Hoteliers have defended the €626m-a-year cost to the exchequer of retaining the low, 9% Vat level for hospitality, saying the buoyancy in tax revenues from the additional jobs and business is making up for the lost tax revenue.
The 9% Vat tax for hoteliers and restaurants, which former finance minister, Michael Noonan, cut from 13.5% to help boost jobs at the depth of the financial crisis, has come under the spotlight, because of its high cost and the prices of hotel accommodation in Dublin and other cities tapping a tourism boom.
A year ago, the Department of Finance said the Revenue estimated that reverting back to the 13.5% rate would bring in extra revenue of €626m. The estimated cost, since its introduction in 2011, to the end of 2015, was €2.1bn.
The department said Ireland’s 9% rate was among the lowest in the EU on hotel accommodation and restaurants — levying the fourth-lowest vat rate on restaurants in the EU, with Romania, Cyprus, and Slovenia; and the EU’s eighth-lowest for hotel rooms, with Romania, Lithuania, Cyprus, Estonia and Bulgaria.
But Joe Dolan, president of the Irish Hotels Federation, said the rate was “realigned” to compete with other European countries and marks an investment by government in an indigenous industry that has created 50,000 jobs in the last five years.
“We believe, over the next four years, we will generate 40,000 jobs,” Mr Dolan said, adding that the 9% tax has kept Irish businesses outside the cities open.
The IHF’s latest monitor showed that most Irish hoteliers reported increased business from American, German, and French visitors, as well as Irish on “staycations”.
But border areas, in particular, were suffering from reduced spending and visitors, because of the slump in the value of sterling against the euro, he said.
“Continued growth remains a priority for the sector, which is the country’s largest indigenous employer,” Mr Dolan said.
Irish tourism “is underpinned by important measures, as the zero-rate travel tax and the 9% tourism Vat rate, which brings us into line with other countries in Europe”.
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