Hints at rise in carbon tax but not property tax in EU report

The Government has hinted in a report to the European Union at possible changes in October’s budget to the carbon tax and reduced 9 per cent VAT rate for hospitality businesses, but is silent on alterations to the property tax system.

The National Reform Programme 2018, which sets out proposals for political reform in a number of areas, was completed this month and signed off by Taoiseach Leo Varadkar.

The report is required as part of the European Semester process, which co-ordinates economic policies across the EU. Under the process there is a requirement for governments to state how they will broaden their tax bases.

The report informs the EU that a “comprehensive study of all aspects of the (lower) 9 per cent VAT rate (on hotels, restaurants and hospitality) will be undertaken by the Department of Finance ahead of Budget 2019”.

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It also states that “work has also commenced on a Carbon Tax review and it is expected that this will also be completed to inform Budget 2019”.

Tourism recovery

The reduced VAT rate has been in place in the hospitality industry since 2011 and there have been calls to restore it to the normal rate, given the recovery of the tourism sector and demand for hotel rooms in Dublin and other centres.

There is no reference to property tax in the document, suggesting that any changes announced in October’s budget will not be put into effect until 2020.

The report does refer to the sugar tax, due to come into place on May 1st, as a base-broadening measure.

Referring to criticism of increases in stamp duty for non-residential property, the report rejects the suggestion that State reliance on transaction-based taxes, which was linked to the last economic crash, has risen.

“Stamp duties represent only a small proportion of Ireland’s overall tax forecast, averaging 3.25 per cent over the 2018-2021 period. The increase in rate represents a pre-emptive measure to ensure imbalances do not arise,” it states.

On Brexit, the report states Ireland will make a strong case that it will require support arising from the disturbances of Britain leaving the EU.

“Intensive work on a no-deal or worst-case outcome is also ongoing. Its focus is on the immediate regulatory and operational challenges which would result from such an outcome. It assumes a trading relationship based on the default World Trade Organisation rules, but also examines the possible effects on many other areas of concern.”

The report also refers to other reform measures such as Project Ireland 2040, Rebuilding Ireland, Sláintecare in the health sector, and the National Mitigation Plan for climate change.