Three of a kind — the Coalition’s €1bn dilemma: Shelve or roll over tax supports

Push is coming to shove on the “temporary” tax supports introduced to help the public through the cost-of-living crisis, which are due to run out at the end of this month. Adding all the sums together, it would cost north of €1 billion to roll over the three tax measures — the 9 per cent VAT rate for hospitality, the VAT cut on energy bills and the excise cut on petrol and diesel — until the end of the year.

This is not allowed for in the budget, so we can expect that the officials in the Department of Finance will not be keen on a full rolling over, particularly as the experience with the 9 per cent VAT rate for hospitality shows that temporary measures can quickly become semi-permanent.

And then there is the politics. The formidable hospitality and restaurant lobby is in full swing, though suggestions that the 9 per cent rate might be extended for dining and not accommodation look administratively tricky. How do you account for the typical two nights and one-dinner hotel offering, for example? As extending this to the end of the year would cost more than €500 million, finance officials will surely try to dig in here. But decisions have yet to be made.

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On the petrol and diesel excise cuts, political compromise may be the order of the day. Reversing the cuts in full would hike petrol prices by 20 cent a litre and diesel by 15 cent. The increases could be 22/23 cent for petrol and 17 cent for diesel if the so-called Nora levy — originally introduced to pay for national oil reserves — returns. It was suspended last year to ensure the budget carbon tax increase did not push up fuel prices but is due to return next month.

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There is no way the Government will allow this scale of increase for motorists. The question is whether to extend the excise cuts for another few months, in the hope retail fuel prices fall or agree on some kind of phasing out over time, with excise gradually returning to previous levels. The battle on all this will be intense over the next week or two.