Restaurants Association Of Ireland Urges Government To Retain 9% VAT Rate

The Restaurants Association of Ireland today is urging the Government to retain the 9% VAT rate for the tourism and hospitality industry. The reduction in the VAT rate to 9% has improved the competitiveness of the Accommodation and Food Services sector since it was introduced, and has also helped ensure the viability of many businesses that have been going through challenging times. The RAI is asking Minister for Finance & Public Expenditure Paschal Donohoe T.D not to return the VAT rate to 13.5%.

 

Chief Executive of the RAI Adrian Cummins said “17 out of 19 Eurozone countries have a VAT rate of below 10%. A 9% VAT rate in Ireland is not only the correct rate for our country, but it is also in line with the rest of Europe. We need this VAT rate particularly now as Brexit negotiations begin, to remain competitive”. Both Minister for Transport, Tourism & Sport Shane Ross T.D. and Minister of State for Transport, Tourism and Sport Brendan Griffin T.D. have expressed that 9% VAT should remain. Mr. Cummins continued “Against this background of intense uncertainty for the Irish economy in general and the Accommodation & Food Services sector in particular, it does not make sense to increase the VAT rate, given the extra vulnerability that has arisen from the Brexit vote”.

 

While some parts of the sector are now experiencing improved trading conditions in line with the economic recovery, it is not universal and many businesses are still under significant pressure. As highlighted by the RAI last month, there is a significant shortage of trained workers in the industry, raising the VAT rate will put a further strain on business owners who are already struggling.

 

Since the introduction of VAT at 9% in 2011, 33,600 direct jobs have been created in the industry. The taxes accruing to the Exchequer from this employment totaled €160 million by the end of 2016. Indirect employment created in the sector since the introduction of the vat rate is estimated at 15,456 bringing the total number of jobs created to approximately 49,056.

 

From an Irish economic and political perspective, there is much to worry about in relation to Brexit. Sterling has lost 23% of its value against the euro since November 2015, and has shed 11% since the Brexit vote. This currency move will damage the competitiveness of Irish exports to the UK and will make Ireland a lot less attractive for UK tourists. It is estimated that for every 1% that UK activity declines, Irish economic growth would decline by about 0.3%. The Accommodation & Food Services Sector would clearly be very vulnerable to a UK recession and ongoing sterling weakness and vulnerability, especially if the 9% VAT rate is not retained. Ireland must remain an attractive destination to tourists, particularly those from the UK.

 

Continuing VAT at 9% into 2018 is crucial, not only to the sustainability of restaurants and businesses in the tourism sector, but also to job creation and regrowth for our economy. The RAI are adamant that Minister for Finance & Public Expenditure Paschal Donohoe T.D must recognize this and make a distinct effort to retain the 9% VAT rate.

 

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