Taoiseach ‘cautious’ about changing hospitality VAT rate

Changing sector’s 9% VAT rate could ‘do damage’ in light of Brexit, says Varadkar

Leo Varadkar: he said no decision had been made on the hospitality VAT rate

Leo Varadkar: he said no decision had been made on the hospitality VAT rate

 

Taoiseach Leo Varadkar has said he would be cautious about changing the special 9 per cent VAT rate for the hospitality industry in the upcoming budget.

Mr Varadkar said while the special rate was not needed to the same extent as when it was introduced, there needed to be consideration that “withdrawing it now could actually do damage” in light of Brexit. .

Speaking on RTÉ’s Morning Ireland, the Taoiseach said no decision had been made on the hospitality VAT rate.

“It has been very successful in helping us to re-grow our tourism and hospitality industry. It probably isn’t needed in the way it was back in 2011 or 2012, but we do need to be cautious of withdrawing this as well because we are starting to see a fall in the number of visitors in particularly from the UK.”

According to recent figures from Fáilte Ireland, visitor numbers from the UK account for more than 40 per cent of inbound tourists, but the numbers of people travelling to Ireland are down 6 per cent this year. The tourism body estimates this will cost the industry at least €88 million by the end of this year. Brexit is the main factor in the drop, while the fall in sterling has also had an impact.

Minister for Finance Paschal Donohoe has faced pressure from within the Department of Finance to phase out the lower rate which was introduced in 2011. Mr Donohoe during the summer played down the prospect of abolishing the rate, citing concerns over Brexit.

Special rate

The tourism industry has called for the special rate to be retained. In a pre-budget submission the Irish Tourism Industry Confederation (ITIC) said retaining the 9 per cent rate on tourism services would support the cost of competitiveness of Irish tourism.

“We believe it works and continues to work. It is part of being competitive as it is not a rate that is out of line with our tourism competitors. It is in line with the rest of EU countries,” said Maurice Pratt, chair of the ITIC.

In a statement the Irish Hotels Federation (IHF) said the 9 per cent VAT rate brought Ireland’s rate into line with other European destinations with which Ireland competes.

“The tourism recovery cannot be taken for granted. Visitors from Britain are down 6.4 per cent so far this year, with regional tourism the worst affected. Given the negative impact Brexit is already having on tourism it is vital that the 9 per cent VAT rate remains at its current level,” said the IHF statement.