The Independent Alliance is objecting to significant budget changes in the special hospitality VAT rate, with one member of the group warning the Cabinet increases for the entire sector could "screw businesses".
The alliance is also digging in on its insistence that pensioners should be exempt from paying property tax, despite meeting resistance from Minister for Finance Paschal Donohoe. Ministers were surprised when Finian McGrath, the Minister of State for Disability Issues, challenged Minister for Business Heather Humphreys on how an increase in the 9 per cent rate would affect those in her sector.
Different ways of changing the tax – such as increasing it to 11.5 per cent, shy of its old 13.5 per cent level, or isolating the hotel sector for an increase – have been discussed.
Minister for Transport Shane Ross is said to have maintained a silence on the issue at Cabinet. But the alliance later held its own separate pre-budget meeting, at which it was agreed that changes to VAT should be targeted at larger operators and not affect smaller businesses.
One Cabinet Minister present expressed surprised at Mr McGrath's intervention, given Budget 2019 is next week and doubt over one of its main revenue raising measures could lead to uncertainty as Mr Donohoe finalises his tax and spending plan.
Those in Government circles have been anticipating the alliance having a row with Mr Donohoe in advance of budget day. Although some have been taken aback by the strength of the positions the four members – Mr Ross, Mr McGrath, John Halligan and Kevin Boxer Moran – have taken.
Mr Donohoe and Fianna Fáil, whose acquiescence is needed to pass the budget, agree there is only €800 million available for new commitments. This means some taxes will have to be raised for a package of measures expected to be well over €1 billion.
Separately, Mr Ross and Mr McGrath are understood to have informally approached Government colleagues and raised concern about being described as “the auld fellas’ party” because of their focus on issues affecting the elderly.
They maintained this was not a fair characterisation.
