With the Budget looming, General Manager Shane Mclave offers his analysis on what this Budget, Brexit and the question mark over 9% VAT could mean for the hospitality industry
It’s the same story every year, as the hospitality industry winds down from a hectic summer season, attention turns to October’s Budget announcement and the debate around the industry’s 9% VAT rate begins again.
So will the 9% rate be kept this year or will it return to the rate of 13.5%, which was last in effect in 2011? The speculation is rampant again this year with no indications as yet from the Department of Finance as Budget Day draws nearer.Many commentators like to discuss the ‘cost’ to the Exchequer but this is an inaccurate analysis of a much bigger picture and completely ignores how beneficial the VAT rate has actually been. According to the Revenue’s own figures, in 2012, the first full year of the 9% VAT rate, income to the Exchequer was €630m from the tourist industry. This figure is anticipated to reach 1.04bn as a result of the increased activity in the sector. The 9% tourism VAT rate has been fantastic help to the Exchequer, not a hindrance.
Since the introduction of the 9% rate, the tourism industry – hotels, attractions, restaurants, B&Bs, caravan and camping sites, activity providers and many others, have created thousands of jobs. Recent figures from the Irish Tourism Industry Confederation (ITIC) show a staggering 79,100 jobs have been created in the tourism and hospitality sector since 2011.
68% of those new jobs are outside of Dublin, a feat no other industry can come close to achieving. Tourism and jobs it creates, particularly in the regions, must be supported and nurtured.
The ITIC has set ambitious goals for the industry, such as growing overseas earnings by 65%. This is only possible with government support… and the retention of the 9% rate. Any further increases in costs will achieve nothing other than stifling demand and damage one of the country’s biggest employers. Now is not the time to meddle with a successful formula that has worked so well and has so much more to offer. With unemployment so low and the minimum wage set to increase further, salaries and wages are increasing meaning the industry is facing mounting labour costs in the coming years. Now, is the exact wrong time to place further financial pressure on the industry.
What many seem to forget is that the 9% rate is not that unusual and actually brings Ireland’s tourism industry in line with the rest of Europe. 16 of 19 eurozone countries have tourism VAT rates of 10pc or less, making Ireland fully competitive with other European cities. This point can’t be stressed enough considering we still don’t know what Brexit will look like. No matter how hard or soft it is, Brexit will have an effect on Irish tourism, a fact the government must keep in mind. Irish tourism is uniquely exposed to Brexit with 40pc of all international visitors coming from Britain.
The VAT rate has enabled Ireland’s hospitality industry to do fantastic things- attracting more tourists, grow across the country and employ thousands of people. For all these reasons and so much more, Keeping Vat at 9% is an absolute must.