The President of the Irish Hotels Federation (IHF), Michael Lennon, today warned that increasing the tourism VAT rate from its current 9% would damage a national industry that generates over €2 billion in taxes for the Irish government each year.
Lennon said, at a time of increased uncertainty over Brexit, it makes no sense to jeopardise Irish tourism further and hinder capacity for growth. In particular, he said the 9% VAT is a key part of the overall competitiveness of Ireland's tourism product.
Mr Lennon said the 9% VAT has enabled Irish tourism to become more competitive internationally and has contributed to tourism growth across the country. At present 16 European countries have VAT rates of less than 10% on accommodation. Lennon stated that any increase in the VAT rate would put tourism businesses throughout the entire country at a major competitive disadvantage compared with other EU countries, particularly at a time when the sector is preparing for Brexit.
The Government introduced the tourism VAT rate in 2011 to promote job creation when the live register had reached almost 450,000 nationally. The IHF beleive Irish tourism will yield €2 billion in various taxes in 2018 and 65,000 new jobs have been created since 2011, with 40,000 more over next five years.
Speaking today, Mr Lennon said, "The financial crisis showed just how vulnerable we are to external economic events beyond our control. Today we face enormous risks and uncertainty with Brexit. Some of the scenarios being forecast would have grave knock-on effects for our own economy, particularly at a regional level."
He added, "The implications for tourism are stark given our heavy reliance on the UK – our largest market, accounting for over 45% of inbound visitors. Added to the poor Sterling exchange rate, any increase in VAT could result in a tipping point that risks a significant loss of market share to other destinations."