Restaurants association calls for Minister to resign after VAT u-turn

Restaurants association calls for Minister to resign after VAT u-turn

The Restaurants Association of Ireland has called on Tourism Minister Shane Ross to resign over the hotel VAT hike u-turn, saying he has "consistently failed" the sector.

The RAI lashed out at the Independent Alliance TD this afternoon after Finance Minister Paschal Donohoe confirmed the VAT for the sector will surge from 9% to 13.5% next year.

In a statement moments after the news was confirmed, RAI chief executive Adrian Cummins said "this was the incorrect decision and had little economic intelligence", warning: "VAT at 13.5% reduces Irish tourism's competitiveness" at a time when Brexit continues to threaten the country.

Saying "this was an election budget paid for by the restaurant and tourism industry", Mr Cummins said up to 27,000 jobs will be "put at risk" by the VAT hike.

And while criticising Fine Gael for the measure, the RAI targeted Tourism Minister Shane Ross, saying he should resign because he has "consistently failed" the sector.

The Irish Hotels Federation was similarly questioning of the move, saying the hike "represents a reckless failure to recognise its economic potential and importance, particularly to rural Ireland".

The VAT hike will also impact on hairdressers and B&Bs.

However, a number of other sectors will see their VAT rates go the other way, with newspapers and sports facilities set to see their VAT rate remain at 9% and the VAT rate on electronically supplied publications cut from 23% to 9%.

Restaurants association calls for Minister to resign after VAT u-turn

Reacting to the announcement today the Irish Hotels Federation (IHF) expressed its deep disappointment at the increase.

Michael Lennon, President of the IHF said the increase is a serious jolt to the tourism industry in Ireland and represents a reckless failure to recognise its economic potential and importance, particularly to rural Ireland.

Mr Lennon urged the Minister to defer the increase until there is clarity over Brexit and to allow existing contracts for group bookings to be completed as prices are already agreed.

“Ireland will now have a higher tourism VAT rate than 26 countries in Europe with which we compete.

"We are already a very high cost economy by international standards so it is astonishing that the Government is now imposing additional taxes on tourists and making our country less attractive as a destination.”

“Have no doubt, this increase will hurt tourism across the country but businesses outside of Dublin will be hit the hardest. Regional businesses will bear the brunt, as about €300m of the €466m in additional taxes will be taken from the rural economy, which has been slower to recover from the economic crisis. This is a devastating blow for the many tourism businesses that struggle to break even or stay open outside the peak season.”

Commenting on the changes to the VAT rate in the hospitality sectors, John Stewart, Tax Director at Deloitte said the increase in the VAT rate will not have any impact on the already high rents being charged in the residential letting market as, in contrast to holiday type accommodation, that accommodation is exempt from VAT.

“Increasing the rate impacts all VAT registered business in the affected tourism sectors regardless of their size, location or turnover as VAT rules do not allow for the increased VAT rate to only apply to certain businesses such as large hotels.

"However, the VAT rate increase will have no impact on non VAT-registered businesses including many of those in the B&B sector where over three times as many B&Bs are not VAT registered. Consequently, the good news for those smaller operators is that, although they did not benefit from the introduction of the reduced VAT rate, they will not suffer any financial cost as a result of the increase in the rate.

“The 9% rate was introduced initially for a three year period following a deep recession and has cost the exchequer an estimated €490m in 2017 and €2.6bn in lost VAT revenue since its introduction.

“With Brexit looming on the horizon and the resulting uncertainty there is a concern that any change to the VAT rate could negatively impact the level of UK tourists coming to Ireland. However, it is expected that the change in the VAT rate will not have a material impact on the number of UK visitors particularly as almost half of all British tourist stays in Ireland in 2016 did not contribute to the domestic accommodation sector as they stayed with friends and family.

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