“This increase will make our tourism VAT rate the second highest in the EU” – mixed reactions from the Irish hospitality industry

“A mixed one.” This is how the Irish Tourism Industry Association (ITIC) summed up the 2023 budget.

So it could have been worse. But for companies caught in a pandemic frying pan into an inflationary fire, things could have been far better.

Treasury Secretary Paschal Donohoe’s decision to let the special sales tax rate of 9 percent expire on February 28 as planned made headlines.

ITIC said the return to 13.5 percent from March 1 was “a significant disappointment”.

Last night, Tánaiste Leo Varadkar slurred the issue by leaving the door open to another review of the VAT rate ahead of March, but hotels, restaurateurs and other tourism businesses are now desperate for certainty about pricing.

Why the big deal? A 4.5 percent increase on your meal, room or ticket may not sound like much, and the 9 percent rate costs more than €427 million a year in lost tax revenue.

But pumping it back up to 13.5 percent by the start of the 2023 season will dampen demand and “damage our competitiveness as a destination,” said Catherine Flanagan, CEO of the Association of Visitor Experiences and Attractions (AVEA).

Most EU countries have VAT rates of 10 per cent or less for tourism and hospitality (although in Northern Ireland and the UK the rate is 20 per cent).

“This increase will make Ireland’s tourism VAT rate the second highest in the EU and well above other European countries where tourism is a significant part of their economy, such as Portugal (6%), Turkey (8%) and Malta (7%). ),” he said to Denyse Campbell, President of the Irish Hotels Federation (IHF).

The government has “missed an opportunity” to help tourism recover, she added.

ITIC, meanwhile, has calculated that raising the rate to 13.5 percent could increase inflation by 0.5 percent.

So yes, Vat keeps teasing.

Like the rest of us, Ireland’s 20,000 tourism and hospitality businesses had viewed budget 2023 as a time of crisis; a line in the sand. The season may have started with post-pandemic optimism, but soaring utility bills, staffing crises and the rising costs of insurance, food, drink, laundry and more have left many on the brink.

The actions of this budget can literally mean the difference between opening or closing over the winter.

“I won’t lie to you,” Galway chef JP McMahon tweeted this week. “The last three years have broken me. From crisis to crisis. The next six months will define Irish food for the next five to ten years. From farmers to suppliers, from chefs to producers.”

For example, last night companies brooded over details of the new Temporary Business Energy Support Scheme (TBESS), which under certain criteria could help with rising energy bills by up to €10,000 a month. Some say it doesn’t go far enough (the scheme expires in February, and the €10,000 cap may not help larger hotels).

The IHF said it is seeking “a change in the criteria” for significant employers.

Many AVEA members are non-profit or charitable foundations and as such may not benefit from a tax credit, Ms Flanagan added.

“We would like to see this scheme – which is in principle a very positive step – extended for the whole of 2023, particularly given the seasonal nature of the sector and energy use,” said Brendan Kenny, chief executive of the Adventure Tourism Association of Ireland ( IAAT). He said it is “extremely important” that all tourism businesses are involved.

The 2023 budget also includes additional support for recruitment, sustainable tourism and the US College Football Classic.

There is €15 million in enhanced funding for overseas marketing and development of The Invitation – a themed tourism project reminiscent of The Gathering.

“Overall we would say we are happy that national tourism agencies are well supported,” Ms Flanagan said. However, concerns remain about the pace of recovery, an ominous winter and next year.

Last year, 2022 was seen as crucial for recovery. It’s now 2023. A deteriorating economic outlook, rising costs and slowing demand have led ITIC to revise its forecasts of a full tourism recovery by 2027.

Mixed news, indeed.

https://www.independent.ie/life/travel/this-increase-will-make-our-tourism-vat-rate-the-second-highest-in-the-eu-mixed-reaction-from-irish-hospitality-sector-42022915.html “This increase will make our tourism VAT rate the second highest in the EU” – mixed reactions from the Irish hospitality industry

Fry Electronics Team

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