Dáil Éireann Debate, Tuesday - 23 January 2024
218. Deputy Niamh Smyth asked the Minister for Finance to review an article (detail supplied); if he will outline what his Department is doing on this matter to help prevent closures; and if he will make a statement on the matter. [2846/24]
Amharc ar fhreagraThe article referred to by the Deputy outlines recent comments by the Tánaiste in the context of a number of business closures in the hospitality sector over the past six months. In particular the Tánaiste made reference to the 9% VAT rate for hospitality and tourism sector and the Tax Debt Warehousing Scheme.
The 9% VAT rate for hospitality and tourism sector was introduced on a temporary basis on 1 November 2020 in recognition of the fact that these sectors were among those most impacted by the public health restrictions during the pandemic. The economic rationale for a VAT rate reduction at that time was to lower consumer prices, encouraging higher demand, more output and an increase in employment.
However, the reduced rate had an estimated cost to the Exchequer of €1.2 billion by the time the rate reverted to 13.5% on 31 August 2023. The Government decided to revert to the 13.5% rate following an economic assessment carried out by my Department which demonstrated that the economy had rebounded strongly from the pandemic and that economic activity was now above pre-pandemic levels. Furthermore, the reduced rate was noted to be both regressive and very costly, and this cost represented a transfer from taxpayers to the sectors concerned. Therefore, I do not currently have plans to reinstate the VAT rate to 9% for the hospitality and tourism sector.
The Tax Debt Warehousing Scheme has offered valuable and practical liquidity support to businesses during the COVID pandemic and continues to support businesses as they recover from the impacts of the pandemic and the cost of living crisis. It has assisted businesses with their cash-flow during difficult trading periods, preventing business failure.
Introduced in May 2020, the scheme allowed businesses to temporarily defer VAT and Employer PAYE, certain self-assessed income tax liabilities, and Temporary Wage Subsidy Scheme and Employment Wage Subsidy Scheme overpayments on an interest-free basis for an extended period of time after which a 3% interest rate applies until the debt is either repaid or the customer otherwise exits the warehouse.
A significant extension to the scheme, announced in October 2022, means that businesses have until 1 May 2024 to make arrangements to repay their warehoused debt. In advance of this deadline, Revenue will engage with all customers with debt in the warehouse in advance of 1 May to discuss their payment options and agree a tailored phased payment arrangement in respect of their warehoused debt based on their individual circumstances.
The overall warehoused debt has decreased substantially since January 2022 when almost €3 billion was warehoused for over 100,000 customers. As of 15 January 2024, Revenue had advised that a total of €1.747 billion was warehoused for 57,703 taxpayers, whereby 70% had outstanding liabilities of less than €5,000. With respect to the Accommodation and Food Service sector, a total of €268 million was warehoused by 5,600 taxpayers, and 1,400 (25%) of these had warehoused debts of less than €100. A further 700 (13%) had warehoused debts between €101 and €1,000 and 950 (17%) had warehoused debts between €1,001 and €5,000.
Revenue has advised me that their approach will be flexible in relation to the agreement of payment plans for warehoused debt. Where there is meaningful and proactive engagement, Revenue will work with businesses and give them every possible support in managing the payment of their warehoused debt over a timeline that suits the individual circumstances and repayment capacity of the business so that they can secure their viability into the future.
However, this flexibility is subject to the key requirement that current liabilities are filed and paid on time. Where taxpayers are finding it difficult to meet their current tax payment obligations the advice remains, as has always been the case, to engage with Revenue as soon as such difficulties start to arise so that an agreed solution can be found.
That said, I have engaged with Revenue in relation to the scheme and asked them to examine where further flexibility might be given to businesses. This work is underway by Revenue and my department and I hope to make a further announcement soon.
This Government is acutely aware of the ongoing cost challenges faced by businesses and has worked to support businesses through the COVID-19 pandemic and more recent challenging times with a wide range of measures for firms of all sizes, but particularly small and medium enterprises. These measures include the wage subsidy scheme, Restart Grants, commercial rates waivers, the extension of the 9% VAT rate, warehousing of tax liabilities, Small Business Assistance Scheme for COVID (SBASC); the Temporary Business Energy Support Scheme (TBESS); and the Ukraine Enterprise Crisis Scheme. These measures were designed to provide vital liquidity support to businesses and have assisted in preventing business failure during difficult trading periods.
Budget 2024 also allocated €257 million to the introduction of the Increased Cost of Business (ICOB) grant, which aims to provide financial support to small and medium sized businesses who operate from a rateable premises. In addition, the Business Users Support Scheme for Kerosene (BUSSK), launched in September 2023, provides assistance to businesses impacted by significant increases in the cost of kerosene heating oil.
Broader supports for SMEs which were announced in Budget 2024 include the extension of the 9% VAT rate on gas and electricity from end-October 2023 to end-October 2024. Furthermore, the temporary excise rate reductions applying to auto diesel, petrol and marked gas oil were due to expire at end-October 2023 and were also extended until end-March 2024.
