Hoteliers want 9% Vat rate extended to 2025

Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath speaking to the media outside Dublin Castle after the  Government announced that it will extend the lower Vat rate for the hospitality sector.

Hoteliers have called for the retention of the 9% Vat rate to 2025, after the Government decided to extend the special rate for another nine months.

Finance Minister Paschal Donohoe has received Cabinet approval to keep the lower rate of Vat in place until the end of February 2023.

Mr Donohoe said extending the 9% Vat rate would support hotels, restaurants, and other tourism businesses. Around 4,000 of these businesses remain in receipt of the employment wage subsidy scheme (EWSS), which is due to come to an end on May 31.

Through no fault of their own, bars, hotels, and restaurants had to close on multiple occasions to help the country make its way through the worst of the public health crisis,” said Mr Donohoe.

He said some businesses will be severely impacted when the EWSS comes to an end, but this is why the Government has decided not to reintroduce the 13.5% Vat rate for at least another nine months.

"The Government in December laid out very, very clearly what we would do in relation to the future of the employment wage subsidy scheme," said Mr Donohoe.

"We’ve implemented that. All non-hospitality businesses ceased to participate in the scheme last month, and we now have an important core of our hospitality sector still in the scheme.

"In terms of the future, the reason why we have maintained the employment wage subsidy scheme the way we have and the reason why we are making the 9% decision today is to give those businesses every chance of being viable in the years to come." 

The Irish Hotels Federation (IHF) said the measure will go a long way to helping the industry to recover; however, given the challenges ahead, the group is calling on the Government to further extend the 9% Vat rate out to 2025 in order to maintain international competitiveness with other European destinations.

“A vibrant domestic and international tourism industry is a cornerstone of economic growth and job creation right across the country," said IHF president Denyse Campbell. 

Denyse Campbell, president of the Irish Hotels Federation. Picture: Fennell Photography

"Extending the tourism Vat rate will aid the recovery under way in the tourism industry after a bruising two years during the pandemic. This is particularly the case as the sector faces into a gale of spiralling business costs, with IHF members reporting year-on-year increases of 88% in energy, 22% in water, and 18% in food and beverage.

Given the critical importance of international competitiveness for our industry, we are calling on the Government to keep the 9% tourism Vat rate under very close review for extension out to 2025.”

Adrian Cummins of the Restaurants Association of Ireland also welcomed the move to extend the lower Vat rate. He said it would help settle businesses ahead of what will be a bumpy tourist season. 

In light of the pressures facing the industry, Mr Cummins said the lower rate should be extended to the end of 2023, given the debt many businesses have built up and that tourist numbers are still not back to pre-pandemic levels.

However, Labour Party finance spokesperson Ged Nash called on the Government to publish the rationale for Vat rate extension, adding that experience shows that such cuts are not passed on to workers and customers.

The hospitality industry is notoriously addicted to low pay and precarious work," he said.

"Once again, the Government has failed to use taxpayer-funded supports to drive better outcomes for workers and society."