INTRODUCED AS A temporary measure in 2011 to stimulate recession-hit industries, the tourism and hospitality sectors’ preferential tax rate has been in the firing line for the past two budgets.
While the government has so far left the levy unchanged at 9% – reduced from the standard 13.5% rate – it’s looking increasingly likely that it will not survive this year intact.
In an interview last week with TheJournal.ie, Tourism Minister Shane Ross suggested the lower VAT rate should be scrapped for large hotels, which he said were “making massive profits”.
Meanwhile, the Irish Times reported that Finance Minister Paschal Donohoe was expected to bin the preferential VAT rate for hotels and other accommodation providers in the budget while keeping it in place for other businesses like restaurants and cafés.
A Department of Finance analysis on the discounted levy, which also covers the entertainment sector, found that restoring the 13.5% rate for tourist accommodation alone would bring in an extra €208 million in tax annually.
However there are many in the accommodation sector who argue that the lower tax rate is needed to fuel industry growth amid an acute shortage of tourist beds.
A recent Crowe Ireland analysis showed Ireland’s hotels were enjoying record profits across the country, but partner Aiden Murphy added that the lower VAT rate could help businesses invest in increasing their capacity to meet demand.
In addition, many hoteliers have said the industry hasn’t fully recovered in regional areas and businesses are suffering the ongoing fallout from the Brexit vote.
With that in mind, we’re asking Fora readers this week: Should the lower VAT rate be axed for hotels?