Tuesday, 13 July 2021
Finance (Covid-19 and Miscellaneous Provisions) Bill 2021: Committee and Remaining Stages
The core elements of section 2 are the two key pillars that have sustained businesses and kept them going over the Covid-19 period. I refer to the employment wage subsidy scheme, EWSS, and its predecessor, the wage subsidy scheme; and to the Covid restrictions support scheme, CRSS.I have some reservations about the end date of the EWSS in the particular context of my industry, which is solely reliant on seasonal business. Most of our business is done in the summer months of June, July and August and that has already been curtailed this year even more than last year. When we move into the off season, which is September, October and November, we will be waiting until the industry takes off again next year. Therefore, the loss of the EWSS on 31 December needs to be looked at again, if possible. The Minister of State talks about not having a cliff edge, but this is a cliff edge because the scheme comes to a sudden and abrupt end at the worst possible time for the hospitality sector, which is the month of January when things are at their hardest and business is at its lowest ebb. We need to see if there is any way the Minister of State can look at amending that or taking us off the payment gradually rather than having a cliff edge.
In fairness to the pandemic unemployment payment, PUP, it is reduced in three stages over three periods. From an industry point of view, we need the Minister of State to look at this issue, specifically the EWSS. To give credit to the Government, businesses would not have survived this pandemic without the EWSS or the CRSS. I ask the Minister of State to come back to me or give some consideration to my proposal.
I join Senator Casey in his remarks about supports to business. The fundamental point is that if you talk to people who work in hospitality, they will tell you that the summer months are their season of opportunity in terms of employment and being able to buffer against the winter. Senator Casey is right. Notwithstanding that winter is bleak, it is bleak in the hospitality sector because it is their shoulder season and their off season. If we are to avoid the cliff edge, we must look at how we can support the industry.
What does the cliff edge actually mean in the context of the hospitality sector? For me, there are four parts to it. One is the imminent announcement of the full reopening of our hospitality sector, which I welcome. This will be significant and will give further employment opportunity. Second, August and the rest of July is when there will be an opportunity for the industry to benefit. As we speak, the Oireachtas transport committee is having a hearing and briefing on the roll-out of the EU digital green certificate, or Covid certificate. The point I am making, which is that we must be ready to allow the hospitality sector to succeed and to have business coming in, does not relate solely to the Minister of State's Department but is part of the whole cross-sectional departmental approach.
The other two parts relate to what will happen in the autumn, when our children will go back to school and there will be a certain element of internal travel and, hopefully, notwithstanding the variants that are arising, international travel. As part of this process, I hope we will see a campaign to advertise that Ireland is open and has a product that can be availed of. The fourth part relates to the point Senator Casey referenced and I will allude to again, which is that two thirds of jobs in the hospitality sector have been lost or are seen as vulnerable. As Senator Casey said, the extension of the different supports, which are very much welcomed by those in the industry, is what we need a Government answer on. The Long Title of the Bill states that its purpose is "to make provision for supports to employers and certain businesses". That is why it is important that the Government engages not just after today's reopening plan, but in the context of what happens in January or even in November and December.
I have met small business people, hoteliers and restaurateurs who are really worried. They have saved for the rainy day. Other political viewpoints would see these people as very rich, but many of them saved for the rainy day in order to carry out renovations or upgrades to their businesses and to keep people employed. Perhaps the Minister of State can come back to us in the context of how we can emerge from the pandemic and, as Senator Casey said, avoid that cliff edge.
I appreciate the comments from both Senators about the EWSS. It is a scheme that has generated many comments and queries but, overall, people recognise how important it has been to maintaining businesses and, especially, the link between employer and employee during this pandemic period. While people have had regular issues regarding specific amounts, dates, details, conditions, eligibility of businesses, who was eligible and who was not, tax and how the rates were set, everybody who discusses the EWSS acknowledges the tremendous support it has been during the pandemic period. To date, €3.872 billion has been paid out on this scheme. It is one of the most effective and business-focused schemes in retaining the link between employees and their employers. As we come out of the Covid situation, it will allow a very easy, smooth transition for employers compared to that for people who are on the PUP and are not on an employer's payroll anymore, but will have to come back onto that payroll. This is a much simpler system for many employees and employers.
