The Government is considering the phasing out of the concessionary 9% VAT rate on tourism services, the 'Irish Times' reports today.
According to the report, pressure to phase out the special 9 per cent VAT rate for the hospitality industry is building within the Department of Finance.
The lower VAT rate introduced during the economic crisis has “done its job” and increasing it would raise €500 million, the Department of Finance has advised the new Minister, Paschal Donohoe (pictured).
The 9 per cent rate for special tourism-related activities, such as restaurants, hotels, cinemas and other areas, was introduced in 2011 to encourage growth and employment in the sector.
Hospitality industry groups have consistently lobbied for its retention but the Department of Finance argues a return to the 13.5 per cent rate would yield €500 million per annum.
A briefing note prepared for Mr Donohoe says the lower rate was “initially introduced on a temporary basis to give a boost” to the hospitality sector and was retained in the last budget because of concerns that Brexit could impact on tourism.
“While all the indications are that the measure has done its job with robust growth in visitors and employment in the tourism area, the general recovery of the economy and increasing prices in the sector raises questions about its future,” the briefing note says.
“It is estimated that the abolition of the 9 per cent rate and a return to 13.5 per cent for the goods and services in this sector would result in increased revenues of around €500 million.”
