After a stellar year, tourism seeks out certainty on low Vat

The country’s main tourism business group has hailed a “stellar year”, but says it could do even more if only it was sure the extra-low tourism Vat rate was here to stay.
After a stellar year, tourism seeks out certainty on low Vat

The Irish Tourist Industry Confederation (ITIC) comprises hoteliers, travel and airline companies, and visitor attractions.

It estimates that with €7.3bn annual revenues, tourism is now one of the few leading industries that spreads prosperity and jobs around the country.

International tourists spent €4.1bn and paid €1.3bn to Irish airlines and ferries in getting here.

ITIC nonetheless says the industry’s contribution to the country’s wellbeing and economic recovery is underappreciated.

One in every five jobs created in the past five years was in some way linked to tourism and hospitality, and the industry will hire 6,800 more people in 2016 to meet the growth in visitors from overseas and the upswing in domestic holidaymakers.

In a media briefing yesterday, ITIC chiefs purposefully didn’t hide their exuberance, hailing successes of recent years in securing tax changes for its members.

The Government had “seen sense” in recent years in removing the airport departure tax — even as the UK has kept its version of the passenger tax.

The 9% Vat on the hospitality rate, though envisaged as a temporary measure, had outperformed in terms of the tax receipts generated for the exchequer, it said.

As can be expected, the cost to the exchequer from the Government’s 2011 decision to reduce the Vat rate from 13.5% to 9% on tourism, restaurants, and hotel accommodation is hotly disputed by the tourism industry.

Initial estimates suggesting the annual loss would be a substantial €350m have been challenged by ITIC and its consultants.

They argue that the full-year costs amount to €160m at most, before the so-called buoyancy effects are taken into account.

Meanwhile, tourism interests in the North have campaigned for an all-Ireland tourism Vat rate, and some Stormont ministers and MLAs have pledged to lobby for its introduction.

In his October budget, Finance Minister Michael Noonan held the tax steady at 9% for another year.

The industry, however, says that uncertainty about the tax hovers over the industry, which is in no way helping private investors to predict revenues and profits that will flow from building and operating new hotels or new visitor attractions in the coming years.

ITIC yesterday insisted that the reduced Vat tourism rate was the right one for the Republic, matching the accommodation tax rates applied across many countries on the continent.

ITIC chairman Paul Gallagher cited the relative underperformance of Scotland as an example of the success of the low Vat tax in the Republic.

Even though competing with Ireland by and large with the same tourism product, Scottish tourism was not tapping the same growth in overseas visitors.

The Vat rate “is not a lower rate, it is the right rate”, Mr Gallagher told reporters.

He said tourism should be regarded as a unique exporting business and one that can bring huge benefits across the country.

Visitor numbers from overseas have reached 8m.

By number of visitors, Britain remains the single largest market, though continental Europeans and North Americans outspend the British when they get here.

Most markets grew last year, including the so-called emerging markets in Asia.

ITIC hailed the performance of a “remarkable” record year as “a testimony” to the way the industry and Government had worked hand-in-hand in recent years.

It also tapped some of the most favourable winds any industry could have expected.

The slump in the euro against sterling and the dollar means visitors get so much greater value for their money when they get here.

The oil price slump has helped contain the costs of air and ferry travel, and also helped control costs of many hotels and restaurants.

New airline routes to Dublin, Cork, and Belfast have improved the ease of getting here in the first place.

As long as the Government pursues the right policies, said ITIC chief executive Eoghan O’Mara Walsh, the industry is set for another record performance in 2016.

However, tourism is far from reaching its full potential, ITIC says.

Pinch points, including a shortage of hotel rooms in Dublin to meet the peak tourism season, are holding it back.

Some of the country’s top attractions — the Guinness Storehouse and the Book of Kells in Dublin — are also reaching full capacity.

ITIC says that investment in technology for visitors in top heritage sites, including at Brú na Bóinne, could help a lot, while the budget of Government agency OPW to maintain historic sites is “a sticking plaster” and needs to be increased.

Mr Gallagher said the Government needs to significantly boost the amount it plans to spend in its capital plan to €50m a year, to help meet some of these capacity constraints.

More could be done to attract visitors to seaside towns, including Youghal and Bray.

The proposed cycle and walkway from Dublin to Galway will set the standard for such projects.

However, too few international visitors travelling from Dublin turn right at Galway and fail to venture in to Donegal, says ITIC.

The confederation also supports the construction of a dual runway at Dublin Airport and rejects claims that Dublin hoteliers are fleecing visitors because of the shortage of hotel rooms.

Overall, tourism industry chiefs are remarkably upbeat. “It has been a stellar year,” Mr Gallagher said.

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