Budget cuts and taxes

Fri, Oct 4, 2013, 01:10

Sir, – Arthur Beesley writes that 1,000 respondents were asked in an Irish Times/Ipsos MRBI survey what were the top three spending areas that they would cut if they were in government and were preparing Budget 2014 (Front page, October 2nd).

Apparently, 18 per cent of those surveyed said that they would cut university staff pay; 17 per cent would cut public sector pensions and 9 per cent medical payments to GPs and pharmacists.

Would it not be more clear-cut and meaningful to say that 82, 83 and 91 per cent of those surveyed were not in favour of cutting any of those spending areas? – Yours, etc,

MAURICE BIGGAR,

Fairwood,

Tinahely, Co Wicklow.

Sir, – With polls clearly indicating that the majority of the population wants a smaller budget adjustment, should the Dáil banish the Fine Gael austerity junkies to the opposition benches?

There is still time to put a new taoiseach, government and budget in place before year-end. – Yours, etc,

FRANK O’CONNOR,

Hillcourt Road,

Glenageary,

Co Dublin.

Sir, – I was surprised and shocked to read Minister for Finance Michael Noonan was contemplating the return of the 13.5 per cent VAT rate for the hospitality and restaurant trade (Home News, September 27th). This would be sheer madness in the current economic climate. For the first time in five years the industry was showing signs of growth, following years of massive decline (24 per cent in visitor numbers, 30 per cent in tourism revenue since 2008). Tourism has the capacity to play an important role in the regeneration of the domestic economy. Since the reduction of the VAT in 2011 it has created over 15,000 jobs in accommodation and food services. There is no quicker way to increase employment than through the hospitality sector, thanks to its labour intensive nature and regional economic impact. Little or no capital investment is required as the product already exists.

Like most other businesses, firms in the tourism sector have aggressively tacked their cost bases in order to remain viable. Hotels and restaurants have achieved significant reductions and passed these on to customers, but some problem areas remain. Many State-controlled or -influenced costs in particular have not come down; local authority rates and energy costs (up 50 per cent since 2005) remain a substantial burden, food costs have also increased substantially over the past year, up 6 per cent in 2013 alone. An increase in VAT will have a dramatic effect on our competitiveness with most of our major European competitors having lower VAT rates than Ireland.

My fear is that any further increase in costs or VAT will drive the hospitality industry towards a low-cost model. The only element of cost that we seem to be able to control is labour, you can see more and more establishments purchasing ready-made foods to reduce this labour cost. Currently at Kelly’s Resort Hotel we employ 197. Since there is no appetite in the market to increase room rates our only option will be to reduce our labour force by 12 to 14 persons if the VAT rate is to increase to 13.5 per cent. This is shameful in a country screaming 14 per cent unemployment.

The retention of the 9 per cent VAT rate is essential to attract foreign tourists but also to restore domestic demand. Total tourism and travel expenditure by Irish residents overseas was €4.4 billion in 2012, which is nearly €1 billion more than tourism and travel earnings from overseas travellers to Ireland. A strong domestic tourism market is a vital element in the recovery of the industry; we have to remain competitive in the domestic market to stop this outflow of Irish money to our competitors. – Yours, etc,

BILL KELLY,

Managing Director,

Kelly’s Resort Hotel & Spa,

Rosslare,

Co Wexford.

Sir, – With the exception of the construction industry, few sectors of Irish industry have been as negatively affected by the domestic and international downturn as the hospitality sector. In this week’s newspapers a further eight hotels appeared for sale in receivership.

Within 20 miles of Ballynahinch Castle, four long-established hotels have permanently closed. This results in the loss of much-needed jobs, reduced offers for our visitors and neglected buildings. These hotels closed before any measure was taken to support the industry. The VAT rate reduction on accommodation and food to 9 per cent has given many hoteliers a real chance of survival.

While many have struggled to meet their financial commitments, the reduction in VAT rates has given them the chance to breathe and consider ways to strengthen their businesses. The industry has not awarded itself pay increases and bonuses, it has instead sought to expand its offer and has created more jobs.

One swallow does not a summer make and as Minister for Finance Michael Noonan was at pains to stress, despite the recent positive reports of exiting recession, the economy is by no means robust. Similarly the modest recovery in the tourism sector is fragile and many businesses are still in a precarious position. In order to allow the positive effects of the 9 per cent VAT rate to take proper hold and bear lasting results, it should for the foreseeable future remain unchanged. Having implemented a strategy with proven results, it would be foolish of the Minister to now abandon it. – Yours, etc,

PATRICK O’FLAHERTY,

General Manager,

Ballynahinch Castle Hotel &

Estate,

Connemara, Co Galway.