As I said, €3.872 billion has been paid out so far since July of last year. Some €672 million has been foregone in PRSI as part of this scheme. The total number of employers who have benefited from or been involved in this scheme is 50,500 and the number of employees who have been through this scheme is 609,700. Not only do I wish to compliment the employers and employees for moving onto this scheme, but I would also like to extend a major thanks to the Revenue Commissioners. I acknowledge their role in this matter because the last time I discussed it in the Houses, people talked about the timescale between an employer making the payment to his employees and getting recoupment from the Revenue Commissioners. The issue of employees who are paid by the week was raised on several occasions, as it could be two weeks into the following month, six or eight weeks later, before they got their recoupment from the Revenue Commissioners. All those things have been substantially speeded up and the turnaround from the Revenue Commissioners can be counted in hours, possibly 24 or 48 hours, rather than days or weeks. The Revenue system has been well capable of doing this.
I will highlight one figure to give an example. In January of this year, which was the peak month for the number of employees on this system, 346,900 people were on the EWSS. Thankfully, the numbers are down. At the end of June last year, the number was 342,000. This shows that the economy is gradually opening up. People are getting back to work and employers are getting back to a level of turnover. The requirements to qualify for the EWSS are no longer there for some employees. People are back on the books paying their tax and employers are back in business. There is still quite a distance to go when 342,000 people were on this scheme last month. That represents 34,000 employers, which is down from approximately 37,000 employers last January.Several thousand employers have been able to leave the scheme because their businesses opened up and the employees involved have also left. The big issue we are talking about is whether there will be a cliff edge on the scheme. I take on board what everybody has said. The message the Government has given out from day one is that there will be no cliff edge. Times are tough enough and people experienced a cliff edge at the introduction of Covid. They were used to a full-time pay packet every month and even those who went on to PUP had, in many cases, a significant reduction in net income into the household, which made matters more difficult. There were issues with the EWSS. People may have been on less income.
Many employers have fulfilled their commitments. People will want to watch their taxation situation on the EWSS and make sure their tax credits and everything are appropriate as the year goes on. We have been clear all along regarding every scheme the Government has introduced and there will be no cliff edge in the EWSS. On 1 June, the Government approved an extension of the scheme until the end of December. That is essentially what is in front of us here but it is not the full story. The amendments provided in this legislation will give legal effect to that decision. We have had this matter right through Covid. The Government would announce the introduction of a scheme with the effective date and the legislation comes to pass to confirm that in due course. Some people said we have often used this as a measure to backdate schemes or otherwise that people had an issue with but it is the only way to operate during Covid. The Government announces the date from which the scheme will be effective and it often takes weeks for the legislation to follow.
The legislation before us amends the scheme and provides that it can be extended beyond the date of December 2021 by ministerial order, but not later than 30 June 2022, should that be determined necessary and appropriate having regard to the underlying economic circumstances. It is considered too early to make any firm decisions regarding the operation of the EWSS post December 2021. Therefore, it is not feasible to determine what would be appropriate beyond that date. Does the scheme end on December 2021? The specifics in front of us do, but the legislation provides the scheme can be extended for a further six months subject to ministerial order. If that arises, there will be a debate on it, if it is deemed necessary and appropriate.
It is not just me saying there will be no cliff edge; this legislation specifically provides it can be run until the end of June next year. People may not have been aware of that aspect of this legislation. We concentrated on 31 December. The commitment is there that it can be extended for a further six months. Let us hope that is not necessary and appropriate. Let us hope Covid is behind us and that, when we get to next spring, the 300,000 people on EWSS have no need for such a scheme.
