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Lower VAT Rate Cost the State €600 Million: Revenue

Published on Mar 24 2015 12:36 PM in General Industry

Lower VAT Rate Cost the State €600 Million: Revenue

The Revenue has said that the reduced VAT rate, lowered from 13.5 per cent to nine per cent in 2011, has cost the State over €600 million in tax income.

Revenue figures, released to RTE's Morning Ireland, showed that if VAT returns were paid at the original 13.5 per cent rate over the past four years, that extra amount would have been accrued.

The figure, however, does not take into account the extra income that was created because of the lower rate, i.e. that businesses would not have been as successful if the old rate was still in use.

Lobbyists for the hotel, restaurant and other hospitality industries have fought to keep the rate down, claiming it has not only reignited business but created jobs too.

Recent CSO figures have shown that prices in the hospitality industry have risen in the past year, despite the fact that one of the major reasons for the lowering of the rate was to reduce prices to attract new business, as well as tourists.

The sector has also been criticised by SIPTU for "pocketing" the reduced rate. The union accused the industry of reaping all the benefits, instead of restructuring pay for employees and reducing prices for customers, which the RAI has called "nonsense".

Stephen McNally, president of the IHF, cited the marked increase in tourist numbers in recent years, with nearly 1.5 million more people visiting a year since the new rate came in.

"The Government has to think if they turn off the tap are they at risk of chasing tourists away from the country?" said Mcnally. "If the rate is not maintained big questions will be asked about what will happen."

Hotel prices increased by 5.2 per cent between January 2014 and the same month in 2015, returning €69 million worth of VAT receipts. If those sales were charged at the higher rate, VAT receipts would have been over €135 million.

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