Fáilte Ireland has published an analysis which illustrates that the reduced rate of VAT for the hospitality sector, introduced by the Government in 2011, has contributed to an increase of 30,000 jobs, amongst other benefits.
The research, An Analysis of the Impact of the VAT Reduction on Irish Tourism & Tourism Development, was designed and commissioned by Fáilte Ireland and then conducted by Deloitte.
The report found a number of very positive developments from the VAT reduction for the tourism sector, including:
- Since the VAT cut, employment in the targeted sectors increased by approximately 30,000 with direct tourism employment up by more than 20,000
- Price pass through of the rate reduction to consumers is evident across nearly every category
- Renewed and sustained growth in overseas tourism numbers and earnings
- Increased activity levels apparent across the industry
- Improved value for money perception across all visitors
The jobs created by the measure equates to a benefit to the Exchequer of circa €165m between additional income tax and social welfare savings and these employment gains follow very significant decreases prior to the commencement of the reduction. Fáilte Ireland estimates that the Exchequer’s tax take on the growth in spending by overseas visitors in 2013 was worth more than €100m.
Additionally, the tax foregone through the implementation of the rate reduction is below initial estimates. For the first twelve months of the measure, there was a net reduction in VAT receipts for the 9% categories of €100m. The report also shows that there has been a stabilisation of VAT receipts since September 2012.
A full copy of the report can be viewed here.