I hope that is helpful to some Members in discussing this valuable scheme, for which the taxpayer has paid €3.872 billion to date and under which €627 million in PRSI has been foregone. It is a practical scheme, which most people can operate effectively with the co-operation of the Revenue Commissioners, who provide instant refunds when employers submit documentation.
I welcome the clarity from the Minister of State. Hopefully, we will not need to be here in June of next year. I am a member of the transport committee and we had an aviation recovery task force. It is time we considered a hospitality sector task force, which would report back. We welcome the increase in people back at work. As the Cathaoirleach Gníomhach said, the scheme has helped so many. I ask that consideration be given to a hospitality recovery task force.
I thank the Minister of State for his comprehensive reply but the definition of a cliff edge is it is there one day and not there the next. That is exactly what he is describing on 31 December. The EWSS will come to an end. I will speak to this from a practical point of view. When Covid hit us, the wage subsidy scheme allowed us to keep core employees on board. We believed at that time this was a short-term provision and we were able to top up employees' wages to bring them to their normal level. Regrettably, as Covid evolved, we were not in a position to do that continually over six or nine months. Now we are reopened, but not fully. The hospitality sector is far from reopened fully as 70% of its income derives from international tourists. We will not get a full recovery until two or three years' time. We are building up our levels of staff because we have relatively high occupancy and steady business coming in the door. That allows us to build up our core staff again. The last thing we want to do is start losing them again. That will happen if this is cliff-edged on 31 December. The hospitality sector, going into its lowest period, will not be in a position to sustain those employees. That will put the industry on the back foot heading into a season in April or May where we will have to go through the entire recruitment process again. The industry is struggling to recruit staff and competing with the PUP, which is almost impossible.
It is a cliff edge. The Minister of State says it might be there until June but we probably need weaning off it, rather than a sudden stop. Will he come back on that?
I welcome the Minister of State. The EWSS and its predecessor have been hugely important as the link between employer and employee. It was one of the core supports introduced by the previous Government and continued since then. It is a key component of the Government's Covid response for business. The priority has been maintaining jobs and businesses once the pandemic ends. We all accept it has lasted longer than any of us expected or hoped.
At the start of this month, the Minister for Finance, Deputy Donohoe, confirmed that payments of more than €3.61 billion and PRSI credit of more than €590 million have been granted to 50,100 employers in respect of some 592,000 workers on the EWSS. Recently, the CSO published analysis of Covid-19 income supports, including the scheme, as part of its Frontier Series. Interestingly, that analysis shows the 35- to 44-year-old group is most supported by the scheme, followed by the 25- to 34-year-old group and the 45- to 54-year-old group.This is not surprising as a key support and a key aspect of the scheme is to maintain the crucial link between employer and employee. It is not surprising that the wholesale and retail trade sectors and accommodation and food service activities benefit significantly from that support.
We have always emphasised the importance of avoiding a cliff edge. I agree with Senator Casey on this when it comes to Covid-19 supports for workers and businesses. This is why this section, which extends the EWSS to the end of the year, is so important. I hope we will not need further extensions but I expect that if they were needed then they would be provided. This is because at the core of Government has been the wish to support business and workers and to provide the crucial link between business and workers.
I was saying something before I was interrupted. I agree that every Member has a mandate, an entitlement and a right to speak on any section of legislation. I am not sure the Senator would follow the rules that she is setting out. Certainly, it is not her place to set rules for others.
The EWSS has been important. I appreciate that it cannot be open-ended and there has to be a finishing point. Yet, I am making an appeal on behalf of the hospitality sector. Large cohorts of our society, including people in their 20s and 30s as well as teens, have not yet received a first dose of the vaccine. They will be unable to participate in indoor hospitality unless they are working in it. I have particular issues around that but that is for a different debate. They will be unable to eat indoors and avail of hospitality until the end of August or coming to September or October.
