9% VAT rate produced 45k jobs claims RAI

45,260 new jobs in the Food, Tourism and Hospitality sectors have been created since the government reduced VAT to 9% according to the Restaurants Association of Ireland in a new report by economist Jim Power.

9% VAT – Food, Tourism & Jobs uses national employment data from the Central Statistics Office to examine the impact of the introduction of the new VAT rate from 13.5% to 9% for tourism-related services and goods.

It covers the direct and indirect number of jobs created and estimates the social welfare savings as well as the increase in revenue for the Exchequer (eg PAYE, USC and PRSI Employer contribution) at county and national level.

“Our report highlights that the introduction of the low VAT rate in July 2011 has been a major driver of local employment growth,” commented RAI Chief Executive Adrian Cummins, speaking at the launch of the report, “45,260 new jobs have been created in the food and accommodation sector across the whole country since this initiative has been introduced.

“Our figures show that 31,000 direct jobs and 14,260 indirect jobs have been developed in this sector since July 2011. It is a substantial number of new jobs to result from just one government action. The 9% VAT rate has benefited regions greatly across the country and we would like to see that maintained.”

Key Findings from the report include:

The number employed in the Accommodation & Food Services sector in Q1 2016 stood at 145,900:

1. The gross annual wage bill paid to those employees is €3.38 billion
2. The net annual wage bill paid to those workers is €3.05 billion
3. The total contribution to the Exchequer through payroll taxes is €695 million.

The increase in direct employment in the Accommodation & Food Services sector between Q2 2011 and Q1 2016 was 31,000.

• The gross annual wage paid to those extra workers is €718 million
• The net annual wage bill paid to those extra workers is €648 million
• The total contribution to the Exchequer through payroll taxes on the increased direct employment is €147.6 million
• The reduction in social welfare payments, assuming the extra employment took people off the Live Register, is estimated at €620 million.

The report demonstrates the considerable social welfare savings made by Exchequer using the model that “for every 10,000 people off the live register and back in employment, it results in a net gain to the Exchequer of some €200 million”.

The increase in direct employment of 31,000 in the Food & Accommodation sector saved the Exchequer €620 million in social welfare payments.

 

Ireland’s Value for Money Rating Rises

On a national scale, tourism has also increased every year since the new VAT rate was introduced, with overall visits to Ireland rising by almost 30% since July 2011.

There’s further good news for Ireland’s tourism sector regarding Ireland’s Value for Money (VFM) rating as the number of visitors rating Ireland ‘good’ or ‘very good’ VFM has increased from 28% to 58% from 2009 to 2015 and the number of visitors rating Ireland ‘very poor’ or ‘poor’ for VFM has fallen sharply from 40% in 2009 to 8% in 2015.