Cork hoteliers urge Government to retain 9% tourism VAT

The current reduced Vat rate is to expire on February 28 and revert back to the higher rate of 13.5% from March 1
Cork hoteliers urge Government to retain 9% tourism VAT

Prior to the pandemic, the IHF said the industry supported over 270,000 livelihoods including some 27,000 jobs throughout Cork.

CORK hoteliers have urged the Government to retain the 9% Vat rate for the tourism and hospitality sector in Ireland, warning that the majority of Irish hotels and guesthouses are still “in recovery mode” from the pandemic.

The current reduced Vat rate is to expire on February 28 and revert back to the higher rate of 13.5% from March 1.

A statement from the Cork branch of the Irish Hotels Federation (IHF) said that, in light of “the growing economic challenges facing the sector”, local hoteliers are urging the Government to retain the existing rate “to safeguard tourism livelihoods and secure the long-term, sustainable development of Irish tourism”.

Prior to the pandemic, the IHF said the industry supported over 270,000 livelihoods including some 27,000 jobs throughout Cork.

In a local tourism update, the federation said that the industry has made “enormous progress” over the past year in restoring employment, boosted by a number of short-term factors including high levels of pent-up demand, and displaced business previously contracted for 2020 and 2021.

“The majority of hotels and guesthouses, however, are still in recovery mode — having come out of an exceptionally challenging two years of Covid, during which time the hotels sector alone lost over €5bn in revenue,” the IHF warned.

It also said the industry is facing into “very worrying headwinds” with the uncertainty around the future economic outlook.

“With a full recovery in tourism now likely to be delayed until 2026, an increase in the VAT rate to 13.5% is the last thing that should be contemplated, given its inflationary impact and the damage it would cause to Ireland’s tourism competitiveness,” the IHF statement continued.

Last week, Finance Minister Michael McGrath said he does not anticipate that all measures put in place to help people survive the pandemic will expire in their entirety at the end of February as planned.

Finance Minister Michael McGrath. Picture: Jim Coughlan.
Finance Minister Michael McGrath. Picture: Jim Coughlan.

Speaking ahead of an event at University College Cork (UCC) last week, Mr McGrath said Government has a number of decisions to make in the coming weeks regarding support measures.

“We have a number of decisions to make in the coming weeks.

“We have a reduced Vat rate on electricity and gas bills, domestic household bills.

“We also have excise reductions in the case of diesel and petrol that also fall to expire in February.”

He continued: “We have a temporary energy business support scheme which got up and running in December and which is also due to end at the end of February, and we have a 9% rate of Vat in tourism and hospitality.

“That dates all the way back to 2011 as part of a jobs initiative that lasted for a number of years, then the normal rate of 13.5% was reinstated.

“Then for 2019 and in late 2020 as part of a Covid stimulus measure it was reduced again,” he said.

“When we brought forward a Budget in late September it was on the basis that all those measures would expire at the end of February.

“I do not anticipate that all of them will in their entirety end at the end of February, I don’t expect that to happen, and I will be making recommendations to the party leaders in the first instance in the coming weeks.

“My own Department is doing a detailed assessment now of all of those different measures and I will discuss it with the party leaders in the coming weeks, and we’ll make decisions but I don’t expect all of them to end in their entirety — but I can’t give a commitment about any specific measure,” he continued.

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