The hospitality sector is missing out on a significant volume of business during the crucial summer months. The Minister of State will be aware of the position of businesses that operate in the hospitality and tourism sectors. Many businesses in my county of Mayo rely on the tourism season, in particular the months of June, July and August, to make the money to sustain the business throughout the year. By missing out on the crucial months when they get most of the trade, they are down significant revenue for the year. Without the continuing support of the scheme, many businesses would approach the end of the year in a bad financial position. These are the businesses that have been able to reopen and that have survived the past year and a half. All credit goes to those involved. My hat goes off to them because it has been an incredibly difficult year. There is no way they will be able to survive beyond the end of this year without support or until they get to next year's season, which will kick off from March or April onwards. They are going to need extra support to keep those people in employment. This applies in particular in a county such as Mayo where hospitality and tourism are one of our biggest employing sectors if we take away agriculture and some large multinationals. Outside of these, the vast majority of people are employed in tourism and hospitality, including many of our younger people. We have high rates of youth unemployment.
Yesterday, I was in Achill in the earlier part of the day. I was talking to a local business owner who owns a couple of businesses, including a bar and restaurant. It has been incredibly difficult. He is not a hotelier so he has not had the opportunity to have people come and stay. He can look around the island and see all the hotels fully operational, fully booked and serving their customers indoors. He is looking forward to reopening and to having diners inside on 19 July. He made the point that the business has lost a great deal of time when it comes to making up the annual revenue that the business relies upon. He employs local people throughout the year. He impressed upon me the need to maintain the supports into next year and to give advance notice of the extension. We should not leave people waiting until the eleventh hour. I know the Minister of State will not do that. He will want to give people as much notice as possible. Christmas will be the next bump when they might get some additional customers.
All the time at the back of our minds we are concerned about new variants. We see what is happening across other parts of Europe. We look across the water to the UK where we see restrictions being reimposed. There is a clear Government policy. We have managed to do this to date in such a way that we have not closed down anything that we have reopened. That is why we have had a degree of caution and have been a little slower to open than other parts of the country. Having said that, there is a fear that we might regress at some point. I sincerely hope that does not happen.
I listened to a business person earlier on "Morning Ireland". The business name escapes me but he runs a nightclub. He was honest in saying that he does not foresee his nightclub business reopening anytime soon. He even suggested it could be three or four months or perhaps even longer before that happens. He fully acknowledged and was complimentary of the Government for the supports that have been in place for business. He was asked the direct question of whether he would survive the coming months. He said that it depended. Having these supports in place is one of the key provisions that will ensure that business can reopen at some point and the owners will be able to hold on to the staff they have. They need flexibility from their creditors as well. The owner made the point that businesses that remain closed or have only partially reopened still have many overheads that have to be met. They still have to pay rent and utilities and some wages. These overheads have not gone away in the past year and a half. Businesses have been paying these bills with little, if anything, coming through the door.
We acknowledge in this House that there is not an endless pot of money. However, this is an important point where we can give security. Behind all of that, if we take away the business and employment aspects of it, those business owners and their families are under great pressure and stress. It has been a highly stressful year and a half. It is affecting their livelihoods, everything they have worked for and everything they have built up over the years. Some businesses may never reopen, but for those who are surviving we have to do all we can to support them through this difficult period and leave no one behind.
Given that the Minister has set a date for us to revisit this, I would appreciate if the Minister of State could confirm or give us some reassurance that he will give significant notice of the extension period. We do not want to leave people in a state of anxiety when they are approaching what Senator Casey called a cliff edge. That is in essence what it is. People will need advance notice so they can make preparations. They will need time to talk to their credit institutions and those to whom they have to pay overheads so they can plan together to try to ensure the business survives. My thanks to the Minister of State for being in the House today. I look forward to his reply on that point.
I note that it is 11.18 a.m. This session will close at 11.49 a.m. I appeal to all contributors to be conscious of that. It would be appreciated if Senators could make contributions timely. Senator Gavan is next to be followed by Senator Higgins.
