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Fears banning cheap alcohol in next Budget will send shoppers North

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Consumers feel they can get a better deal north of the Border

Consumers feel they can get a better deal north of the Border

Minimum unit pricing has made alcohol more expensive in Ireland

Minimum unit pricing has made alcohol more expensive in Ireland

Leo Varadkar is pushing for a 30pc tax band

Leo Varadkar is pushing for a 30pc tax band

Alcohol is now cheaper over the Border in Northern Ireland

Alcohol is now cheaper over the Border in Northern Ireland

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Consumers feel they can get a better deal north of the Border

There are fears new laws banning the sale of cheap alcohol could reduce tax returns because people are going North to buy beer, spirits and wine.

The Government has been warned the introduction earlier this year of minimum unit pricing on alcohol could ultimately lead to less tax due to people shopping in Northern Ireland.

A Department of Finance Tax Strategy Group paper on excise duty said it was too early to gauge the impact of the introduction of minimum unit pricing.

But it warned: “It is clear, however, its introduction has resulted in price differentials on alcohol products across the border which might lead to an increase in cross-border trade, undermining the tax take from alcohol sales.”

The warning was made among a range of options on tax and welfare for ministers to consider as they prepare for next month’s Budget.

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Minimum unit pricing has made alcohol more expensive in Ireland

Minimum unit pricing has made alcohol more expensive in Ireland

Minimum unit pricing has made alcohol more expensive in Ireland

This includes proposals to increase all welfare rates by €15 and introduce tax cuts for two million taxpayers.

The Government is not bound by the recommendations but Finance Minister Paschal Donohoe said consideration will be given to all the proposals outlined by his officials.

The paper on excise notes that the Drinks Industry Group Ireland (DIGI) and the National Off-Licence Association have called in their pre-budget submissions for a 7.5pc reduction in alcohol excise in Budget 2023 with a further 7.5pc reduction in 2024.

“It considers that this will help the drinks and hospitality sector to rebuild commercial activity in all areas of the country and to recover employment,” it said.

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The document also notes that Ireland has the highest level of excise duty on wine in the EU and the second highest on beer and spirits.

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Alcohol is now cheaper over the Border in Northern Ireland

Alcohol is now cheaper over the Border in Northern Ireland

Alcohol is now cheaper over the Border in Northern Ireland

Meanwhile, a paper on property-related taxes warned it was “difficult” to form a “reasonable” policy which would stop accidental landlords from cashing in on their properties.

The Tax Strategy Group said rent controls put in since the financial crash has meant “amateur” landlords do not have “time, money or risk appetite” to stay in the rental market.

They said accidental landlords are “keen to sell” once they are no longer in negative equity on their properties and any policy options to stop this are “extremely limited”.

It comes as Tánaiste Leo Varadkar said he was in favour of tax breaks for landlords in a bid to encourage them to stay in the market.

Currently, landlords pay taxes of more than 50pc on their rental income and this may be reduced in September’s Budget.

Officials downplayed the prospects of cutting the VAT on new homes to 9pc from the current 13.5pc, something that is allowed under EU rules and builders have lobbied for.

The officials raised fears having different VAT rates for commercial and residential property would be hard to administer and increase the risk of fraud as well as questioning whether developers would pass on the potential saving to homebuyers.

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Leo Varadkar is pushing for a 30pc tax band

Leo Varadkar is pushing for a 30pc tax band

Leo Varadkar is pushing for a 30pc tax band

A lower rate would have to apply equally to homebuyers and big investors, they noted.

Cutting VAT to the lower rate would reduce the price of a new home on the market for €300,000 to €288,105 – if the rate change was passed on in full.

Meanwhile Mr Varadkar’s proposal for a third income tax rate of 30pc would benefit around one million income taxpayers, a paper on tax cuts said. If the new rate was applied to income between €36,800 and €46,800 the gain would be €1,000 a year for single earners and married one-earner couples.

The document shows the introduction of indexing the income tax system at 3pc could see a single person gain €416 a year, or €8 a week. A married, one-earner couple with no children would gain €466 annually or €9 weekly. Two million taxpayers would benefit from this measure.

The paper also looks at an increase of €1,500 in the single income tax standard rate band. This would mean taxpayers could earn an additional €1,500 before hitting the 40pc tax rate.

In the document on the Social Protection budget package, options are outlined for increasing rates on all welfare payments such as the state pension, jobseeker’s benefit and disability payments by €15.

Landlords pay taxes of more than 50pc on their rental income

The paper says a €15 increase would see a person on a working age payment see their weekly rate increase to €223 while a person on the contributory State pension would see their rate increase to €268.30 a week.

It says a €15 increase in all rates along with proportionate increases for qualified adults and those on reduced rates of payment would cost the taxpayer €1.1bn.

A €6.50 a week increase in the Living Alone Allowance, at a cost €78.1m, is also being considered.

The report also warns of a growing black hole in the Social Insurance Fund which funds pensions. It is predicted the fund will be running a €2.3bn shortfall in 2030 and €13bn by 2050 before steadily increasing to €21bn in 2070.

It suggests increasing employer and employee PRSI rates by 1.5pc over the next five years.

This would mean that the current employee contribution rate of 4pc, which has not changed since 2001, would increase to 5.5pc and the employer rate of 11.05pc would rise to 12.55pc.


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