Hoteliers Plead for 9% VAT

Hoteliers have called on Government to continue the reduced nine per cent VAT rate for hospitality, pointing to new research which shows 57 per cent of its members have experienced a drop in advanced bookings from Britain.

Denyse Campbell, President of the IHF, said many key tourism markets were experiencing a cost-of-living crisis, and the "last thing the Government should be contemplating is an increase in consumer taxes such as tourism VAT".

Members of the Irish Hotels Federation claim a return to the 13.5 per cent rate would leave Ireland’s hospitality sector with the third highest VAT rate in the EU at a time when the sector is facing "a perfect storm" of rising energy costs at home, while key tourists markets abroad are hit by their own cost-of-living crises.

Citing new figures for advance bookings in 2023, the Federation said the hospitality sector is at a "critical juncture".

In addition, the research found:

• Almost half (48 per cent) of respondents reported reduced bookings from Northern Ireland (9 per cent reported an increase, 43 per cent no change)
• 37 per cent reported reduced bookings from the rest of Europe (17 per cent reported an increase, 46 per cent no change)
• 41 per cent reported reduced bookings from the US (32 per cent reported an increase, 27 per cent no change)

Hoteliers are particularly concerned about economic forecasts for the UK, with inflation having reached a four-decade high and the country facing the risk of a prolonged recession. The financial outlook for the rest of Europe continues to be affected by the ongoing war in Ukraine.

The hoteliers said a full recovery to pre-Covid visitor numbers is not expected until 2026, with tourism businesses facing the risk of a softening in demand as a result of a slowdown in the global economy.

In Budget 2023 the Government said it would end the temporary nine per cent VAT rate, with a higher 13.5 per cent rate applying from March. Minister for Tourism Catherine Martin has said she personally favours the retention of the lower rate and would seek approval from her Cabinet colleagues to continue it, while keeping it under review.

Ms Campbell said far from being an exceptional measure, most European countries have a low VAT rate on tourism accommodation. Those European countries that place a high value on tourism as part of their economy tend to have lower tourism VAT rates, she said.

“For example, of the 27 EU countries, the VAT rate on accommodation is 9 per cent or lower in 16 countries. In these countries it is settled policy to support tourism with a lower VAT rate as its contribution to tourism jobs, businesses and the wider economy pays its way many times over.

“It is therefore very worrying that Government is considering an increase at this time, given the impact it would have on inflation and the damage it would cause to our tourism competitiveness – resulting in Irish consumers and overseas visitors having to pay the third highest tourism VAT rate in all of Europe.

“Now is not the time to jeopardise the recovery by increasing tourism VAT. The focus of the Government should instead be on safeguarding tourism livelihoods and securing the long-term sustainable recovery of our industry,” she concluded.