ronan fagan
In an open letter to constituency public representatives, Barry Kennedy, chairperson, Midlands Branch, Irish Hotels Federation (IHF ), has expressed his concern for Government plans to increase consumer taxes (VAT on hospitality and tourism ) at a time when individual’s personal finances are already under significant pressure due to the cost-of-living crisis.
“I am writing on behalf of hotels and guesthouses throughout this constituency, representing 20 local businesses, to highlight our growing concerns about plans in September to increase consumer taxes on Irish hospitality and tourism.
“Government estimates indicate that the proposed increase in VAT to 13.5 percent would see people paying an additional €560 million in taxes each year, a 50 percent increase in taxes on items such as the price a cup of coffee, the cost of a meal out, a stay in a hotel or guesthouse and the charge involved with social events.
“This is at a time when people’s personal finances are already under significant pressure due to the cost-of-living crisis. With inflation remaining persistently high, consumer prices are forecast to be over 16 percent higher in 2024 than they were in 2021. Meanwhile, households are also being squeezed by soaring mortgage interest rates, with more increases to come,” Mr Kennedy stated.
The concerned chairperson noted that the escalating cost-of-living crisis has a knock-on effect on the decisions the average person makes when deciding whether or not to spend money on discretionary items such as going out for a meal with family and friends or taking a short break in Ireland.
“Tourism and hospitality are particularly vulnerable and invariably one of the first to take the hit. From a tourism perspective, the current 9 percent VAT is the right rate for Ireland. It is in line with average rates of tourism VAT across Europe. Increasing the rate of VAT paid by consumers to 13.5 percent would make us an outlier among our competitors. We would have the third highest tourism VAT in Europe, which would seriously undermine our international competitiveness and ability to attract visitors.
“The reality is that Ireland is already one of the most expensive places in the world in which to live and do business. Recent figures show that general consumer prices in Ireland are the highest in the EU at over 46 percent above the average. This begs the question we are asking all TDs to consider - ‘why should Ireland, as an island destination, have the third highest tourism VAT rate in all of Europe?’
“How can it be in the interest of our vitally important local hospitality and tourism industry to impose the highest taxes on visitors and people holidaying at home – second only in the EU to Denmark?
“As we look to develop and grow our local hospitality and tourism offering, the focus should be on making us more attractive as a tourism destination, not more expensive. This is where the Government’s approach to taxation is of critical importance. Taxation is one of the key tools at its disposal to create the right conditions for continued long-term and sustainable recovery of hospitality and tourism. The decision around Ireland’s VAT is now of particular relevance given the challenges currently facing our wider tourism industry, including enormous increases in the cost of doing business and uncertainty in overseas markets,” Mr Kennedy added.
Continuing, the chairperson noted that recent figures from Fáilte Ireland indicated that displaced tourist capacity due to emergency Government contracts will result in a cost of approximately €1 billion in lost revenues for downstream tourism enterprises, including many regional and rural businesses that play a vital role in the wider tourism ecosystem.
“This hit is in addition to the proposed annual €560 million VAT increase. There is now a real risk that long term damage will be done to our wider industry, including local tourism enterprises in our constituency.
“This does not have to be the case. When it comes to Government taxation policy, we have seen the enormous success of Ireland’s competitive approach to attracting foreign direct investment. Similarly for the indigenous economy, the Government’s approach to the 9 percent VAT rate has delivered phenomenal results in support of employment and local businesses since its introduction in 2011.
“Over the intervening twelve years, despite a financial crisis and a pandemic, tourism and hospitality has generated approximately €66 billion in revenues for the economy and over €15 billion in taxes for the exchequer, the benefits of which have been felt in our constituency.
“We hear about the need for Ireland to create a more balanced economy that supports indigenous sectors and a greater spread of investment throughout the country and what better way to do this than by creating the best environment to support hospitality and tourism, our largest indigenous employer?,” Mr Kennedy commented.
Continuing, Mr Kennedy noted that VAT increase on hospitality and tourism would pose significant risks to a vital part of an economy that supports over 20,000 businesses throughout the country.
“This is an industry that, prior to the pandemic, supported some 6,400 jobs throughout our constituency, generating €87 million in revenues annually for our local economy.
“Ireland should be doing everything possible to support indigenous economic activity that distributes prosperity and opportunities throughout the entire country, including regions such as the Midlands. This requires a long-term Government strategy that balances a focus on competitiveness, investment in our people and allocation of resources for targeted development of our tourism infrastructure.
“The last thing we should be doing is increasing consumer taxes on hospitality and tourism and making Ireland less competitive. On behalf of hoteliers throughout our constituency, we are urging local TDs to support our call on the Government to retain the 9 percent VAT rate,” Mr Kennedy concluded.
