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KPMG recommends zero-rate VAT for certain businesses to help boost economy

Many businesses will need support in the weeks and months ahead, as the country begins to reopen.

For those already struggling, there will be the additional financial pressure of ensuring their business is Covid-19 compliant.

With this in mind, KPMG is proposing a range of initiatives to support businesses and help kick start the economy.

The accountancy firm has submitted the report to Government for consideration.

Changes to the Irish VAT system are among those suggested within the report.

Speaking on Morning Ireland, Seamus Hand, Partner at KPMG, said they are suggesting the introduction of zero-rated VAT for affected businesses such as restaurants, bars and non-food retail, to improve cash flow and increase profitability.

"Many companies have faced significant cash flow challenges over the last period, they have had virtually no revenue and still some significant fixed costs. They will need some temporary cash flow support to get going again and we think a temporary proposal of a six-month zero-rate VAT and some other short-term liquidity measures are needed," he said.

The report also suggests the reintroduction of the 9% VAT rate for the tourism and hospitality sectors after that initial six-month period.

In order to revive the economy, Mr Hand called for the definition of SMEs to be expanded, to ensure all companies can avail of supports.

 "We believe that some of the businesses in the middle find it harder to get support, so we have proposed that gap be closed. This should be facilitated by faster processing and administration of requests. We have suggested a tiered system where some of the smaller and easier to administer requests could be dealt with quicker and others looked at on a case by case basis," he said.

Mr Hand said the measures contained within this report are intended to build on those already initiated by Government and proposed by others.

"We came into this crisis with a very strong economy, with lots of companies that were trading very well, so some of the additional measures we have proposed are to try and facilitate those very successful companies by reviving their businesses and getting the economy going again, so that the country can be well positioned to get back to a strong position," he said.

In the medium to longer-term perspective, the report states that Ireland must retain

attractiveness to foreign direct investment in a post Covid-19 and post Brexit world.

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