Failure to extend 9% tourism VAT beyond next August ‘disaster’ say restaurants

Tourism industry welcomes spending package of more than €100m

The Budget 2022 package for tourism and hospitality has received a mixed reaction from different quarters of the industry. The decision to extend wage subsidies to the end of next April was welcomed, as was a package of spending tourism and hospitality spending measures of more than €100 million.

However, the failure to extend beyond the end of next summer the special 9 per cent VAT rate for the sector was labelled a “disaster” by restaurants.

Meanwhile, the wider tourism industry welcomed €89 million in business continuity grants and extra marketing funds, as well as €60 million to extend to the end of the year a waiver on commercial rates for hospitality tourism and arts.

The Restaurants Association of Ireland (RAI) said the budget was "disastrous, [with] no ambition to stimulate and revitalise the tourism industry", which has been one of the worst hit by the pandemic.

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Rate

The Government had already confirmed earlier this year the extension to the end of August 2022 of the special 9 per cent rate for the sector introduced in last year’s budget.

The industry lobbied hard for a further extension, and the RAI said the planned return to a 13.5 per cent rate on September 1st next year would contribute to demise of many businesses.

"The VAT rate ending, and wage supports tapering off will be the death nail in the coffin of many hospitality businesses this winter. Although the supports offered in today's budget are welcomed, there are still some long hard months ahead," said Adrian Cummins, the RAI's chief executive.

Eoghan O'Mara Walsh, the chief executive of the sectoral umbrella group, the Irish Tourism Industry Confederation, said it was "very disappointing" that the VAT rate had not been extended: "It damages our competitiveness when industry will be in fragile recovery phase. Ireland to have one of the highest tourism Vat rate across European Union. "

Philip Nolan, VAT Partner at financial advisory group BDO, said the failure to further extend has caused "much disappointment... following an extremely challenging period".

Mr O'Mara Walsh welcomed a further €50 million announced by Minister for Public Expenditure Michael McGrathin business continuity grants that will be administered by Fáilte Ireland, expressing the hope they will be paid "promptly" in the first quarter of the year.

Funding

Mr McGrath also announced €39 million in enhanced funding for tourism marketing. Mr O’Mara Walsh said the split between extra marketing funding for domestic and international tourism would be “crucial”. Minister for Tourism Catherine Martinlater said that €35 million of the funding would go on international marketing.

She also signalled a further €10 million in funding for industry skills training, digital technology, and financial support for the Aer Lingus US College football classic, due to be held in the Aviva stadium next year.

The Vintners Federation of Ireland, which represents pubs outside of Dublin, welcomed the extension of wage subsidies and the industry’s financial supports as “meaningful”, but said it was “disappointed by the VAT decision.

The tourism industry also welcomed a €90 million package of spending measures for aviation, to help boost connectivity to the State. The restoration of key airline routes after the lifting of public health restrictions has been a key industry demand to help reboot the tourism and hospitality sector, which employed 265,000 before the pandemic.

Mark Paul

Mark Paul

Mark Paul is Business Affairs Correspondent of The Irish Times. He also writes the Caveat column