In his latest editorial, Cyril, Editor, highlights the frustration building in hotels and restaurants as VAT decisions hang in the balance.
A number of local authorities recently indicated their intention to apply tourist taxes within their areas. The belief is that around €12 million could be raised in Dublin alone via this method. It has been met with strong opposition from a number of fronts.
Tourist Taxes Spark Industry Alarm
The IHF and others have roundly rejected its implementation on the grounds it could have a serious backlash for tourism. The industry is fighting hard to get VAT returned to 9% in the upcoming budget and is opposed to anything that would have a negative impact on the sector. Every sector within the hospitably family has come together to demand the reinstatement of 9% rate.
Mixed Messages on VAT Leave Hospitality Sector in Limbo
The government, however, seems to be speaking with a forked tongue around the issue.
High-profile ministers have alluded to the high cost of the VAT reduction’s implementation or cited introducing two strands of tax: one for food and one for accommodation. Needless to say, the sector is not happy and concerned that promises given during the election may count for naught as the government flip flop around the issue.
Minister Patrick O’Donovan recently added to the debate when he accused the sector of robbing people with exorbitant charges whenever high profile and well-attended events such as concerts or sport events occur in the capital. Somehow the minister doesn’t understand the simple economics of supply and demand. Go to any capital when a noteworthy event is taking place and see the rates rocket across the board. This could be seen as a reason not to adjust the VAT rate and justify the decision by blaming the behaviour of hotels.
More worryingly was a recent meeting between representatives of the hospitality sector and Paschal Donohoe in which the Finance Minister refused to commit to reducing the VAT rate. The sector continues to experience challenging cost doing business: from the increase in energy costs and the rise in cost of food such as beef (which has risen by a whopping 96% in three years), along with wage and other pressure points. The ESB has achieved over a €424 million profit in six months. Yet prices continue to rise.
Maybe our ministers should focus on how some of these profits could be returned to the sector by way of a more competitive rate structure. After all, the sector is 97% state owned and can be made to comply with government requests much easier than private operators. No doubt they will cite anti-competitive reasons as to why this can’t happen, but I hope that during an energy crisis the government could come up with a solution in the short term.
A Voluntary Tip That Rings Alarm Bells
I recently experienced something that rang alarm bells for me. I was with a group of friends in a restaurant (prior to attending the recent Robbie Williams concert in Croke Park) in one of our so- called tourism hotspots, Temple Bar, where the bill presented included a “voluntary tip” . This shocked me as the group had not been told of this charge, either verbally or via the menu, and the server did not explain it when presenting the bill. We only noticed it afterwards. This type of behaviour doesn’t do the sector much good and adds fuel to arguments put forward by the likes of Minister Donovan.
Let’s hope this was an isolated incident, but I wonder…is it?
