Planned hospitality Vat cut equal to hiring 11,400 nurses or 7,800 teachers, Fiscal Council warns

"The proposed Vat rate cut for hospitality businesses will cost the equivalent, per year, as increasing the standard rate income tax bands by €3,000, hiring 11,400 nurses or recruiting an extra 7,800 teachers, the Irish Fiscal Advisory Council has warned. While the Fiscal Council, headed by economist Seamus Coffey of University College Cork, does not comment directly on individual budget measures the timing and language of the report will inevitably be seen as a blunt warning to Finance Minister Paschal Donohoe."

"The analysis puts the full year cost of reducing the Vat rate for the hospitality sector from 13.5p to 9pc at €870m. The State's budget watchdog, set up after the Crash to avoid repeating the mistakes that left the economy and public finances in dire condition, sets out the stark numbers in a working paper released effectively on the eve of next Tuesday's Budget 2026."

"The paper examines the so called "pass-through" to consumers of a number of temporary Vat reductions and restorations that have benefited the Irish hospitality and tourism industry as well as other sectors like newspaper producers since 2010. Its findings show a mixed picture, with the degree of pass-through varying significantly depending on the direction of the tax change. A 2011 Vat reduction led to a 50pc pass-through to consumer prices, the Council found, while a 2019 Vat increase resulted in an 88pc pass-through."

The Irish Fiscal Advisory Council estimates that cutting the hospitality Vat rate from 13.5% to 9% would cost approximately €870 million per year. That annual cost is equivalent to increasing the standard-rate income tax bands by €3,000, hiring 11,400 nurses, or recruiting 7,800 teachers. The Council's working paper examines the pass-through of temporary Vat changes to consumer prices across sectors since 2010. The pass-through results vary by direction of the tax change and economic conditions, with a 2011 reduction showing a 50% pass-through and a 2019 increase showing an 88% pass-through.

Read at Irish Independent