The Finance (No 2) Act 2011 introduced a second reduced VAT rate of nine per cent to apply in respect of supplies of certain goods and services for the period from the 1st July 2011 to the 31st December 2013.
The move follows that of France which, through lobbyist Jacques Borel, secured a VAT reduction to 5.5 per cent for the accommodation industry there.
Ireland’s nine per cent rate applies to certain goods and services previously liable at the 13.5 per cent rate and includes restaurant and catering services, hotel and holiday accommodation, admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions, fairgrounds or amusement park services, the use of sporting facilities, hairdressing services and printed matter such as brochures, maps, programmes, leaflets, catalogues and newspapers.
And while the UK has no plans to monitor the results of the Irish VAT cut, the British Hospitality Association argues that Britain’s 20 per cent VAT rate makes UK tourism “uncompetitive” compared to almost all key European competitors now. In Italy, it’s 10 per cent; in Spain, it’s eight per cent and in Germany it’s seven per cent.
The BHA’s concerns are echoed by the British Beer & Pub Association which recently called on the UK government to consider lowering VAT to help recovery and boost jobs.
“With this sensible, job-creating move, Ireland is just the latest in a long line of EU countries to cut VAT on food in the hospitality sector, with the UK looking increasingly like the ‘odd one out’,” commented BB&PA Chief Executive Brigid Simmonds, “In France they introduced a reduced rate of VAT in January 2009 for restaurant food and hotel accommodation. This created 29,500 jobs in the first year alone – making the hospitality sector in France a key driver of jobs”.
However VFI Chief Executive Padraig Cribben pointed out that, “This is only for food served. It does not apply to drink served. We welcome the move but would like to see the Minister exploring the potential to carry out a similar exercise on alcohol served”.
The LVA similarly welcomed the reduction, stating, “While retail pricing is a matter for individual members, we are encouraging publicans to pass on the VAT reduction on food to consumers”.
From 1st January 2014 the rate on these goods and services will revert to 13.5 per cent, the Government has stated.
In the meantime it’s contemplating increasing the top rate of VAT to as much as 23 per cent, possibly as soon as next November’s Budget.
The Memorandum of Understanding signed with the EU and IMF states that the “Finance Bill 2012 will contain necessary provisions to bring into effect the already signalled VAT increases in 2013 and 2014”.
It’s expected that under the National Recovery Plan, the standard rate of VAT is to be increased by one per cent in 2013 with a further one per cent increase of one per cent in 2014.