With the hospitality industry resigned to the concessionary 9% rate of VAT rising to 13.5% in to-day's Budget, attention will shift to the level of Government investment in tourism.
ITIC has made a strong case for increased investmet in tourism infrastructure and funding for Failte Ireland and the response of the Minister for Finance will be interesting.
The Irish Hotels Federation has expressed deep concern at reports that the tourism VAT rate is to be increased as part of Budget 2019.
Michael Lennon, President of the IHF said the mooted increase to 13.5% would be disastrous for Ireland’s competitiveness as a tourism destination and represented a failure to recognise its economic potential and recovery, particularly among regional and rural tourism businesses.
“The proposed increase would be reckless and would result in Ireland having a higher VAT rate on tourism than 26 countries in Europe with which we compete.
We are already a very high-cost economy by international standards so it is alarming that the Government is now looking at imposing additional taxes on tourists and making our country less attractive as a destination.
“Any increase would hit tourism throughout the country with businesses outside of Dublin being hit the hardest."
Mr Lennon said that the introduction of the 9% VAT rate in 2011 showed great foresight by the government.
He said that it recognised the tourism industry’s ability to deliver on jobs across the country.
“We have achieved this by providing a quality product, high levels of service and competing internationally for business every day.
“We recognise that Government needs to tax industry to pay for the many social calls on the exchequer.
However, we have argued that the best way to generate the additional funds needed for public services is to support those business sectors that are contributing.
Mr Lennon said that the industry is already facing enormous difficulties due to the uncertainty around Brexit and the fall in the value of Sterling.
“UK tour operators, for example, represent up to 30 per cent of the business for many hotels. With bookings made up to two years in advance, prices in many cases are already locked in, meaning hoteliers would be left to pick up the cost of the VAT increase," he said.
Commenting on the VAT report published by the Department of Finance during the summer, Mr Lennon said that it failed to take account fully the benefits of tourism to the regions or the serious risks associated with Brexit.
“It also lacked balance, basing much of its analysis on Irish household spending patterns while choosing to ignore that the vast majority (80%) of revenue generated by tourism comes from out of state visitors,” he said.