The Irish Hotels Federation has expressed its deep disappointment at the increase in the tourism VAT rate to 13.5% announced by finance minister Paschal Donohoe (pictured) as part of Budget 2019.
Michael Lennon, president of the IHF, said the increase represents a reckless failure to recognise its economic potential and importance, particularly to rural Ireland.
“Ireland will now have a higher tourism VAT rate than 26 countries in Europe with which we compete,” said Lennon. “We are already a very high cost economy by international standards so it is astonishing that the government is now imposing additional taxes on tourists and making our country less attractive as a destination.
“Have no doubt, this increase will hurt tourism across the country but businesses outside of Dublin will be hit the hardest. Regional businesses will bear the brunt, as about €300m of the in additional taxes will be taken from the rural economy. This is a devastating blow for the many tourism businesses that struggle to break even or stay open outside the peak season.”
Lennon’s criticism was echoed by the Irish Tourism Industry Confederation. CEO Eoghan O’Mara Walsh commented: “The increase in the VAT is likely to damage demand and, with Brexit less than six months away, this is extremely worrying for Irish tourism and will make trading conditions much harder for business.
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“The government’s investment in tourism remains wholly inadequate,” he added. ”In 2008 current expenditure was €153 million, after this budget it will still only be €149 million. This is insufficient for a sector that is so vital to the economy and employs so many throughout the country.”
Adrian Cummins, chief executive of the Restaurants Association of Ireland, said: “VAT at 13.5% reduces Irish tourism’s competitiveness, resulting in less appeal to overseas visitors and, most worryingly, impacts the value for money offering which discourages people to spend their money in Ireland on Irish goods and services.
“This was an election Budget paid for by the restaurant and tourism industry,” Cummins added. "The sector accounted for 7.7% of total employment in the economy in the first quarter of 2018. With an increase to 13.5%, it is expected that 27,000 jobs will be put at risk.
“Restaurant owners, many of whom are main employers within their communities, will be hit hard by this increase. It only adds to the ever-growing costs of doing business in Ireland, along with high rent and inflated insurance premiums and for many, the additional challenge of operating in a rural or border county given the uncertainty of Brexit.”
Kick In The Teeth
The Vintners’ Federation of Ireland described the VAT rate increase as a shocking and retrograde step that will cause excessive damage to the sector.
Chief executive Padraig Cribben stated: "Removing the 9% VAT rate in today’s Budget is a kick in the teeth for the hospitality sector. It will introduce uncertainty and undermine confidence in many pubs selling food who are already worried about their exposure to the effects of Brexit. Publicans in areas of the country where the recovery is weak will be disproportionately affected.
“During the recession, many pubs invested heavily in a food offering that provided exceptional value to consumers along with job security to staff. The VAT increase will reduce competitiveness and force many of those pubs to cut staffing levels. It is simply impossible for most business owners to absorb this increase.
“Today’s news is a hammer blow to our members and will have long term consequences. Removing this support to food operators at the stroke of a pen is a betrayal of all those who give everything in a high-risk sector."
Cribben added: “It is further evidence, if it was needed, that our tourism minister Shane Ross has once again failed the hospitality sector."
