‘More needed’ on Vat front if tourism is to survive the crisis

The Government has potentially set back the recovery of the Irish tourism industry, and endangered its survival, by not slashing the tourism Vat rate to 5%, an industry body has said.
‘More needed’ on Vat front if tourism is to survive the crisis
Minister for Finance Paschal Donohoe TD leaving the Cabinet Meeting in Dublin Castle this afternoon.Photo: Stephen Collins /Collins Photos Dublin

The Government has potentially set back the recovery of the Irish tourism industry, and endangered its survival, by not slashing the tourism Vat rate to 5%, an industry body has said.

The long-awaited July stimulus package has also been slammed as being “not strong enough to stabilise the SME sector”.

Both sectors plan to aggressively lobby the Government for more action in the October budget after deeming this plan not to have achieved nearly enough.

The Restaurants Association of Ireland said no decrease in tourism Vat is “a nail in the coffin” for hospitality businesses in the border counties, as they will be competing with a 5% rate in the North.

Finance Minister Paschal Donohoe said a broad tax reduction – seen via the cut from 23% to 21% in the headline Vat rate - would best help.

The tourism-related aspects of the stimulus package – essentially a tax rebate/voucher scheme for consumers aimed at boosting domestic holiday demand, and a €10m start-up grant for tourism businesses – were welcomed by the Irish Tourism Industry Confederation (ITIC).

However, along with the overhaul and extension of the temporary wage subsidy scheme and an extension to commercial rates waivers, ITIC said these were only “important first steps”.

The wage subsidy scheme currently supports 400,000 jobs and the pandemic unemployment payment scheme – also extended to April – supports 313,800 people.

“Much more is needed if tourism and hospitality businesses are to have any hope of surviving this crisis,” said ITIC chief executive Eoghan O’Mara Walsh.

“As many as 20,000 tourism and hospitality businesses are clinging on by their fingertips and they need wide-scale financial support to prevent significant job losses and business closures, particularly in regional Ireland.” 

ITIC wanted a €1.5bn injection to support tourism businesses and a temporary reduction from 13.5% to 5% in the tourism Vat rate to maintain Ireland’s competitiveness. 

Since the UK made the same Vat move recently, only Denmark has a higher tourism Vat rate than Ireland in Europe.

SMEs will benefit from expanded restart grants, initial 0% interest rates on loans and increased seed capital. 

The Small Firms Association said the measures will allow SMEs to access investment funds and working capital, while parent body Ibec said the plan was “a timely confidence and investment boost”.

However, SME Recovery Ireland chair John Moran said the overall measures “simply do not go far enough to prevent firms from folding”. 

He warned that if more is not done in Budget 2021 and October’s National Economic Recovery Plan the overall cost of reviving the economy will grow.

“Being too frugal at this critical stage is a mistake…The longer we wait to fix the problem, the bigger the bill to fix it will be,” he said.

Cork Chamber CEO Conor Healy said: “As with previous Government supports, the proof will be the accessibility and clarity for business and the community. 

"We will review the details of the supports and will liaise closely with Chamber members to assess the effectiveness of these schemes.”

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