The industry has reacted positively to the news that the special 9% VAT rate for hospitality businesses has been retained in Budget 2018, despite calls from a growing number of corners for the reduced rate to be brought back in line with the standard VAT percentage.
In his budget speech, Minister Donohoe acknowledged that while Dublin's hospitality offering is at an all-time high, “VAT policy cannot be decided on the basis of one location only but in the context of the national interest”.
“Accordingly, I have decided not to change the VAT rate on the tourism and services sector in Budget 2018,” he continued.
Minister of State Michael D’Arcy, T.D., said in a statement: “The retention of the 9% VAT rate for the hospitality will help mitigate the Brexit impact on the tourism and hospitality sector, particularly outside Dublin.”
Joe Dolan, President of the IHF said the rate has been instrumental in the recovery of the tourism industry, which has created approximately 60,000 new jobs since the measure was introduced in 2011. “Tourism is an indigenous export industry which not only supports approximately 230,000 jobs - equivalent to 11% of total employment in Ireland - it also plays a vital role in addressing the regional imbalance in our economy. The decision is a critical vote of confidence in the tourism industry at a time when it faces significant risks, most notably from Brexit,” he said.
Mr. Dolan acknowledged the support provided by government, Minister Paschal Donohoe and by Tourism Ministers Shane Ross and Brendan Griffin, as well as public representatives across the country.
Adrian Cummins, Chief Executive of The RAI, commented: “The Retention of VAT at 9% into 2018 and beyond is crucial, not only to the sustainability of restaurants and businesses in the tourism sector but also to job creation and the continued growth of our economy.”
Mr. Cummins noted that he believes Ireland to be operating in a three tier economy - with Dublin powering ahead in many areas, and many regional tourist hotspots reporting strong business, albeit on a seasonal level, while rural and border counties continue to experience difficult trading conditions. A 9% VAT rate, he stated, is "Crucial to these parts of Ireland".
The RAI also called on the government to reduce the current rate of excise duty in their Pre-Budget Submission 2018. While there was no reduction, the RAI is relieved that there was no increase in excise duty in Budget 2018. Ireland pays the highest excise duty on wine in Europe, with the tax take on a standard bottle of wine now over 50%.
Adrian Cummins continued: “The budget that was delivered today will bring a positive response from the restaurant and tourism industry”.
Fáilte Ireland’s CEO, Paul Kelly, said: “An emphasis on greater competitiveness, allied with the lower VAT rate and Fáilte Ireland’s continued investment in tourism product, will create the necessary environment for the tourism sector to generate additional revenue and deliver more jobs in the year ahead.”