Documents drawn up by the Department of Finance state that high hotel prices in Dublin do not justify the tourism industry's reduced VAT rate of 9%.
According to The Irish Times, the documents, which were compiled before the budget in October, claim that increasing the VAT rate to 13.5% for hotel accommodation would address "the issue of high hotel prices not warranting" the 9% rate, while maintaining the reduced rate for other services in the hospitality sector.
Research undertaken on the run-up to this year's budget revealed that the 9% VAT rate on hotel rooms was one of Europe's lowest, with Dublin hotel prices being the 10th highest out of the countries included in the research. The data indicated that the average room rate in Dublin at the end of 2016 was €147 per night.
Additionally, the Department of Finance estimated that increasing the VAT rate to 13.5% across the hospitality sector would bring in €491 million in revenue. The reduced rate is estimated to have cost the State €2.2 million since its introduction in 2011.
Representatives of the hospitality industry have been very vocal in their opposition to rising the VAT rate, with an Irish Hotels Federation spokesperson stating, "The 9% VAT rate continues to be one of the most successful job-creation initiatives in modern times, with its positive impact on tourism exceeding expectations."