It is nice to see the Minister of State again. It is clear what is going on here. There is a well co-ordinated effort by Government Senators to ensure we do not get to talk about the tax sweetheart deal in section 15. It is a shameful deal to exempt cuckoo funds, investor funds and vulture funds from tax. It means that first-time buyers will be disadvantaged and ridiculous leasing deals, whereby the council does not get to own anything, will be concluded.
There have been lengthy comments. My questions and comments relate to the newly inserted section 2(1)(b). They relate to time and the fact that these provisions allow for the extension of emergency measures. It was described how we do not want to fall off a cliff edge and that there is not an indefinite pot of money. I am responding to those points raised by Government Senators. We are in an emergency and we have a window in respect of fiscal responsibilities.The European Union has introduced a suspension of fiscal rules, much as this Bill extends various exemptions for a limited time. That waiver is there to allow states to invest in a more resilient future that will give them the stability to avoid future crises and crashes, whether financial crashes, the climate crash or the Covid response. Those of us who have urged the Government to use this fiscal opportunity want that opportunity to be used to build up the State, our public services, our public land and our reserves so that we have more as a State to face the next challenges. We are not calling for the fiscal space available, with opportunities to borrow at reasonable rates in recognition of the emergency period, to be channelled into private investors' hands, which will not make us more resilient as a State in the long term.
We need tax reserves. I guarantee that we will see Fine Gael Ministers in here in two years telling us that we need to look at austerity again and that we cannot spend forever. We said today that the Government cannot spend recklessly. When it gives a 10% stamp duty waiver and exempts investment fund from the measure-----
I am speaking to the section. I am speaking to it far more directly because I am speaking about financial emergency measures. The financial emergency measures, both at an EU level and in this section of the Bill, require us to be responsible. It is not responsible that we do not have stamp duty for investment funds if they are leasing back, which is notoriously bad value. According to the Business Post, it will cost €1 billion for 2,400 leased properties. We reward them for leasing. It is not a matter of them having these properties and us encouraging them to lease the properties to local authorities. Local authorities are competing with investment firms for the purchase of these estates. That is what happened in Kildare and what we have seen. They are competing and we are weakening the hands of local authorities in that regard.
This relates to the extension of measures to December 2021 from March 2021 and to June 2022. I am speaking on this because the fiscal rules at European level are only waived until 2023. This section is an example of how we can use that time. There are positive things in this Bill but there are also mistakes. I urge the Government to recognise and remedy that.
Perhaps I was a little long-winded. The employment wage subsidy scheme is important. Many people in the county I live in rely on it. This is my only opportunity to speak about it before the recess. On the other matter that Senators have mentioned, I am not in favour of that tax exemption at all but to suggest that by having spoken on another section I was somehow preventing others speaking is not a fair comment.
A hospitality task force was mentioned. Everybody knows that will be a matter for the relevant Minister and it is not something which I am in a position to get into today. Senator Higgins mentioned changing the qualifying period. Section 2(1)(a) states, " ‘qualifying period’ means the period commencing on 1 July 2020 and expiring on 31 December 2021 or on such later day than 31 December 2021 as the Minister may specify in an order made by him or her under subsection (21)(a);”. Subsection 21, on page 5 of the Bill, states, "by the substitution of “30 June 2022” for “30 June 2021”,". The legislation has specified the possibility that it can be extended by ministerial order and the exact date referred to is in the legislation. It is important because this is one of the biggest items. There is about €4 billion of taxpayers' money involved. It is one of the biggest supports for business. People have asked that advance opportunity be given. In recognition of what has been said in the House, there is not an endless cost. The Government will run a deficit as appropriate but will not spend when it is not appropriate to do so.
