Donegal hotel and guesthouse representatives today renewed their call on the government to retain the 9% tourism VAT rate.
The Irish Hotels Federation (IHF) made the call in response to very challenging economic headwinds facing the sector over the next 12 months.
New industry research carried out by the organisation indicates the sector is now at a ‘crucial juncture’ as it grapples with economic slowdowns in key overseas markets, escalating business costs and the impact of inflation on discretionary consumer expenditure.
They say the hotel sector supported 8,000 tourism jobs in Donegal (pre-Covid) and generated more than €249 million for the local economy.
Paul Diver, IHF Donegal Branch, expressed deep concern about the impact the proposed VAT increase to 13.5% would have on an industry still recovering from the pandemic.
“With many of our key tourism markets experiencing a cost-of-living-crisis, the last thing the government should be contemplating is an increase in consumer taxes such as tourism VAT,” he said.
“Consumers in Ireland and across our overseas markets are already being squeezed by exceptionally high levels of inflation and other pressures on their finances, which means there is a very real risk that many will pull back from spending on discretionary items such as holidays and breaks away.
“It is therefore very worrying that the government is considering an increase at this time given the impact it would have on inflation and the damage it would cause to our tourism competitiveness – resulting in Irish consumers and overseas visitors having to pay the third highest tourism VAT rate in all of Europe. Now is not the time to jeopardise the recovery by increasing tourism VAT. The focus of the government should instead be on safeguarding tourism livelihoods and securing the long-term sustainable recovery of our industry.”
Mr Diver noted that, far from being an exceptional measure, most European countries have a low VAT rate on tourism accommodation.
For example, of the 27 EU countries, the VAT rate on accommodation is 9% or lower in 16 countries.
“In these countries it is settled policy to support tourism with a lower VAT rate as its contribution to tourism jobs, businesses and the wider economy pays its way many times over,” he explained.
“This should equally be the case for Irish tourism as our largest indigenous industry, which prior to the pandemic supported over 270,000 livelihoods, including some 16,000 jobs throughout Kerry, generating €592m in tourism revenues annually for the local economy.”