Government Turns It's Back On Tourism
Speaking about the increase, Adrian Cummins, Chief Executive of the Restaurants Association of Ireland said, “This was the incorrect decision by Government and had little economic intelligence behind the decision to increase the VAT, as did the report by the Department in July which didn’t take consideration of Brexit or revenue generated by overseas tourists to Ireland. VAT at 13.5% reduces Irish Tourism’s competitiveness, resulting in less appeal to overseas visitors and, most worryingly, impacts the value for money offering which discourages people to spend their money in Ireland on Irish goods and services. With Brexit on the horizon and the as yet unknown implications it may have on our sector, this decision has put the Irish Restaurant Industry in jeopardy. This was an election Budget paid for by the Restaurant and Tourism Industry.”
By increasing the VAT to 13.5% the Government is negatively impacting the Irish Tourism sector and dismissing a positive job creation initiative. The sector accounted for 7.7% of total employment in the economy in the first quarter of 2018. With an increase to 13.5%, it is expected that 27,000 jobs will be put at risk based on calculations by economist Jim Power.
Since the reduction in VAT in 2011, the number of people working in the Accommodation & Food Services Sector increased by 79,424 in Direct and Indirect Employment. The payroll taxes accruing to the Exchequer from this extra employment from Q2 2011 to Q1 2018 was €278 million and yet Ireland’s tourism sector has seen a 25% decrease in investment since 2008.
This 13.5% Vat rate for Tourism is now higher than 26 other countries in Europe including; Spain, France, Italy, Cyprus, Netherlands, Austria and Portugal. It has created a massive challenge for an industry who operates on low margins and relies upon tourists.
After months of lobbying through the ‘Keep VAT at 9%’ campaign, the pleas of the Restaurants Association of Ireland, its members and wider reach of interest groups have fallen on deaf ears. Restauranteurs, many of whom are owner-operators, and the main employers within their communities will be hit hard by this 4.5% increase. It only adds to the ever-growing costs of doing business in Ireland, along with high rent and inflated insurance premiums and for many, the additional challenge of operating in a rural or border county given the uncertainty of Brexit.