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9% VAT Rate for Tourism Results in New Jobs

Published on Aug 25 2014 1:02 PM in General Industry

9% VAT Rate for Tourism Results in New Jobs

The Restaurants Association of Ireland (RAI) today published a report entitled, ‘9% VAT – Food, Tourism & Jobs – Rebuilding Ireland’s Economy’, highlighting the positive impact of the 9 per cent VAT rate for tourism related goods and services, introduced in July 2011.

Speaking about the launch of the report and the success of the reduced VAT rate, Adrian Cummins, chief executive of the Restaurants Association of Ireland, said that, "As this report proves, in terms of creating new jobs in the food and accommodation sector, the introduction of the new VAT rate in July 2011 has been a major success. 31,584 new jobs have been created across the country, with 21,633 of these being direct jobs in the food and accommodation sector."

The report uses national employment data from the Central Statistics Office and examines the impact of the introduction of the new VAT rate since 2011, when it was reduced from 13.5 per cent to 9 per cent. The report covers the direct and indirect number of jobs created, an estimate of social welfare savings, as well as the increase in revenue for the Exchequer (e.g. PAYE, USC and PRSI Employer contribution) at a county and national level.

Key Findings

Key findings from the report include that there has been an employment increase, both directly and indirectly. Between Q2 2011 and Q1 2014, direct employment in the accommodation and food services sector increased by 21,633 to 136,537. An additional 9,951 indirect jobs were created elsewhere in the economy, giving a total employment increase of 31,584.

There have also been significant savings for the Exchequer due to a decrease in social welfare recipients. The report uses the model that "for every 10,000 people off the live register, and back in employment, it results in a net gain to the Exchequer of some €200 million." Viewed on a national basis, the Exchequer made a remarkable €433 million in social welfare savings as a result of the 21,633 direct jobs created since the VAT rate was reduced.

The new jobs created as a result of the reduced VAT rate has also meant additional revenue for the Exchequer from the increase in payroll tax receipts. Nationally, the contribution from employee taxes (USC and PRSI) and employer taxes (employers PRSI) from the 21,633 direct jobs has delivered €103 million in revenues for the Exchequer.

Ireland’s Value for Money Rating Rises

Tourism has also increased every year since the new VAT rate was introduced, with overall visits to Ireland rising by 17.82 per cent since July 2011. There is further good news for Ireland’s tourism sector regarding Ireland’s Value for Money (VFM) rating as the number of visitors rating Ireland ‘good’ or ‘very good’ VFM has increased from 28 per cent to 40 per cent from 2009 to 2012 and the number of visitors rating Ireland ‘very poor’ or ‘poor’ for VFM has fallen sharply from 40 per cent in 2009 to 16 per cent in 2012.

Visitor Numbers Increase

Since the introduction of the new VAT rate of 9 per cent there has been strong growth in the number of overseas visits to Ireland. According to the CSO figures overseas visits to Ireland grew by 10.3 per cent overall in the period from January to June 2014 when compared to the corresponding period of 2013.

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