There are other amendments to this section that need to be addressed so that people understand. The Bill provides for a modification of the conditionality of entry to the scheme. There is a turnover test to qualify which requires that employers compare current operations with business operations pre-pandemic in 2019. It is proposed to maintain the turnover threshold to avail of the employment wage subsidy scheme from 1 July, which was last week, at a 30% decrease and to broaden the reference period from six months to a full year so turnover in the full year of 2021 is compared with the full year of 2019, with appropriate arrangements for qualifying businesses which may not have been in operation for all of 2019. There is a change in the reference period and it is important that employers know that. With many businesses fully closed or severely limited in their capacity to trade due to the public health restrictions in the first half of 2021, this change to the reference period acknowledges the frail nature of firms in certain sectors. Operating a full-year reference period will enable as many employers as possible to continue to avail of the employment wage subsidy scheme as the economy continues to reopen businesses and begins to recover from Covid-19.
The Government has approved an extension to quarter 4 and the Bill gives effect to this. It is considered too early to prescribe the precise operational parameters of the scheme that should apply for that quarter. It is important that businesses are aware of this because they need an opportunity to know what is coming down the tracks. This legislation recognises that the Minister for Finance has a duty to have regular assessments to determine whether it is necessary to adjust the level of certain elements of the employment wage subsidy scheme, having consulted with the Minister for Social Protection and the Minister for Public Expenditure and Reform. This assessment will consider the date of the scheme, the rates of the subsidy, applicable income thresholds for employees and the turnover test. Decisions on the matter will be made shortly.
I note that the economy continues to reopen. The capacity of businesses also increases so they can increasingly rely on their own resources to cover wages of employees beyond what is covered by the employment wage subsidy scheme. The Minister will consider a change to the scheme from quarter 1, which may require an employer contribution towards employees' wages. I am signalling this possible change in good time to provide sufficient notice for businesses. It is being considered that employers may have to make a contribution to employees' wages. The taxpayer has already paid €4.5 billion under this scheme. Every employer needs to hear me saying this. The rest is important but this will impact employers in September. No details have been worked out and the issue will be examined, but employers should be on notice that the matter is being looked at. It would be remiss of me not to refer to that when addressing this section.
Fine Gael is fully supportive of section 6. We initiated reduced VAT rate in 2011 in response to the unemployment crisis. We needed to look at sectors that were capable of providing employment and could provide a quick response to a stimulus to direct support. At that time, it was one of the key components of the Action Plan for Jobs introduced by the then Minister, Deputy Bruton. It worked by targeting hospitality and tourism. It provided jobs in rural and urban areas. It was highly successful and kick-started the recovery of the economy at the time. While that eventually came to an end and was reversed, in response to the Covid pandemic it was a provision we were able to put back in place. It was the correct decision to do that as a quick change that could be enacted to support the tourism sector. It amends that Act to apply the 9% rate for key sectors.
Coming from Galway and Connemara, we know the benefit of such a rate to the tourism and hospitality sector. It was a successful intervention in the past, it is still, and it can be into the future. I acknowledge and commend the Minister on this initiative and its continuation. I certainly support section 6.
Senator Kyne outlined most of what is involved. Regarding the 31 August 2022 date, the Covid crisis has been rolling and none of us knows where it will end. Every time it extends, the period of recovery for the industry also needs to be extended. The hospitality needs the 9% VAT rate for a two-year recovery period. Ending this on 31 August 2022 will give it only a year because we will not be back at full capacity even in the middle of next year. Senator Kyne has referred to the importance of the hospitality sector throughout the country, but it is even more important in rural areas. The previous Government leaned on the tourism industry to create jobs and revitalise the country. In recent years the hospitality sector has had more time with a 9% VAT rate than at the normal 13.5% rate.
If the Government values tourism as it claims, it should look at the inequality across Europe where most countries apply the lower VAT rate to the tourism sector. If it believes in the tourism sector as opposed to using it for its benefit when it suits, we need a conversation not about August 2022 but what the real VAT rate for the hospitality sector should be in the future. We need that low rate to sustain ourselves into the future.
