Robert McHugh examines how increased consumer taxes on the Irish hospitality and tourism sector are affecting the industry.
The recent decision by the government to increase consumer taxes on the Irish hospitality and tourism sector from 9% to 13.5%, has caused consternation across the industry.
Overnight, Ireland has gained the dubious distinction of having the third highest tourism VAT rate in all of Europe.
Severe Criticism
Tourism is Ireland’s largest indigenous employer and the move was greeted with severe criticism from all constituent parts of the industry including hotels, restaurants, pubs and nightclubs.
Many within the industry have argued that the tax hike will lead to massive job losses and the closure of many hospitality businesses that are already biesiged by high costs and poor trading conditions.
Hotel Sector
Hotels across Ireland have dreaded the increase in VAT, with many believing it will be a final blow for smaller establishments that are already struggling to stay solvent.
Denyse Campbell, the IHF president, has warned that rural and regional businesses outside the tourism hotspots will be hit hardest as will those businesses that rely heavily on food and beverage sales with very tight margins. “Increasing tourism VAT to 13.5% will ultimately have an inflationary impact, which is a major concern given the potential implications for people’s spending decisions," said Campbell.
"It is a serious blow for our sector, including hotels and guesthouses which have experienced enormous increases in the cost of doing business."
Tough Summer
At the beginning of August, the Restaurants Association of Ireland (RAI) said it believed Ireland should retain the hospitality sector's reduced VAT rate, but only for food-related businesses.
Adrian Cummins, chief executive of the Restaurants Association of Ireland, said poor weather and rising energy and ingredient costs, were among the reasons why restaurateurs feel their businesses have struggled this summer.
"The increase of the VAT rate is the final nail in the coffin for many small cafes, restaurants and food-led pubs,” warned Cummins.
Pubs And Bars
Meanwhile, the Vintners Federation of Ireland (VFI) also strongly criticised the government's hospitality VAT rate increase and labelled it 'a tax on the consumer.'
The federation has also warned that increasing VAT to 13.5% will negatively impact the trade as the summer season ends and a quieter autumn trading period arrives.
"Customers are already feeling the pinch with cost of living increases so this is a short-sighted move by government that will lead to concerns about long-term viability," said VFI president John Clendennen.
Outlook
The hospitality sector has faced a very difficult trading season recently with high energy bills, higher food prices, an unseasonably wet summer, and a customer that is weary about putting their hand into their pocket due the cost of living crisis.
The new increase in consumer tax on the Irish hospitality and tourism sector was only enforced at the beginning of September and is already a contentious issue.
At a time when the tourism and hospitality needs as much help as possible from the government, the hike in tourism tax seems like a step in the wrong direction.
