Senior Government figures have “grave concern” that restaurateurs and hoteliers will exploit the staycation subsidy to “opportunistically gouge” customers.
Government sources have told the Irish Examiner that the need to introduce the rebate scheme quickly means it is "far from perfect” and is open to potential abuse.
“Sure, we will have it in for October and watch the prices go up," said one senior figure. "We are fearful they will use this rebate as an excuse to increase prices to ensure they don’t lose out.
"There is always the risk of what happened the last time [temporary Vat reduction in 2012] — that the industry keeps the benefit as opposed to passing it on to the consumer," added another source. "Of course, there is a concern that some will opportunistically gouge when it comes to pricing."
However, industry bodies have reacted strongly to any suggestion that their members would seek to exploit the stimulus measures. Indeed, they were critical, saying the €7bn package did not go far enough.
Adrian Cummins of the Restaurants Association of Ireland said his members are “hugely disappointed” with the package and said that no gouging will be going on.
“Rather, our members will be cutting staff numbers because they won’t have the volume of business to keep them on," said Mr Cummins. "This is about trying to stay alive in business.
On Thursday, the Government announced its staycation subsidy which will allow people who spend €625 on accommodation, food, and non-alcoholic drinks between October and April to claim back an income tax credit worth €125, with consumers able to upload their receipts to an app on their phone in order to claim the credit.
The Government also reduced the main rate of Vat from 23% to 21% in the so-called 'July Jobs' stimulus plan. The tax cut will be in place from September this year to February 2021.
This was surprising as there was strong resistance within Government to any cut in Vat which would benefit the hotels and restaurants as opposed to the customer.
While the clear intent of the plan is to provide a boost to the employment-heavy tourism and hospitality sectors, there are fears across the coalition that the benefits of such measures will not be passed on to the consumers.