VAT hike comes 'at the worst possible time with Brexit looming', says tourism chief

Rising revenue and a record number of overseas visitors made 2018 a highly successful year for Irish tourism, but industry chiefs are warning of upcoming threats to the sector in the form of Brexit and an impending VAT hike.

VAT hike comes 'at the worst possible time with Brexit looming', says tourism chief

Rising revenue and a record number of overseas visitors made 2018 a highly successful year for Irish tourism, but industry chiefs are warning of upcoming threats to the sector in the form of Brexit and an impending VAT hike.

To help offset the challenges, the Irish Tourism Industry Confederation (ITIC) has called on tourism agencies to roll out a Brexit fund for business, similar to that of Enterprise Ireland and Bord Bia.

Expansion in air and ferry services would also help with the growth of Irish tourism in 2019, the ITIC says.

ITIC chief executive, Eoghan O’Mara Walsh, warned that the Government has withdrawn a key enabling factor for the sector’s success by hiking up the VAT rate in the tourism and hospitality sector from 9% to 13.5% as of January 1.

“The decision by the Government to increase the tourism VAT rate by 50% on January 1 imposes a €466 million tax on the tourism and hospitality sector next year.

“This is at the worst possible time with Brexit looming and tourism’s competitiveness diminished and ITIC repeats its call for this VAT hike to be deferred,” Mr O'Mara Walsh said.

In his Budget address last October, Finance Minister Paschal Donohoe said a review of the 9% VAT rate had found that the measure had "done its job".

He said in the new economic reality it is appropriate to increase the rate of VAT in the tourism sector to 13.5% from January 2019.

Mr O'Mara Walsh identified Brexit as the biggest threat to Irish tourism: “A hard Brexit would be very damaging to the Irish tourism and hospitality sector and it is estimated could cost Irish tourism €390 million in its immediate aftermath. 3.6 million British visitors came to Ireland this year and a hard Brexit is likely to knock the UK economy as well as impacting on aviation and regulatory regimes."

Mr O’Mara Walsh identified the return of a hard border as anathema to Irish tourism: “Tourism by its very definition is the free movement of people and a hard border across the island of Ireland would be extremely damaging and we urge the EU and UK to do everything possible to avoid [it]."

Ireland earned an estimated €6.9 billion from overseas tourism this year, comprised of €5.2 billion spent by overseas visitors when in Ireland and €1.7 billion spent with Irish airline and ferry companies. According to ITIC, an additional €1.9 billion is likely to have been generated in domestic tourism revenue, with a further €350 million earned from Northern Ireland visitors.

Expenditure by international visitors to Ireland was up 7% on the previous year with 25,000 new tourism jobs created in 2018.

It is expected that 9.6 million international tourists will have visited Ireland in 2018, with double-digit growth from North America and Europe.

ITIC estimates earnings from tourism for 2018 accrued €2.1 billion to the exchequer through direct tourism-related taxes. It estimates growth will continue in 2019 and that the sector can increase 5%-7% in volume and 6%-8% in value.

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