The VAT rate for Ireland's hospitality sector will be reduced from 13.5% to 9% on November 1, and will remain at 9% until December of next year.
This is one of several support measures that were announced for Ireland's hospitality and tourism sectors as part of Budget 2021 on Tuesday October 13.
The government also announced that businesses that have to close due to COVID-19-related restrictions or that have experienced an 80% decline in turnover will be able to avail of a grant that will capped at €5,000 per week.
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The scheme, the purpose of which is support companies' cash flow and keep businesses afloat, will operate when level three COVID-19-related restrictions are in effect. The first payments as part of the scheme will be made in mid-November, and the scheme will operate until the end of March of 2021.
Additionally, debt warehousing for small and medium sized businesses will be extended for a 12 month period with no interest and a €30 million fund will be administered via the Ireland Strategic Investment Fund; the wage subsidy scheme will be continued in some form when the current scheme ends in March and will go on for the duration of 2021; and €55 million will be provided for a tourism business support scheme while €5 million will be provided for tourism products development.
Irish Hotels Federation Response
Commenting on the measures announced as part of Budget 2021, Irish Hotels Federation (IHF) president Elaina Fitzgerald Kane said, "The extension of employment supports until the end of December 2021 is very welcome. However, we are disappointed that the rates of the EWSS scheme were not increased. This does not recognise the challenges facing tourism and hospitality businesses in retaining key staff during the difficult winter/spring months and against the backdrop of additional restrictions.
"We also welcome the reduction in the tourism VAT to 9%, which is the right tourism VAT rate. It is an important measure that will stimulate demand and aid the recovery of the tourism and hospitality industry. After the last recession, tourism created the most jobs - 90,000 new jobs - and there is no doubt that the 9% VAT rate contributed significantly to this increased employment. Pre-COVID, our industry supported almost 270,000 livelihoods, one in ten jobs across the country, 70% of which were outside of Dublin. Reducing the Tourism VAT will help sustain jobs and communities across Ireland.
"As well as providing a stimulus in the Irish economy, the reduction will improve our competitiveness as an international tourism destination. However, it should be a permanent measure, at a minimum of five years. Contracts with tour operators for example, which can account for over 30% of many hotels' business, are agreed two years in advance. Before today, VAT on Irish Hotels was the second highest in Europe and higher than 30 European Countries. The UK - our nearest largest market and one of our biggest competitors - for example, currently has a VAT rate of 5% so today's reduction is an important boost to our competitiveness.
"We cautiously welcome the extension of the local authority rates waiver period to 31st December, 2020, and we look forward to engaging further with government if, as expected, COVID restrictions are still in place at the end of the year. While every help is welcome, the time period should coincide with business interruption due to COVID-19 and for a minimum of 12 months. After that, payment of local authority rates should be based on reduced levels of activity due to the crisis and until the industry has recovered. Businesses cannot be expected to pay rates on historical turnover figures that do not reflect the significantly lower levels of business that hoteliers are experiencing."
Fitzgerald Kane also welcomed the announcement that the government will introduce a compensation scheme for businesses that have to close due to COVID-19-related restrictions, as well as the €55 million allocated for a tourism business support scheme and the €5 million for tourism product development.
Fitzgerald Kane added that additional liquidity measures are still required to help fund hotels during the coming months as a result of the cash flow lost out due to COVID-19-related restrictions, and concluded, "We will continue to seek an extension of the moratorium on bank term loans from six months to 12 months. Government must continue to support us on finding the way forward on this as we feel it is a missed opportunity."
Restaurants Association of Ireland Response
Restaurants Association of Ireland (RAI) chief executive Adrian Cummins commented, "This budget is a lifeline for the restaurant and hospitality industry. We welcome the reduction of the VAT rate from 13.5% to 9%.
"We also are pleased to see the COVID Restriction Support Scheme (CRSS) announced offering cash payments of up to €5,000 a week for firms forced to close due to COVID-19 restrictions. While these new measures announced today won't fix everything, there is now hope for many restaurant businesses who are struggling.
"The Restaurants Association of Ireland also welcomes the extension of the EWSS scheme until the end of 2021, but it is disappointing that the EWSS and PUP wage supports were not restored to their previous rates, especially for the restaurant and hospitality sector, which is essentially locked down again. We welcome the extension of the commercial rates waiver until the end of 2021.
