Tourism body fights to keep reduced Vat rate

The country’s main tourism industry group has warned any UK recession sparked by the Brexit vote will inevitably directly hit Ireland as it urged the Government to make the reduced Vat rate tax an untouchable part of the tax code here.

Tourism body fights to keep reduced Vat rate

In its pre-budget submission, the Irish Tourist Industry Confederation said the drop in the value of sterling against the euro since the June 23 vote makes the UK “a better value” destination for overseas’ tourists at the cost of Ireland.

It wants the Government to keep in mind the importance of the industry and the almost 227,850 people the industry employs ahead of October’s budget.

Eoghan O’Mara Walsh, chief executive at the ITIC, said the Government ought to make good its promise to fully restore its international promotional budget to pre-crisis levels and that the reduced Vat tax of 9% should be a “pillar” in the same way that the 12.5% corporation tax is widely accepted as a permanent fixture of Ireland’s tax code.

In papers released by the Department of Finance last month, the Government’s Tax Strategy Group reported that reverting back to the 13.5% tourism Vat rate would bring in €626m in additional revenue for the exchequer each year.

Since its introduction in 2011, the tax cut has cost the exchequer €1.2bn, the Tax Strategy Group said.

The Tax Strategy Group said that Ireland’s 9% rate is the fourth lowest levied on restaurants in the EU, along with Romania, Cyprus and Slovenia.

And its is the eighth lowest rate levied on hotel accommodation, along with Romania, Lithuania, Cyprus, Estonia and Bulgaria.

Citing research by PwC, the tax group said that Dublin hotels had the second highest rate for room occupancy in Europe after London, and prices in Cork and Killarney and “far beyond Dublin” were rising strongly too.

“Maintaining the reduced Vat rate must be viewed in this context,” said the Tax Strategy Group.

However, Mr O’Mara Walsh said that the cost of the reduced rate was in fact zero when the increase in numbers visiting the county was taken into account.

He said that hotel room prices in Dublin had risen because so few hotels had been built in recent years.

After creating 35,000 jobs across all parts of the country in the last four years, the tourism industry believed that the reduced tax rate should be a “permanent pillar”, he said.

Sterling had fallen by over 10% since the Brexit vote which was “bound to impact” the tourism numbers, while any UK recession would automatically affect the number of British visitors, Mr O’Mara Walsh said.

ITIC again said it believed the Government’s long-term targets for the industry were “not ambitious enough”.

It said the industry attracts 8 million overseas’ tourists, employs 227,840 people and contributes €1.8bn in revenues to the exchequer.

“Tourism is performing strongly at the moment and s Ireland’s leading indigenous sectoral employer but ensuring sustainable growth and regional balance cannot be taken for granted,” the industry group said.

“Brexit poses a two-pronged immediate-term challenge for the tourism sector in Ireland. The UK has become a better value location for international holiday-makers due to the fall sterling and UK visitors will find Ireland more expensive as a result,” it said.

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