Tourist tax would shut businesses and lead to job losses, industry body says

A proposed tourist tax would devastate the industry and provoke job losses across Ireland, representatives are warning.

The Irish Tourism Industry Confederation (ITIC), an umbrella group for hotels, other accommodation providers, pub-owners, restaurants and attractions, said businesses “will not survive” if the Tax and Welfare Commission suggestion goes ahead.

Elaina Fitzgerald Kane, chair of the ITIC, said the measure would also further hike inflation and leave Ireland a less attractive place to visit at a time when purse strings are being tightened across the world in the teeth of an energy and cost of living crisis.

“There is a real cost-of-living crisis right now, but there is also a cost of business crisis,” she said.

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“It is a double whammy for the tourism industry and there is already a lot of concern about what lies ahead - 2023 is not going to be a normal year.

“There are a lot of issues being carried over from the pandemic, the outlook is not strong - we have never seen higher inflation in the UK, our largest market, and there is negative growth forecast in the US - and people will have less disposable income.

[ ‘Accommodation tax’ for tourists proposed by Tax and Welfare Commission ]

“This is the wrong time for any tourist or bed tax. It will be just too difficult to sustain. We will see livelihoods lost, a lot of businesses just won’t be able to keep going.”

The ITIC includes the Irish Hotel Federation, Restaurants Association of Ireland, vintners representatives, airliners, ferry operators and major tourist draws like the Guinness Storehouse.

The Tax and Welfare Commission has floated the idea of an extra “accommodation tax” levied on tourists to Ireland to support the cost of their use of public services while here.

In a report, unpublished but sent to the Department of Finance, it argues similar charges are already in place in many other European capitals, including Paris, Berlin and Vienna.

While it does not recommend a rate, it says similar levies around Europe average between €0.40 and €2.50 a night.

Ms Fitzgerald Kane, a former president of the Irish Hotel Federation, said before the pandemic tourism in Ireland was a €9.2 billion industry, €7 billion of which came from overseas visitors.

It still has not recovered to pre-2019 levels and economic uncertainty globally “probably means a falling level of demand, both internationally and domestically,” she added.

“Tourism already contributes €2 billion in tax returns to the exchequer, it employs 270,000 people - 70 per cent of those outside Dublin. It is a major regional employer, Ireland’s largest indigenous sector, and many communities around the country are totally dependent on it.

“The pandemic really showed that, when the industry ground to halt.

“We are really grateful for government support through the pandemic, because there would be no tourism sector now without them, but the industry isn’t expected to recover to pre-2019 levels until 2026.

“That is a long road ahead, with a lot of uncertainty.”

On the commission’s call to curb reduced VAT rates, tourism is currently operating on a cut 9 per cent VAT rate, Ms Fitzgerald Kane said a return to a 13.5 per cent rate would make it the highest in Europe after Denmark.

“The 9 per cent VAT is the natural rate for the tourism industry,” she said. “It keeps us on an even keel. If it goes up, whatever chance we have of trying to stay competitive will be gone.

“Introducing a bed tax or tourist tax on top of that just takes us a step further. There would be huge concern about anything done that causes further inflation.

“The market just won’t be able to sustain it. It is critical that we keep VAT at the lower rate.”