The special 9% VAT rate introduced in 2011 to encourage employment and growth in the tourism sector during times of economic crisis might be phased out, as the Department of Finance has advised Minister Paschal Donohoe that increasing it to 13.5% would translate into an extra annual revenue of €500 million.
As reported by The Irish Times, the department has suggested that this preferential rate “has done its job” and it has been pointed out that it was introduced as a temporary measure “to give a boost” to the industry but due to the impact of Brexit, it was kept as part of the last budget.
The 9% VAT rate benefits numerous tourism-related activities including hotels, restaurants and cinemas, and trade organisations are expected to strongly resist the increase.
This is not the first time a call to increase the VAT for the hospitality industry has been made. Last year the Department of Finance also suggested the possibility, and on a briefing for the then minister Michael Noonan it was pointed out that “the general recovery of the economy and increasing prices in the sector raises questions about its future.”
The Irish Times also reported that Minister for Tourism Shane Ross is not in favour of the increase and has said that the industry still needs the 9% rate.