Minister for Transport, Tourism and Sport Leo Varadkar refused to assure hoteliers the 9% rate VAT for the hospitality sector will be continued into 2013.
Mr Varadkar said that the scheme had only been designed to last for one year and that it had cost the exchequer over €110m.
“I can’t give hoteliers an assurance in relation to VAT levels,” he said.
“It has been very successful for tourism and the hotel sector and also for restaurants and the leisure sector but it does cost.
“It cost the exchequer between €110m and €130m a year, which is a lot of money and that has to be worked out in the context of the next budget as to whether we have that space, a lot of it will come down to how tax returns perform in other areas.”
Speaking at its annual conference in Kilkenny City, IHF president Paul Gallagher called on the minister to fight for the rate to be retained as a key competitive advantage for Ireland as a tourism destination, particularly in the run up to the Gathering in 2013, billed by the Government as Ireland’s biggest ever tourism initiative.
According to research carried out in advance of the conference, 92% of hotel and guesthouse owners are concerned that the Government might increase the VAT rate next year.
Some hoteliers fear that a cost hike in the VAT rate would affect the viability of their businesses.
Uncertainty around its retention is already an issue feeding through from overseas markets and could become a barrier to securing sustained growth in visitor numbers as international tour operators book some 18 months in advance.
“At a time when the recovery in overseas visitor numbers is fragile and domestic consumer confidence is weak, the rate reduction has been a very positive driver of demand,” says Mr Gallagher.
Mr Varadkar agreed that the reduction in VAT rate had helped grow the tourism sector this year. He promised to pass on hoteliers’ concerns to Finance Minister Michael Noonan.
“It has been very successful in helping to correct the view that Ireland is a high-cost destination and to help out the tourism industry during a very tough time,” he said. “I’ll certainly discuss it with Michael Noonan and my colleagues, but we are a long way off framing the next budget.”
© Irish Examiner Ltd. All rights reserved