The VAT rate was lowered from 13.5 per cent to nine per cent last July as part of the Government jobs initiative, a temporary measure due to run out this December.
Speaking at its Annual Conference in Kilkenny City, IHF President Paul Gallagher called on the Minister Transport Tourism & Sport to fight for the rate to be retained as a key competitive advantage for Ireland as a tourism destination, particularly in the run-up to the Gathering in 2013, billed by the Government as ‘Ireland’s biggest ever tourism initiative’.
The IHF stated that forward booking by tour operators, domestically and internationally, is a vital component of the hotels sector. According to research carried out in advance of the conference, 92 per cent of hotel and guesthouse owners are concerned that the Government might increase the VAT rate next year, citing the negative impact it would have on the viability of their businesses. Uncertainty around its retention is already an issue feeding through from key overseas markets and is becoming a barrier to securing sustained growth in visitor numbers as international tour operators book some 18 months in advance.
“At a time when the recovery in overseas visitor numbers is fragile and domestic consumer confidence is weak, the rate reduction has been a very positive driver of demand,” says Mr Gallagher. “However, it has to be more than a short term stimulus, the real benefit is the medium term certainty it gives on pricing of hospitality products. This will be particularly important to support Government’s plans to attract an additional 325,000 visitors around next year’s Gathering.”
“The Government has recognised tourism at the centre of its economic policy with the VAT reduction initiative and we’ve been very diligent in the passing it on. It would be a missed opportunity to see this revised rate peter out at the end of the year.”
“The assistance from Government has been a much needed boost for the sector by allowing hotels and guesthouses retain and create jobs in an otherwise turbulent environment. While 2012 is undoubtedly going to be another challenging year, the retention of this rate would help to avoid any further retraction of the sector, and allow tourism to continue to be an indigenous driving force of the economy,” he continued.
However the Minister told conference delegates that the measure cost the Exchequer €110 million to €130 million a year.
“That has to be worked out in the context of the next Budget as to whether we have that kind of space,” he said.
The Government would be assessing “how well tax returns actualy perform in other areas in the context of the next Budget”.
The most powerful arguments to Government would be that it had actually created jobs. The Minister was unsure that this was the case.
The Irish Hotels Federation represents almost 900 hotels and guesthouses throughout the country, which in turn employ 54,000 people.