Hoteliers seek cut in VAT rate

HOTELIERS want the rate of VAT reduced as part of December’s Budget in a bid to attract more tourists.

The Irish Hotels Federation (IFH) says that at 13.5% the VAT rate on accommodation and restaurants is the second-highest in Europe and damaging the businesses of many of its members.

The IHF said many businesses have seen their costs spiral and that was leading to higher prices, which was putting off potential tourists coming to Ireland.

The IHF said yesterday it was focused on being competitive and providing value for money for visitors coming here, but its efforts are hampered by the VAT regime and other increasing costs such as energy and as local authority rates and charges.

It said the high rate of VAT was a serious barrier to achieving the targets set by the Government-appointed Tourism Policy Review Group of doubling overseas tourism revenue by 2012.

IHF chief executive John Power says VAT on hotels much be reduced to 10% and he also wants an additional €15 million for the tourism marketing budget.

“Government reports have acknowledged the (tourism) sector as being the most important Irish-owned sector of enterprise, national and regional wealth creation and employment generation. The Budget provides an opportunity to safeguard this national asset and be a catalyst for future growth,” says Mr Power. He added some aspects of government policy was working against the interests of tourism and must be addressed if the country was to take best advantage of growth opportunities in tourism.

“It is surprising that, although 52% of every euro spent by visitors ends up going to the Exchequer, fiscal policies are still in place that inhibit the industry’s potential development.”

Although there was 5% increase in visitors in 2003 to 6.2 million, the industry saw its revenues rise by just 2.9% and this reflected increasing costs at home as well as competition from other countries for tourists.

“In addition, a combination of high costs and euro appreciation is fundamentally worsening the cost base of the hotel industry. This, combined with the punitive VAT rates, exorbitant local authority rate increases of some 12.7% and other indirect taxes, is placing the sector in a business cycle where its options to increase competitiveness are tremendously curtailed.”