Tourism firms may raise prices to pay off warehoused tax bills

Accommodation & Food Services businesses have until May 1 to repay the debt or enter a phased repayment arrangement.

More than 900 food and accommodation businesses in Ireland's hospitality sector owed at least €50,000 in warehoused tax debt with over 100 firms owing at least €500,000.

Analysis carried out by Fáílte Ireland found that businesses in the Accommodation & Food Services sector still owe more than €265m as of January 2024 out of a total of €1.7bn owed by various businesses.

Introduced as a business support measure during covid, participating firms could defer payment of VAT, PRSI and other tax bills. Over concerns about the impact on businesses that must still repay the warehoused tax, the government agreed to cut interest rates on the debt from 3% to 0%. 

All businesses have until May 1 to repay the debt or enter a phased repayment arrangement. However, Fáilte Ireland said repaying the debt will place financial stress on owing firms. 

A survey carried out by the tourism body in January found just 17% of tourism businesses availed of the scheme in the first place. But of those who did, 47% have yet to arrange a repayment arrangement with Revenue. 

Half of these firms also said repaying the debt would have a 'significant' impact on their business. According to the survey, tourism businesses expecting a moderate to significant impact of the debt repayments plan to deal with it in different ways. 

The most frequently cited action is to ‘stop or reduce investment in the business’. Fáílte Ireland noted that it may help in the short term, but this could harm the quality of the industry’s offering in the longer term

"The indication is that stopping or reducing investment is the most common action in all sectors and regions with a sample size of substance," Fáilte Ireland said.

They also warned that prices in the industry could rise with 41% of firms considering increasing revenue as a way to pay off the debt which Fáilte Ireland said could put Ireland’s value-for-money proposition at "further risk".