The Government’s scope to announce new tax cuts in the coming budget is “narrow”, Minister for Finance Jack Chambers has said.
The new Fianna Fáil deputy leader said there would be “limited scope” for various proposals that have been floated, such as reducing VAT placed on the hospitality sector to the previous lower rate of 9 per cent.
“We’re in a process of engagement now across Government on what’s possible, and that will be ongoing for the next number of weeks,” Mr Chambers said. “So we’re not speculating or going to conclude either way on many of the tax proposals, which people will be floating over the next period,” he said.
The cut in the VAT rate for the hospitality sector from 13.5 to 9 per cent was originally made to support the industry during the recession, but was reintroduced for a period during the Covid-19 pandemic. The Restaurant Association of Ireland lobby group has been campaigning for the lower rate to be reinstated for the industry in the coming budget.
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Budget 2025 is set to be announced on October 1st, the last before the next general election as the Coalition comes towards the end of its term.
Speaking in Brussels before a meeting of euro zone finance ministers, Mr Chambers said the Government would not have much room to manoeuvre, despite speculation about a giveaway budget in advance of a general election. “We set out our summer economic statement last week and as part of that we’ve a tax package of €1.4 billion. I was very clear last week that the priority for that package will be to support low, middle income earners,” he said.
[ Summer Economic Statement: Are the days of prudence well over?Opens in new window ]
Mr Chambers, who was appointed Minister for Finance last month, said the “majority” of that available package would go towards reducing the tax burden facing workers. “That leaves scope for other measures but we haven’t yet decided where that will fall or what it will be,” he said.
“We have to make sure that the hospitality sector in particular has sustainability on its costs base, but there has been no decision taken on that in particular,” he said. Much of the funds available in the coming budget would go towards maintaining or expanding existing levels of public services, he said.
Ahead of the meeting, Paolo Gentiloni, the EU economy commissioner, said the bloc would need to ramp up discussions about how to raise funds to meet mounting demands for more spending, which he suggested could include common borrowing.
The Eurogroup meeting is expected to discuss plans for how to make the EU more competitive economically, to prevent the bloc being left behind by the United States and China.
Mr Gentiloni said long debated EU reforms to make it easier for people to invest money they had sitting in saving accounts into European businesses had faced “a lot of difficulties” in recent years, such as differences between member states.
The Italian commissioner said there had been a lack of “political will” to push forward the capital markets union reforms.
Mr Gentiloni said he thought the coming five-year term of the next European Commission would be a “better environment” to make progress on the long-stalled plans.
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