Although it was widely anticipated, tourism and hospitality sector bodies have reacted with fury to the Budget decision to restore VAT on tourism services to 13.5%.
The Restaurant Association of Ireland has called on Tourism Minister Shane Ross to resign, claiming that he has 'failed the industry'.
Announcing the tax increase, Minister for Finance Paschal Donohoe recognised that the industry supported almost 240,000 jobs, and said a new economic reality had taken hold which meant the reduction was no longer justified.
“Since the introduction of the new VAT rate in 2011, overseas visitors numbers have increased by over 3.4 million, and tourism employment has grown significantly,” he said.
The measure is expected to raise €466 million next year.
Commenting on the changes, John Stewart, Tax Director at accounting company Deloitte said the increase will have no impact on non VAT-registered businesses including many of those in the B&B sector.
The Irish Hotels Federation expressed its 'deep disappointment' at the increase . President Michael Lennon, said the increase is a serious jolt to the tourism industry in Ireland and represents a reckless failure to recognise its economic potential and importance, particularly to rural Ireland. Mr Lennon urged the Minister to defer the increase until there is clarity over Brexit and to allow existing contracts for group bookings to be completed as prices are already agreed.
“Ireland will now have a higher tourism VAT rate than 26 countries in Europe with which we compete. We are already a very high cost economy by international standards so it is astonishing that the Government is now imposing additional taxes on tourists and making our country less attractive as a destination.”
Adrian Cummins, Chief Executive of the Restaurants Association of Ireland said, “This was the incorrect decision by Government and had little economic intelligence behind the decision to increase the VAT, as did the report by the Department in July which didn’t take consideration of Brexit or revenue generated by oversees tourists to Ireland. VAT at 13.5% reduces Irish Tourism’s competitiveness, resulting in less appeal to overseas visitors and, most worryingly, impacts the value for money offering which discourages people to spend their money in Ireland on Irish goods and services. With Brexit on the horizon and the as yet unknown implications it may have on our sector, this decision has put the Irish Restaurant Industry in jeopardy. This was an election Budget paid for by the Restaurant and Tourism Industry.”
The Irish Tourism Industry Confederation (ITIC) has expressed significant disappointment with Budget 2019.
Eoghan O’Mara Walsh, CEO of ITIC, said:
“Budget 2019 has been very disappointing for tourism, Ireland’s largest indigenous industry and biggest regional employer. The tourism VAT rate had been at the appropriate rate for the sector and hiking it by 50% as the Government has done today is a damaging blow to the industry.”
“The increase in the VAT is likely to damage demand and, with Brexit less than 6 months away, this is extremely worrying for Irish tourism and will make trading conditions much harder for business”.
Brexit poses a major risk to Irish tourism with 39% of all international tourists coming from Britain. ITIC has previously estimated that a hard Brexit will cost Irish tourism €260 million in its immediate aftermath growing to half a billion euro.
O’Mara Walsh said: “Britain is by far Ireland’s largest source market for tourists. The decision by the Government to increase the tourism VAT rate only serves to undermine the competitiveness of the sector at a time when a hard Brexit looms with weakened sterling, potential border controls, and aviation disruption all likely to hit the sector hard. This budget does anything but Brexit-proof Irish tourism”
The Drinks Industry Group of Ireland (DIGI) says failure to reduce alcohol excise tax and increasing the VAT rate restricts growth and trade in the face of Brexit