Zoos, costs and Covid 19
The are many examples of how Covid 19 is affecting business. An article in the Irish Times of 18/11/2020 provides a nice example, from Dublin Zoo. We all love a visit to the Zoo – well, I certainly do – but we probably never stop to think about the costs of running a zoo.
According to the Irish Times article, Covid 19 has left a €10 million hole in the finances of Dublin Zoo, and it costs €500,000 per month to feed and care for the animals. Looking at recent annual reports, the annual income of Dublin Zoo is about €20m. That would mean about 30% of the the income is used to cover feeding costs (500000 x 12 = €6m). This is a fixed cost, as the animals must be feed and cared for. If income has fallen to zero in recent months due to Covid 19, it is easy to see how Dublin Zoo – or any zoo – could get into financial trouble quite quickly.
Cost effectiveness and social housing in Ireland – should VAT be part of the debate?
First of all, let me say I am no expert on the area of social housing, so I apologise in advance if I am missing some key points in the debate. Second, this blog post emerged as I searched for some thoughts on cost effectiveness. The post may be a little Ireland-centric in context, but I am sure Ireland is not the only country where the sale of new homes is taxed.
Housing is an ongoing problem in Ireland, and the issue of affordability is often mentioned by the media, governments and other actors. While searching for some material on cost effectiveness, I found several articles which suggested that more affordable homes/social housing could come from local authorities taking on the building themselves. This makes some intuitive sense in that a construction firm’s profit margin does not need to be paid and thus the cost per house may be lower. However, this made me think of two things:
- When I was younger (30-35 years ago) local authorities began to phase out building and maintenance of homes as third parties could do so more efficiently and at a lower cost. Thus, an infrastructure to start doing so again is not there, needs to be built (pardon the pun) and will cost money.
- The VAT rate on new homes is 13.5 % presently. Thus, if a person pays €350000 for a new home, €42,630 is VAT and must be paid over to the government – assuming a developer builds/sells a house. If a local authority (e.g. a city) built a house for re-sale, as far as I know VAT is still included in the price. If it were renting the house to a tenant – again as far as I know – it is not chargeable, but VAT on the cost of building cannot be reclaimed.
You may be thinking, so what, as the VAT can be used by the government to build more houses, or even be paid back to the purchaser – I do not believe we can be sure the former would happen (unless ring-fenced), and the latter does not happen as far as I know.
Taking the above two points, it is questionable if house building by governments is more cost effective. If we consider VAT as a cost to the end-purchaser, surely some scheme which reduces or eliminates VAT in certain circumstances would result in more cost effective housing regardless of who builds them?
Martin's accounting blog 