Editorial: Lower Tourism VAT Rate Before It’s Too Late

Wednesday, October 18, 2023.

The recent decision to return VAT to 13.5% was met with dismay by the industry: the increase will undoubtedly have a negative impact. Ireland now has the second highest tourism band of VAT in the EU.

The tourism industry, like other sectors, will be watching the forthcoming budget with concern. Let’s hope common sense prevails and the Minister for Finance and his government reinstate the VAT rate or give increased support to the industry.  The recent decision to return VAT to 13.5% was met with dismay by the industry: the increase will undoubtedly have a negative impact. Ireland now has the second highest tourism band of VAT in the EU. Most observers believe the 13.5% rate will add to increased inflation amongst other negative traits, impacting the competitiveness of the sector.

The hike comes at a time when cost factors are creating worrying scenarios for the country. The most recent ERSI reports indicate contraction for the first time in over 10 years. Coupled with increased labour, insurance and food costs, competitive margins are becoming eroded in a challenging marketplace. The Restaurants Association of Ireland (RAI) are predicting that a substantial number of small businesses will not be able to remain in operation due to the VAT hike; it will, the association claim, fuel inflation.

These concerns were expressed at the recent Irish Tourism Industry Confederation (ITIC) conference. The VAT increase, along with less bed stock due to the Ukrainian and migrant crisis, is making it more difficult to sell Ireland as a competitive and value for money destination, some hospitality representatives believe. In ITIC’s Vision 2030 report the Confederation outlines predictions that the sector could deliver approximately €15 billion to the economy, which could equate to almost €4billion in tax receipts and over 350,000 jobs.  However, we can’t achieve this goal unless government has policies and supports that are pro tourism and enterprise.

At the conference Paul Kelly, CEO Fáilte Ireland, acknowledged that while over €64m has been made available to help increase accommodation – and support other ventures in the midlands region – local authority  planning delays could result in a portion of this money not being allocated before the cut off deadline of 2026. There needs to be commitment and engagement from local authorities and relevant government departments to ensure this objective is met. Time for joined up thinking. We need a workable and streamlined planning process to facilitate and ensure this €64m is utilised for the better of tourism.

Tourism and the wider hospitality family are as always fighting for recognition at the cabinet table. The current Tourism Minister is seen, by many who have confided in me, as pro arts and culture and she is not sufficiently engaging with the sector. Her absence at a number of key industry events has raised eyebrows.  We need, once and for all, a designated minster for the sector. Time and time again, this industry has battled with adversity and challenges that would have seen other sectors pull the plug and get out. Therefore, is it not unreasonable to ask for a sense of fair play and acknowledgment from our government.

In the Sept / October 2023 Magazine Issue we feature Design Bravery – Clare McDonald , Guestline – The New Era of self – service check in and IFSA News.

Read the Sept / October 2023 Magazine Publication HERE

 

Cyril McAree – Managing Editor Hotel & Restaurant Times

 

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