In a review of the special 9% VAT rate for tourism, the Department of Finance has found that the rate has cost €2.6 billion since being introduced in 2011, with officials questioning whether the rate is still relevant considering the tourism sector is currently booming.
As reported by The Irish Times, the Irish Tourist Industry Confederation (ITIC) has warned that raising the rate could adversely impact future growth prospects and reverse an initiative credited by the industry as helping to generate thousands of jobs.
However, the Department of Finance's report suggests that the economic usefulness of the reduced rate has declined over the years and calls the scale of its tax foregone cost "deadweight" when set against "the limited benefits" of retaining the rate.
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The report suggests that the rate can be increased in the next budget without harming employment or demand from tourists to visit Ireland. The Irish Congress of Trade Unions (Ictu) stated that a "fairer rate" of 13.5% should be applied for hotels and restaurants, which it referred to as being highly profitable businesses.
Ictu lead researcher Ger Gibbons commented, "The conclusions of our research are that this tax subsidy is unnecessary in a sector which is booming and whose larger firms are doing best of all; where prices are still among the highest in the EU; where workers are three times more likely to subsist on the minimum wage than the average Irish worker; where the alleged impact on employment has been greatly exaggerated and, finally, where essential tax revenue is diverted from essential services like housing or childcare."
© 2018 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.