Scant hope of continuing reduced Vat rate for tourism and hospitality sector

The reduced rate of Vat is due to come to an end at the end of next month following a six-month extension agreed by the Government        

The Tax Strategy Group papers state that the reduced rate has so far cost the exchequer €1.2bn, and represented “a very significant investment” in hospitality and tourism.

Department of Finance officials have offered scant hope that tourism and hospitality firms will secure a further extension in the reduced Vat rate of 9% for their sector.

The reduced rate of Vat for the sector is due to come to an end at the end of next month following a six-month extension agreed by the Government designed to help businesses fully recover from the fallout of the pandemic.

However, the Tax Strategy Group papers state that the reduced rate has so far cost the exchequer €1.2bn, and represented “a very significant investment” in hospitality and tourism.

Vat receipts across the board gathered €26.7bn in revenues last year, up from €18.8bn in 2021.

Each 1% increase or decrease in the 9% Vat rate would yield an increase or decrease of €140m a year, according to the papers.

The papers also highlight arguments about increasing the overall thresholds to qualify for Vat to €40,000 and €80,000 for services and goods, respectively, to reduce the burden on small firms.

On corporation tax, the Tax Strategy Group again focuses on the concentration risk of a handful of large companies paying the lion’s share of all corporation tax revenues.

The 10 largest corporation tax payers accounted for €13bn of the €22bn collected in corporation tax receipts last year.