"The €55 million announced for a tourism business support scheme and €5 million for tourism product development is welcome, and specific details of how the scheme will impact restaurant and hospitality businesses are eagerly awaited.
"Although the supports offered in today's budget are welcomed, there are still some long hard months ahead. Since lockdown measures and restrictions have been put in place, our industry has complied with the rules. Public safety and the safety of workers have always been at the top of our agenda. But this has meant serious financial difficulties for many. We needed the government to help us fight for survival. Today's announcements are a temporary lifeline, and we will need ongoing support to trade out of this."
Licensed Vintners Association Response
Licensed Vintners Association (LVA) chief executive Donall O'Keeffe commented, "The importance of this budget to the pub sector in Ireland can't be overstated, it was very much the last chance saloon for whether many pubs would see out the year. Thankfully, based on initial review, it looks like real support has finally been provided to the pub sector, which has been shut by order of the government.
"This is the type of support our industry has been seeking for months and months, so it will come as critical relief to pubs across Dublin and beyond that the despair they have been experiencing has finally been recognised. On the face of it, the government's COVID Restriction Support Scheme appears to be exactly the type of assistance that should have been forthcoming for pubs and other sectors of the economy who have been taking the hit due to the public health restrictions. We have long argued that if pubs and other businesses need to stay closed to protect the public good, then these businesses and their employees should be properly compensated.
"The absence of meaningful relief has put massive pressure on pubs and the hospitality industry to reopen as livelihoods have been on the line for months now. Non-food pubs in Dublin haven't been open for seven months. We hope these measures will provide some mitigation and ease part of that pressure.
"We would also encourage the government to review and recognise the impact of these measures, particularly when it seems like pubs and the rest of the hospitality sector will be facing rolling restrictions well into 2021. It would be counterproductive if the restrictions were to last a lot longer than the current window outlined for some of these supports, particularly given how much strain these businesses have been placed under already this year."
Vintners Federation of Ireland Response
Vintners Federation of Ireland (VFI) chief executive Padraig Cribben commented, "The CRSS provides a degree of hope in that it will supply much needed grant support to publicans for the next five months if we remain at level three or higher.
"The new scheme provides a bridge to the future where COVID is over and normal life resumes. Publicans have paid a huge price for closing their businesses, so this announcement is the least they deserve. Government needs to address the fact these businesses have been closed for a protracted period and reflect that in the support package.
"The reduction in the hospitality VAT rate from 13.5% to 9% is a welcome development for the food and accommodation sector. At present, it's of little use to most hospitality businesses, but hopefully they can avail of the full benefit in 2021.
"It was important that government brought clarity to the issue of commercial rates for the remainder of 2020, so we welcome the news that rates will be waived for the final quarter. There will be a need to revisit this issue for next year as most pubs, when they reopen, will continue to trade at less than half capacity. There is scope within the €3.4 billion fund government has set aside for 2021, which must be used in a targeted way for sectors most impacted by COVID.
"The minister for finance, Paschal Donohoe, says small businesses are the backbone of the economy. While Budget 2021 is a positive start, the future remains extremely uncertain and it’s only when the end of the pandemic is in sight will we know if these measures have been enough."
Tourism Ireland Response
Finally, Tourism Ireland CEO Niall Gibbons stated, "The measures for Irish tourism businesses outlined in Budget 2021 are an important first step on the road to recovery for Irish tourism, including the reduction of the VAT rate from 13.5% to 9% and a fund of €55 million to support tourism businesses in response to COVID-19. When international travellers are on the move again, the reduced VAT rate will ensure that Ireland is more competitive and that tourism businesses can offer good value to help hold our market share. Tourism Ireland will be communicating the good news about the new VAT rate to our important travel trade partners around the world.
"We welcome the decision to maintain the level of investment in the tourism marketing fund, which will be important for the restoration of overseas tourism, when the time is right."
Gibbons added, "This is a truly terrible time for tourism, but I do believe that Irish tourism can, and will, recover from this devastating pandemic. There are undoubtedly significant challenges for our industry. Once this crisis is past and Ireland is open again to international visitors, we in Tourism Ireland will be ready to play our part in delivering a sustainable recovery for the long-term future of our industry."
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