yesterday recommended that the special 9% Vat rate should be increased to 13.5%.
Reacting, Mr Donohoe said he would be "very carefully considering the recommendation" and would "take it into account in the final decision that the Government will make in two weeks' time".
However, there were loud calls from the Fianna Fáil parliamentary party to maintain the reduced rate.
Cork South West TD Christopher O’Sullivan said many of his colleagues are adamant that the hospitality sector outside Dublin which is seeing energy bills soar by 300% should not be hammered by the Vat increase.
The dampening impact on consumer confidence of the cost-of-living crisis is also causing the Government to slash growth forecasts for next year, Minister Donohoe said.
The reduction in purchasing power caused by inflation and increased uncertainty and weaker external demand will also see Irish-based companies hold back on investment, he said.
“As a result, my department will be revising down its projection for modified domestic demand growth next year in the budget,” he said.
Mr Donohoe also said the surge in volatile corporation taxes will top €20bn by the end of the year.
“This is a staggering figure. To put it in context — a decade ago, receipts from the corporate sector amounted to around €4bn,” he told the Oireachtas Finance Committee.
The surge in corporate tax revenues is disproportionately concentrated among a small handful of firms. Just one of these firms leaving Ireland would be a significant blow to our tax revenues, Mr Donohoe said.
Public Expenditure Minister Michael McGrath said that of the €6.7bn budget pot, he will unveil a package of €5.7bn in spending, up €1.7bn on what was originally planned, while the remaining €1bn will go toward tax cuts.
Mr McGrath will say that total Government spending will increase to €90.3bn next year, with core spending rising to €85.8bn.
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