Minister for Finance Paschal Donohoe TD has announced that the 9% VAT rate for the hospitality and tourism sectors will be extended for six months, until 28 February 2023, following an approval of the proposal by the government at a Cabinet meeting on Tuesday 10 May, according to a statement published on Gov.ie.
Details
The extension’s estimated cost is €250 million, according to the statement, which also noted that it will cover the same goods and services as the original measure: restaurant supplies, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, and hairdressing, as well as some printed matter, such as brochures, leaflets, programmes and catalogues.
Statement By Minister Donohoe
The statement published on Gov.ie included one from Minister Donohoe, wherein he said, “The tourism and hospitality sector was one of those most impacted by the public health restrictions put in place throughout the pandemic. Through no fault of their own, bars, hotels and restaurants had to close on multiple occasions to help the country make its way through the worst of the public health crisis.
“The government put in place unprecedented support for the economy, with the wage subsidy scheme supporting the incomes of citizens across the country. The accommodation and food services sector was the most supported by the Employment Wage Subsidy Scheme, to ensure that workers maintained the link with their employers, and to give businesses the best-possible chance to weather the pandemic.
“The 9% VAT rate was introduced in response to the challenges posed by Covid-19, to support the hospitality sector, and today the government has decided to extend the period when the 9% rate will apply for a further six months. This will provide further support to the tourism and hospitality sectors over the busy November-December period and into the early new year.”
Statement By Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media
The statement published on Gov.ie also included one from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media, Catherine Martin, wherein she said, “I am delighted that the Minister for Finance, Paschal Donohoe, and my colleagues in government have agreed to extend the reduced VAT rate until end-February 2023. The Hospitality and Tourism Forum, which I co-chair with the Tánaiste, has repeatedly raised the importance of extending the lower VAT rate for the entirety of 2022. I have pressed on this issue for several months now, and I know that this extension will give the sector time to rebuild and consolidate after a harrowing two years under Covid-19. The extension will promote business survival and support employment in the industry.”
IHF Response
The Irish Hotels Federation (IHF) responded to the aforementioned news by stating that hotels and guesthouses across the country have welcomed the announcement from the government, and that this measure will go a long way to helping the industry recover, however – given the challenges ahead – the IHF is calling on the government to further extend this measure out to 2025, in order to maintain international competitiveness with other European destinations.
IHF president Denyse Campbell said that the 9% VAT rate is the right one to support recovery in Irish tourism and hospitality and enable the sector to rebuild, following an exceptionally challenging two years, particularly in light of spiralling business costs.
Campbell stated, “We warmly welcome this decision by the government to extend the 9% tourism VAT. Hoteliers and everyone across the tourism industry recognise the vital supports put in place by the government during the pandemic. These played a crucial role in enabling businesses to survive, and we are now working to restore the livelihoods of the 270,000 people who worked in our industry prior to Covid.
“A vibrant domestic and international tourism industry is a cornerstone of economic growth and job creation right across the country. Extending the tourism VAT rate will aid the recovery under way in the tourism industry, after a bruising two years during the pandemic. This is particularly the case as the sector faces into a gale of spiralling business costs, with IHF members reporting year-on-year increases of 88% in energy, 22% in water, and 18% in food and beverage.”
Campbell stated that increasing the VAT rate to 13.5%, as had been planned, would have been counterproductive in terms of Ireland’s international competitiveness, adding, “The previously proposed increase would have made Ireland a European outlier, with just one country in the EU – Denmark – having a tourism VAT rate exceeding 13.5%. Given the critical importance of international competitiveness for our industry, we are calling on the government to keep the 9% tourism VAT rate under very close review, for extension out to 2025.”
RAI Response
In a statement published on RAI.ie, the Restaurants Association of Ireland (RAI) responded to the news of the 9% VAT rate’s extension by saying that it welcomes the decision taken by Minister Donohoe.
The statement published on RAI.ie included one from RAI CEO Adrian Cummins, wherein he said, “Since the Budget last October, the Restaurants Association of Ireland has called for this extension as tourism and hospitality businesses – some of the worst impacted by Covid trading restrictions – continue to recover. This decision to extend the rate is welcome at a time when hospitality businesses face rising input costs and inflation.”
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