The Irish Tourism Industry Federation (ITIC) has warned that Government that raising the VAT rate for tourism and hospitality businesses – at a time of a cost of living and cost of business crisis – would be very damaging.
The 9% hospitality/tourism VAT rate – which directly affects around 20,000 businesses – is due to increase to 13.5% at the end of this month.
ITIC chairperson, and hotelier, Elaina Fitzgerald Kane said: “Increasing VAT will be inflationary, threaten jobs and be self-inflicted folly.”
Tourism is Ireland’s largest indigenous industry, employing around 260,000 people. ITIC has appealed to government to keep the 9% VAT rate intact beyond the end of this month to help the post-Covid recovery of the sector.
“Maintaining VAT at 9% is one of the few ‘controllables’ available to government to curb the current extraordinary inflation that businesses face and raising tourism’s VAT rate will only serve to jeopardise livelihoods, most of which are based in regional Ireland,” Ms Fitzgerald Kane said in an open letter to the Government.
The letter went on to say: “Due to tight margins an increase in the VAT rate cannot be absorbed by the significant majority of the 20,000 businesses in the sector and will mean increased prices thereby lessening the disposable income of every citizen in Ireland, something that Government repeatedly states that it is trying to remedy. Having lost over €6 billion in revenue during the pandemic, the most recent CSO statistics clearly demonstrate that restoration of employment in the tourism industry is substantially behind other sectors. In many cases throughout the country, whole communities are dependent on a vibrant tourism sector.
“As I write this, tourism is in the midst of one of its biggest crises mainly due to extraordinary inflation levels, supply shortages and weak economic source markets. Pent up demand that bolstered business last year is now gone. Increasing VAT at this time will only compound some serious problems.”
Ms Fitzgerald Kane went on to say in the letter: “This is a tax on domestic consumers as much as tourists. A recent RED C survey showed that two thirds of respondents do not want the VAT to be increased and we urge you to listen to the public mood on this issue. On an international competitiveness front, an increase in the sector’s VAT rate will mean Ireland has the 2nd highest tourism VAT rate across the eurozone.
“As an island nation, our competitiveness is key and a decision to increase VAT will further erode our already waning competitiveness internationally. We already have a significantly higher cost base than most other European countries and damaging our competitiveness further would be self-inflicted folly. The regrettable reality is that if VAT is not maintained at 9%, much of the good work done by Government to support the tourism industry during the pandemic will come undone.“
