The Government has rebuffed a proposal from the company behind One4All gift cards to introduce a scheme that it claims could deliver a €3.9 billion stimulus to retailers and hospitality businesses.
The Gift Voucher Shop wants employers to be allowed give their staff up to €2,000 of their salaries in January and February tax-free in the form of vouchers that are only redeemable in Irish shops, bars, restaurants and hotels. However, Paschal Donohoe, the Minister for Finance, on Wednesday night indicated he would not agree to the proposal.
The company commissioned a report by economist Jim Power, in which he recommends the Government expand an existing scheme, the small benefit exemption scheme, which currently allows employers to pay up to €500 to staff in vouchers in a once-a-year tax-free payment.
Pandemic’s toll
In order to help the recovery in the sectors worst hit by the pandemic – hospitality and retail – Mr Power suggested the amount payable under the scheme be quadrupled and applied to ordinary salaries, as distinct from bonuses. He also said it should be spread over two months to allow lower-paid workers get the full benefit of the proposed scheme.
The report, which was submitted in recent weeks to various government departments and opposition politicians, says that if 1.3 million workers fully availed of the scheme, it would inject €2.6 billion into the economy. Assuming a conservative 1.5 times “multiplier effect”, which takes into account how extra spending is distributed throughout the economy, Mr Power says the full stimulus would be €3.9 billion.
Tax foregone
The report says the tax foregone by the State would be €800 million but this would be partially offset by an estimated €350 million in extra VAT receipts, while, it is argued, the measure would save jobs in the businesses worst-hit by the pandemic.
Ged Nash, the Labour Party's finance spokesman, submitted a written parliamentary question to Mr Donohoe last week inquiring if he would support the scheme, but the Minister replied he had "no plans to change the small benefit exemption scheme at present". The Minister's spokesman told The Irish Times this "remains the position".
