Poll: Should the government keep the tourism sector's special VAT rate?

IRELAND’S TOURISM CHIEFS have been lobbying for the minority government to maintain the sector’s preferential 9% VAT rate in Budget 2017.

The rate for hotels, attractions, restaurants and other tourism businesses was reduced from 13.5% to 9% in 2011 in a bid to give a much-needed boost to the hospitality trade.

It was due to be phased out by the end of 2013, but has since been ‘extended indefinitely’.

Critics have argued that the lower VAT rate is costly – worth hundreds of millions in forgone revenue for the exchequer - and has already achieved its mandate, with Ireland on track to deliver its target of 10 million visitors by 2025.

They also claim consumers aren’t enjoying the benefits of the reduced tax as hotel rates in Dublin have climbed nearly 20% in the year to July as occupancy levels topped 90%.

The Department of Finance has argued that a return to the 13.5% rate is due because the temporary initiative has “done its job”, according to a briefing note to Minister Michael Noonan.

Minister for Tourism Shane Ross

Nevertheless, those in favour of retaining the current tax rate argue it has helped boost employment, particularly in areas outside Dublin, which are yet to enjoy the same rebound in their fortunes.

A report by Crowe Horwath accountants found that hoteliers in the capital made more than double the amount of profit per room than their counterparts on the western seaboard last year.

Meanwhile, the Restaurants Association of Ireland claimed that more than 45,000 jobs were created in the food, tourism and hospitality sectors since the lower rate was introduced.

For his part, Noonan has acknowledged that the argument for keeping the lower rate is diminishing each year in Dublin, but that the case for retention of the measure for the rest of the country remains.

With that in mind, we’re asking Fora readers: Should the government keep the tourism sector’s special VAT rate?