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Paschal's €7bn plan as he tries to get us all to spend, spend, spend in virus wake

Minister urges shops to pass on VAT savings to customers

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Taoiseach Micheal Martin and Tanaiste Leo Varadkar before unveiling the €7bn plan

Taoiseach Micheal Martin and Tanaiste Leo Varadkar before unveiling the €7bn plan

Taoiseach Micheal Martin and Tanaiste Leo Varadkar before unveiling the €7bn plan

Finance Minister Paschal Donohoe has insisted retailers pass on the VAT cut announced in the Government's €7bn July Jobs Stimulus package.

The minister made the intervention after the surprise announcement that VAT will be cut from 23pc to 21pc on goods and services for the next six months.

"I'm asking retailers to pass on this tax cut, to reduce their prices," Mr Donohoe said.

"New spending will save jobs we have and is crucial for creating new jobs in 2021.

"I know it's a tough time for many retailers at the moment, and this big move should help with sales and jobs."

Prices

The VAT cut was a last-minute addition to the Government's economic stimulus package and is aimed at incentivising people to spend money in shops after months of Covid-19 restrictions.

However, there are concerns that retailers will increase prices and consumers will not benefit from the cut.

The last time the VAT rate was reduced for the tourism industry, hotel and other acc- ommodation prices soared.

The VAT reduction comes as new Central Statistics Office figures show household savings are at their highest levels since the economic crash, meaning people have more disposable income.

"Now is the right time to start on the path to a jobs-led sustainable recovery," the plan unveiled yesterday said.

"The July Stimulus of over €7bn will build economic confidence within public health constraints and deliver immediate effective supports to get people back to work."

Taoiseach Micheal Martin pledged yesterday that he would not increase taxes on savings in the forthcoming Budget to claw back the massive spending on the stimulus plan.

"We won't be hitting DIRT [Deposit Interest Retention Tax] or anything like that," Mr Martin said, before adding: "It's a very natural and understandable thing to do to put money away in a time of uncertainty."

Another key measure aimed at boosting consumer confidence is the expansion of the Help to Buy scheme allowing first-time buyers to claim back €30,000 on a new home worth up to €500,000.

The Cycle to Work scheme was also increased, allowing cyclists to claim up to €1,500 for electric bicycles and up to €1,250 for all other bikes.

The Government also unveiled its Stay and Spend tax rebate plan, which will allow people to claim back up to €125 on their hotel and restaurant bills over the next six months if they spend €625 in the same period.

It will allow couples to claim back €250 if they spend €1,250 on meals and accommodation before next April.

The stimulus also focused on providing supports for businesses.

These include replacing the Temporary Wage Subsidy Scheme with an Employment Wage Support Scheme that will see the State pay €205 and run until April.

The new scheme will see businesses whose turnover has fallen below 30pc receive a state subsidy of €205 a week per employee, including seasonal workers and new recruits.

It will also be available to new companies operating in industries badly affected by Covid-19.

Meanwhile, the Pandemic Unemployment Payment (PUP) will be reduced and split into three separate rates in September, but will be extended until April.

From September 17, the three rates of the payment will be:

• €203 for those who earned less than €200 before the Covid- 19 pandemic.

• €250 for those who earned between €200 and €300.

• €300 for those who earned more than €300.

All three rates will be tapered back to the standard Jobseeker's payment of €203 in April.

No new applicants will be accepted on the scheme from September.

The stimulus also features major investment in trainee and apprenticeship schemes.

Employers will be paid €3,000 for every apprentice they hire under a scheme.

They will be paid €2,000 in the first year and €1,000 in the second year if the apprentice is kept on.

The package includes a commitment to invest €200m in training and education work placement schemes.

This includes an extra 10,000 places on placement schemes available to those unemployed for more than six months.

 

Key points

Workers: The Temporary Wage Subsidy Scheme will be re-purposed into the Employment Wage Support Scheme and run until April 2021. The new scheme will see businesses whose turnover has fallen below 30pc receive a state subsidy of €205 a month per employee. This includes seasonal workers and new employees.

Unemployed: The Pandemic Unemployment Payment will be reduced and split into three  separate rates from September 17 but will be  extended until April. The new rates are:

€203 for those who earned less than €200 before the pandemic;

€250 for those who earned between €200 and €300;

€300 for those who earned more than €300.

First-time buyers: The Help to Buy scheme for first-time buyers is to be increased to allow people to claim €30,000 on the price of new homes. The expansion of the scheme means first-time buyers will be able to claim 10pc rather than 5pc of the price of a new house, capped at €500,000.

Holidaymakers: People going on staycations will be able to benefit from a first of its kind tax-back scheme, which will run from October this year until April 2021 and will apply to hotels, food and non-alcoholic drinks.

Holidaymakers and diners will have to spend up to €625 to claim back the maximum €125 tax rebate. A couple can claim €250.

Consumers: The 23pc Vat rate on goods and services will be reduced to 21pc. This should see the cost of everything from food and alcohol to clothes and motor repairs come down.

Commuters: The Cycle to Work scheme allowance will increase from €1,000 to €1,500 for electric bicycles and to €1,250 for all other bikes.

Infrastructure and community investment:

€75m for minor works for primary and secondary schools.

€113m for investment in train and bus networks.

€40m for investment in infrastructure heritage, arts, tourism and Gaeltacht, with a further €20m for the Court Service and An Garda Siochana.

The Department of Housing secured €60m for refurbishing.