Hotel federation criticises expiration of 9% VAT rate

'Increasing taxes on holidaymakers and Irish consumers is the last thing we should be doing,' Denyse Campbell, president of the IHF said

The lower VAT rate of 9% expired at midnight on Thursday and reverted back to 13.5%. 

The Irish Hotels Federation (IHF) has criticised the Government for letting the special 9% VAT rate for the hospitality and tourism sectors expire, saying it undermines Ireland’s “ability to compete” for international visitors.

The Government has long signalled that the 9% rate would expire at midnight on Thursday with the rate going back up to 13.5%. The lower rate was re-introduced during the pandemic to help struggling businesses and later extended to help them deal with rising inflation and the cost-of-living crisis.

The expiration of the VAT reduction has also been criticised by associations representing pub owners as well as restaurateurs.

Denyse Campbell, president of the IHF, said it comes at a time when Irish consumers are “already under financial stress with persistent inflation and soaring mortgage interest rates”.

“It is a serious blow for our sector, including hotels and guesthouses which have experienced enormous increases in the cost of doing business,” she said, adding that rural and regional businesses outside of tourism hotspots will be hit the hardest as will businesses that rely heavily on food and beverage sales.

Ms Campbell called this move a “significant step back” for communities that rely on the tourism and hospitality industry as a major driver of economic activity. “Increasing taxes on holidaymakers and Irish consumers is the last thing we should be doing,” she said.

Figures published by the Central Statistics Office (CSO) last week show that tourists to Ireland stayed here for roughly a week on average and spent €1,357 each.

That average consisted of air fares of €387, €42 on pre-payments, €452 on accommodation, and €493 on day-to-day expenditure.

In June, 619,000 people visited Ireland from abroad of which 36.8% were from Britain and nearly 24% from the US. The total estimated spend by these foreign visitors was in the region of €841.2m.