Waterford’s retail and hospitality sectors could be in line for a €50 million COVID stimulus if Government make changes to the Benefit in Kind (BIK) scheme, according to a new economic study.

As a measure to protect retail and hospitality jobs in Waterford, Waterford Chamber is calling for a temporary increase from €500 to €2,000 for non-cash rewards under the Governments innovative Small Benefit Exemption Scheme for Tax Free vouchers and extending it to normal pay.

This change could see Waterford employees receive part of their gross pay in the form of Waterford Shop Local Gift Vouchers which are redeemable in Waterford’s shops, bars, restaurants and hotels.

A new study by economist Jim Power shows that with 1.3 million Irish workers using the scheme there would be an initial input of €2.6 billion into the retail and hospitality sectors with a multiplier effect of additional spending increasing this to €3.9 billion. If 16,500 workers in Waterford were to use the scheme it would provide a €50 million stimulus for the county’s retail and hospitality sector. 

Waterford Chamber believes this will offer a desperately needed boost for these sectors, with domestic demand forecast to decline 6.5% in 2020 and consumer spending on goods and services forecast to fall 7.7%. The hospitality sector has also seen the greatest decline in employment this year accounting for 30% (53,600 jobs) of jobs lost, with employment in the retail sector making up 5% (15,600 jobs) of jobs lost.

Using Waterford Shop Local Gift Vouchers ensures that this change to the BIK scheme will generate significant domestic economic activity in a short period of time, encouraging spending and helping to build consumer confidence at an uncertain time. With personal saving having increased since the beginning of the COVID-19 crisis, this scheme will encourage spending across the county for the hardest hit sectors of the economy.

Adapting the current BIK scheme will also deliver a tax saving for Waterford workers and businesses, with up to €615 saved per employee increasing the spending power of consumers. The state will benefit too with €390 million in additional VAT receipts from gift card and voucher spending in shops, bars, restaurants and hotels.

Speaking about the proposed changes to the BIK scheme, Gerald Hurley, CEO of Waterford Chamber said; “Waterford’s retail and hospitality sectors have been amongst the hardest hit since the start of the COVID-19 pandemic, with hundreds of jobs lost and many businesses facing closure. Stimulating these sectors is hugely important for the Waterford economy and we believe incentivising spending over saving through the BIK scheme is a cost-effective way for the Government to support our county’s businesses.

“This proposal to temporarily increase the BIK scheme limit for non-cash gifts from €500 to €2,000 and to extend it to normal gross pay will result in tax savings for employees and will encourage spending in local shops, bars, restaurants and hotels. This has the potential to deliver a €50 million stimulus for our local retail and hospitality sectors at a time when it is most needed.”