Last week I brought the attention of the House to the recently published PwC report which made the case for extending the VAT rate of 9% for hospitality up to the end of 2023. Has the Minister of State had the opportunity to read the report? Why did the Government select August 2022 as the end date? Would it consider extending the lower rate to the end of 2023 as recommended by the report? It is reasonable and sensible and would allow businesses to plan beyond this crisis period and let them get back on their feet.
In general, I welcome the Government's continued support for this sector. We certainly need to do more. I concur with the comments of my colleagues that the support should be continued.
The explanatory memorandum states section 6 extends to 31 August 2022 the application of the 9% VAT rate to the supply of restaurant and catering services, to guest and holiday accommodation, to entertainment services such as admission to cinemas, theatres, museums, fairgrounds, amusement parks and sporting facilities, to hairdressing and to the sale of certain printed matter such as brochures, maps and programmes. Does the 9% rate apply to the entertainment business, which is strongly linked to hospitality? I know the explanatory memorandum refers to entertainment, but I seek clarification on the music sector.
The decision to retain the 9% VAT rate will be most welcome among stakeholders and is a sign the Government is listening. I concur with the remarks of Senator Kyne that it will be a lifeline for them. While there may be grounds to extend it further, at least this extension gives sufficient space to have that discussion at a later date. It is a positive and essential move for a sector that has been almost devastated.
I agree with colleagues and welcome the extension to August 2022. As Senator Martin said, it allows us sufficient time. If we do not see the necessary recovery happening by August 2022, consideration can be given to extending that. Everyone has talked about why it is important to get the tourism and hospitality sector back up and running. It must be remembered that significant numbers of people employed within that sector are young people. If we are to address some of the high rates of unemployment among young people, we must ensure the hospitality and tourism sector is back up and running and is vibrant.
There is one element of warning. When the VAT rate was reduced in the past, some businesses decided to take advantage of it and tried to kill the golden goose. This is not in the best interests of the industry. Through this measure the Government is trying to help the industry. Businesses that try to do that are not being fair in terms of the overall initiative.
I agree with Senator Murphy that we need to look at the broader entertainment industry. In his response, I ask the Minister of State to define if it is covered. Just as tourism has suffered, those in the arts and entertainment sector have equally suffered a significant blow. We need to ensure the incentives are there to be able to get that sector up and running again.
The Senators have raised a number of issues and I will try to deal with them as concisely as possible. The Finance Act 2020 provided that the 9% VAT rate would apply until 31 December 2021. It applies to certain goods and services which primarily relate to the hospitality and tourism sector which were then subject to the VAT rate of 13.5%. It has been decided this extension should run until 31 August 2022. I know there are requests to extend it to 2023 given the time it will take for the tourism industry to recover. Obviously, I am not making any commitment here, but I am sure those points will be raised well in advance of the budget for 2022. These matters can be dealt with in the budgetary context. I give no commitment except to say I expect that matter will be considered as we approach the budget in the autumn.
The extension will cost the Exchequer approximately €350 million. We all know that when a VAT rate is reduced, businesses have discretion over the prices they set and it will remain their choice. In some cases, businesses will pass on, at their discretion, the full reduction in VAT and others will not because they will need it for cash flow purposes to meet their daily costs. That is a matter for businesses and it is a matter that comes up every time there is reduction in a VAT rate.It is up to consumers to watch out for that when they go to different premises.
I was asked specifically about the music and entertainment sector by a couple of Members. I assure Senators that the provision introduced in budget 2021 does apply the temporary 9% VAT rate to admission fees for cinemas, theatres and musical performances. Under long-standing provision in Irish legislation, admission fees to live theatre or music performances are exempt from VAT subject to certain conditions. The VAT treatment of admission to theatre and musical performance is dependent on the type of event which takes place and the facilities that are available for the consumption of food and drink, including alcohol, during all or part of the performance. Broadly, if there is a live performance and food and drink are not available, the admission tickets are exempt from VAT. If there is a live performance with food and drink available, the admission tickets are subject to the reduced rate of VAT of 9%. For venues where the entertainment is not a live theatre or music performance, including dances, discos, nightclubs and pubs, the standard rate of VAT at 23% continues to apply. Therefore it is not only the performance but what else is happening in the venue at the time.
