Tourism and retail groups have slammed the Government over a “botched” attempt to safeguard small traders through changes to a Vat refund scheme for tourists.
They said the Government’s decision to lower the spending threshold on its Vat refund scheme for non-EU visitors does not go far enough and will do nothing to help small retailers who are heavily dependent on the holiday spend of visitors from North America and the UK.
The Government has effectively conceded that proposed changes to the existing Retail Export Scheme, which allows non-EU tourists claim Vat refunds on gift items purchased here, were flawed.
Changes are being proposed to the scheme as part of wider legislation to prepare Ireland for Britain’s exit from the EU. It had been proposed that all tourist gift purchases costing less than €175 be excluded from the scheme due to the fear it may be abused after Brexit.
“Tourism groups have said the passing of a bill proposing changes to the tax-free shopping status of non-EU visitors would be an “own goal” and “disastrous” at a time when in-bound tourism is already on its knees due to Covid flying restrictions.” https://t.co/RikwJYO0fA— Eoghan O'Mara Walsh (@EoghanOMW) November 17, 2020
That would have essentially compromised many small retailers as nearly 85% of refunds have been for purchases of less than €175 and shoppers would have been forced to buy bigger ticket items elsewhere to qualify for refunds.
The Government has now agreed to a lowering of the spending threshold to €75.
Finance Minister Paschal Donohoe said the lowering of the threshold will minimise the scope for abuse of the scheme and will be “important” for retailers.
However, neither retailers nor tourism chiefs agree and they say the threshold remains too high.
Blarney Woollen Mills CEO Freda Hayes, who is spokesperson for the ‘Stop Another Tourism Tax’ retail campaign, said the reduction “will do nothing” to protect retail and tourism.
She said around 50% of all transactions are under €75, meaning the changes to the scheme will still be “a huge blow” to small independent retailers who don’t sell high-value items.
Ms Hayes said her alliance is seeking an urgent meeting with Minister Donohoe to seek an explanation.
"Around 50% of all transactions are under €75, and this will still be a huge blow to small, independent retailers, especially along the Wild Atlantic Way, who don’t sell high-value items." Ms Hayes said.
"The Department of Finance needs to explain how they arrived at this figure, and why Ireland is the only country in the EU doing this at a time of crisis for tourism and retail," she said.
Eoghan O’Mara Walsh, CEO of the Irish Tourism Industry Confederation – ITIC – said that while the threshold reduction looks like an improvement, “the real way to think of it is an increase from €0 as it is now to €75”.
“A €75 threshold still impacts 50% of US tourists and will depress demand, significantly impacting tourism businesses. We are still arguing for the status quo [with the rest of Europe] to be maintained,” he said.
No other European country is changing Vat-back policies and are using that fact as an incentive to target British visitors after Brexit.
Economist Jim Power, who recently penned an economic impact assessment of the scheme, said it “defies belief" that the Government would introduce such a "hammer blow" to sectors that are already under serious pressure.