If you have ever wanted to know how the Department of Finance thinks, a line in last year’s pre-budget advisory documents from the Department to the Cabinet should be mandatory reading.
Talking about proposals to cut VAT for the hospitality sector from the current rate of 13.5% down to 9%, the Department dropped this corker of a quote:
“The cost is very significant. For instance the cost of a further temporary VAT reduction to 9% for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 million. Therefore this would constitute an enormous fiscal transfer of taxpayer’s money to the sector which the evidence available at present does not support.”
Consider the sentence I have highlighted in bold: What the department is saying is that to cut taxes – IE simply to collect fewer euros in tax from the public and the businesses they frequent – would represent “a transfer of taxpayer’s money”.
But of course, that’s entirely false: No money is being transferred, in a VAT cut, from one taxpayer to another. It is simply not being transferred to the state. The whole point of the VAT cut is to reduce the price of food in restaurants by about 4.5%, thus reducing prices and helping more families to enjoy a meal out. And also, ideally, helping businesses by making them more attractive to customers. The only loser in this is the Department of Finance, which gets fewer euros in tax.
We have essentially been briefed this week by Ministers that if the tax cut for the restaurants goes through, then that’s it for the rest of us: The Government will not have enough money to cut our income taxes if it does something nice for the restaurants.
It is not hard to see the political game that is being played: This is the classic effort to set one group of taxpayers at the throats of another.
What’s more, we are all going to be hit with another whammy: Over the past few years, in preparation for the general election, we had a whole bunch of “cost of living” supports rolled out as one-off payments: People might remember the credits applied to their electricity bill. Those being one-off payments, I am told that the Government won’t be making them this year. So your taxes will stay the same, and your available money to pay bills will go down. In other words: Most taxpayers will be worse off as a result of the budget.
But fear not, because your sacrifices are to be put to good use: This Government of ours, which has doubled state spending in a decade, is going to spend more on “infrastructural projects”, which includes things like roads, schools, and children’s hospitals.
What the state does not tell you is the amount of this money which goes on things of questionable value. For example, hundreds of millions, if not billions, have been expended on retrofitting state buildings over the last few decades to be “more energy efficient”. This is not money spent on upgrading the performance of the buildings, but on reducing their carbon footprint. The beneficiaries of it have been an array of private sector companies who have grown fat on retrofitting contracts. The actual benefit of the work on a day-to-day basis for the taxpayer is entirely negligible – and if you do not believe me, ask yourself why so few buildings have enormous signs on them saying “retrofitted for carbon efficiency with your taxes”.
If they thought you liked it, those signs would be everywhere, like the ones on every new road crediting the EU for the job.
In the meantime, last Monday’s national economic forum was a veritable who’s who of the state’s fastest growing sector: The taxpayer funded NGO and lobby sector. This is the sector that – amongst other inefficiencies – spends €25,000 per homeless person in Dublin, has one employee for every three homeless people, and hasn’t made a dent in the problem.
Do you know who wasn’t represented at that forum? Any group of any kind arguing for a reduction in wasteful government spending, and tax relief for hard working taxpayers.
The very concept is entirely alien, you see: The only reason we get tax cuts at all in this state is because some politicians think they are a good way to buy votes before an election. The default setting, as deftly explained in the quote that started this article, is that all the money in your pocket belongs to the state and you should be grateful for what you are permitted to keep.
In the meantime, families across Ireland are struggling with the cost of groceries, energy, fuel, and other living expenses. The rise in prices in recent years has dramatically outstripped income. And the worst part? Government spending is at least partly to blame: In housing alone, the state has pumped billions of euros of demand into a sector with limited supply, driving up prices. At the petrol pumps, the state’s hunger for money and climate action is putting families to the pin of their collar. Hotel prices and hospitality have suffered from the almost wholesale takeover of many hotels for migrant accommodation, at the cost of billions.
The whole thing, speaking plainly, is a crooked racket: As my colleague Matt has pointed out and as some of our media colleagues are belatedly catching on, a small number of people have made enormous sums off state policy. The rest of us pay for it. And now, we won’t even get a tax cut.
They want you to blame the poor restaurant sector for that. Don’t believe it for a moment.