Looking to 2023 can be considered separately but not as part of the legislation here today.
I refer to the period 1 and period 2 described in this section. Tax warehousing was critical where businesses could not access credit from their banking institutions and it was the only way they could get cash liquidity to pull them over. Can period 1, the restricted trading phase, be extended to when businesses are actually reopening? That is when they could do with a cash injection or have the tax warehousing available to them to help with liquidity as other bills come in.
The interest phase of the warehousing is one of the options that does not cost the Government anything. We are only deferring the payment from the business. Revenue is trying to charge almost 0.5% or 0.25% over and above what is being charged by the commercial banks under other schemes. Will the Minister of State look at both of the issues, first that the period would not be the restricted trading only but also the reopening period and, second, the interest charged on the warehousing of that tax, which is currently 3%? We can get a commercially better rate on the market.
As I said yesterday, there is no interest chargeable in the coming year. The interest comes in at 3% in 2022. Employers will be able to warehouse debt so long as they continue to file and make returns. It is important they keep paperwork up to date, know precisely what the liability is and what they will have to pay when the time comes. You cannot come along at the end of the scheme and say you want to warehouse all the VAT and PAYE. You have to keep all the returns up to date so Revenue can fully assess what is going on. They can make arrangements, as stated, in period 3 to repay the outstanding amounts of EWSS and abide by that agreement. If they fail to do so, normal interest rates of 8% - which seems high but it is the normal rate - will be reimposed. That is way down the line, from 2023 onwards. It is important that people know that between now and then, no interest will apply in the relevant tax period. The 3% rate will apply in period 3, which is January 2023, until EWSS overpayments are repaid in full. Revenue has a long period to allow for that at a very low interest rate. The higher rate is far down the line and it is hoped employers will not be in the situation that arises and that Covid will be well behind us by the time people have paid their debts.
The warehousing provisions are very important in giving the breathing space and scope to businesses. It is not a case of companies not paying their tax. The State will not lose out in the long run, it just gives businesses breathing space with tax, VAT and PRSI. Sections 8 to 12, inclusive, are all broadly similar on warehousing. The provision of a zero interest phase is very important, as is allowing that to run up to 31 December 2022 under period 2. Period 1 runs to the end of this year and there is a further period 3 where interest is charged at 0.3% per annum and warehoused liabilities to run from 1 January from 2023. I acknowledge the provisions that have been put in place under sections 8 to 12, inclusive.
I am going to speak on the section if the Chair will let me. Please bear with me, and as I was saying, not allowing those of us who have put in amendments to talk about them. Make no mistake, Fianna Fáil, Fine Gael and the Green Party are the friends of the vulture funds in this country.
The time permitted for this debate having expired, I am required to put the following question in accordance with an Order of the Seanad of this day: "That section 12 is hereby agreed to in committee, in respect of each of the sections undisposed of, the section is hereby agreed to in committee, the Title is hereby agreed to in committee, and the Bill is accordingly reported to the House without recommendation; Fourth Stage is hereby completed; the Bill is hereby received for final consideration; and the Bill is hereby returned to the Dáil."
Niall Blaney, Paddy Burke, Jerry Buttimer, Malcolm Byrne, , Micheál Carrigy, Pat Casey, Shane Cassells, Lisa Chambers, Martin Conway, Ollie Crowe, John Cummins, Emer Currie, Aidan Davitt, Regina Doherty, Aisling Dolan, Timmy Dooley, Mary Fitzpatrick, Robbie Gallagher, , Seán Kyne, Tim Lombard, Vincent P Martin, John McGahon, Eugene Murphy, Fiona O'Loughlin, Joe O'Reilly, Pauline O'Reilly, Mary Seery Kearney, Barry Ward, Diarmuid Wilson.