Varadkar pushed for 9% Vat rate

Finance Minister Michael Noonan, retained the 9% VAT rate for the hospitality industry after the successful intervention of the Minister for Transport and Tourism, Leo Varadkar, new documents show.

In this month’s budget, Mr Noonan retained the 9% Vat in spite of giving strong indications in the run-up to the budget that he would increase the rate.

The retention of the 9% Vat rate was the subject of strong lobbying from the hospitality industry and new documents released in response to a Freedom of Information request show that Mr Varadkar wrote to Mr Noonan to highlight the merits of retaining the 9% rate.

Mr Varadkar asked Fáilte Ireland to commission a report on the impact of the 9% rate with the report carried out by Deloitte.

In his letter dated Jul 31 to Mr Noonan, Mr Varadkar stated that in light of the report, “I believe that not only are there very strong economic grounds of maintaining the 9% rate, but that it is affordable from an Exchequer perspective”.

Mr Varadkar said that the measure to reduce the rate to 9% “has been one of the most successful job creation measures implemented by Government to date”.

He said: “It has helped to drive an increase in overseas tourist numbers and revenue due to an improved perception for value for money in Ireland which has in turn helped to create between 10,000 and 25,000 new jobs depending on which study you provide.

He added: “It has also been recognised as evidence of the strong commitment by the Government to job creation in a labour-intensive export-orientated service industry.”

Mr Varadkar stated: “The Vat reduction is one of a number of similar measures being taken across Europe, including in Germany, France and Switzerland, to boost employment and economic activity in tourism and hospitality sectors, with some of the reduced Vat rates significantly below 9%.”

Mr Varadkar said the cut to 9% “has contributed to a marked and continuing improvement in Value for Money (VFM) perceptions of Ireland by overseas visitors.

He said: “It is likely that improved perceptions of VFM have also contributed to increased spend by overseas visitors and, in that regard, revenue from overseas visitors increased in 2012 by €158m.”

President of the Irish Hotels Federation, Michael Vaughan said yesterday: “The intervention by Minister Varadkar doesn’t surprise us as he has been a stalwart and a champion of the hospitality industry from the get-go.”

Mr Vaughan said the retention of the Vat rate will have a widespread impact. He said: “It will increase jobs in tourism and to have increased the rate would have sent out the wrong message internationally.”