VAT rate for hotels must be reduced to 10%, says IHF

THE rate of VAT for hotels and restaurants should be reduced from 13.5% to 10% in the budget, the Irish Hotel Federation (IHF) urged yesterday.

In its pre-budget submission, the IHF says the increase in VAT last year was damaging the industry and making the country even more uncompetitive. It said that reducing VAT would bring Ireland in line with other European countries.

The IHF also wants the Government to allow VAT as a business input. It said hotel and restaurant costs are recognised as legitimate business expenses in most EU economies, but not in Ireland. “An Irish VAT registered company can reclaim the VAT on accommodation and restaurant charges, incurred for business reasons, in most European countries but does not benefit from the same treatment at home in Ireland,” the IHF said.

It added that Irish hotels and restaurants are at a competitive disadvantage in dealing with EU business customers, who are registered for VAT, and can claim credit for it for similar expenses in other EU countries but not for business expenses incurred in Ireland.

IHF president Jim Murphy also wants the Government to increase the amount it spends on marketing Ireland as a tourism destination by €40 million and wants the rate of excise duties on spirits to be brought back down to the level they were before last year’s budget.

“The position of the hotel and tourism industry remains difficult, with substantial uncertainty over projected growth in 2004. Within a stagnant international economic environment, a number of fundamental budgetary measures are urgently required to stimulate growth.”

With world tourism expected to double in the next 20 years, Ireland could be left behind the IHF said, unless action is taken to improve the tourism product.