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VAT returns may fall by up to €6.7bn due to coronavirus – ESRI

VAT receipts could fall this year by between €3.9 billion and €6.7 billion, according to research carried out by the Economic and Social Research Institute. 

The ESRI has forecast that spending by households could fall by between 12% and 20% as a result of the restrictions imposed to tackle the spread of Covid-19.

The ESRI says the impact of the coronavirus measures have delivered a “spending shock” to the economy.

Spending on essential goods like groceries is up, but spending on pretty much everything else is down, leading to a dramatic effect on VAT paid on goods and services. 

During the shutdown phase of restrictions, the average amount of VAT paid by households halved. 

The study by the ESRI examines what the final impact could be under three different scenarios. 

If a vaccine is found and everything returns to normal by the end of the year, VAT could still be down by €3.9bn. 

If a second wave of the virus hits, this could result in a €6.7bn hit to the Exchequer.

The biggest decline in VAT is expected to be from lower spending on transport, followed by restaurants and bars.

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