Written by 12:13 pm Economy, Staff's Picks

ESRI: VAT Returns May Fall By €6.7bn

ESRI warns that a second wave of the Coronavirus pandemic could result in a VAT receipt fall between €3.9 billion and €6.7 billion.

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A research carried out by The Economic and Social Research Institute has shown that VAT receipts could fall by between €3.9 billion and €6.7 billion in 2020.

The study showed that the lockdown and social restrictions implemented to halt the spread of the COVID-19 pandemic may result in an overall fall in spending by between 12% and 20% per household.

These restrictions have resulted in a huge “spending shock” in the economy, ESRI states.

While there has been an increase in spending when it comes to home essentials like groceries, spending has been drastically reduced in every other field, causing a devastating effect on VAT for various goods and services.

The average amount of VAT per household fell by over 50% during the lockdown phase of Coronavirus restrictions.

The ESRI study examined three different scenarios of the final impact of the pandemic on the economy.

The first scenario involves the discovery and distribution of a vaccine by the end of the year, helping the economy and spending return to normal. Even in the best case scenarion, VAT would be down by €3.9bn, which is a fall of 18.7%.

The second scenario considers the implications of a second wave of the virus which could lead to a €6.7bn fall or 31.7% reduction.

The lockdown will have the worst impact on the transport and hospitality industries, which is where the biggest decline in VAT is expected.

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