(1) THAT the 9 per cent rate of value-added tax which is provided for in subsection (1)(ca) of section 46 of the Value-Added Tax Consolidation Act 2010 (No. 31 of 2010) and which applies to the supply of goods and services referred to in paragraphs 3(1) to (3), 7(b) to (e), 8, 11, 13(3) and 13B(1) to (3) of Schedule 3 to that Act, be increased to 13.5% and that the Value-Added Tax Consolidation Act 2010 (No. 31 of 2010) be amended accordingly.
(2) THAT this Resolution shall have effect on and from 1 January 2019.
(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).
This resolution provides for an increase of the VAT rate to 13.5%, with effect from 1 January 2019, on all services and goods to which the 9% rate currently applies, with the exception of newspapers, periodicals and sporting facilities. The proposed change will apply to catering and restaurant supplies, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter, hairdressing, the sale of live horses and greyhounds and the hire of horses. The increase is estimated to raise €466 million in 2019 and €560 million over a full year.
The 9% VAT rate was introduced as a new temporary reduced rate as part of a jobs initiative from July 2011 to December 2013. It was aimed at boosting tourism and at the creation of additional jobs across that sector. From budget 2014 it was decided to retain the 9% rate to support increased numbers of jobs and, latterly, due to the weakness of sterling following the UK vote to leave the European Union.
During last year's Finance Bill, the Minister for Finance committed to undertake a comprehensive study of all aspects of the 9% VAT rate to better inform any decision on the reduced rate. The review of the 9% VAT rate, analysis of economic and sectoral developments published in July, assesses the 9% VAT rate's relevance, its cost, value for money, impact to date, and the estimated impact were it to be removed. This matter was debated at an appropriate Oireachtas committee. The review found that tourism expenditure was more sensitive to income growth and the economic cycle than price changes, which reduced the relevance of the VAT rate applying to the sector. The review found that there was a lack of competitiveness in the sector and that if the 9% rate were increased, it would likely not materially impact demand or employment in the sector.
With economic analysis indicating that there is a decline in competitiveness across the sector, that the majority of activity at the 9% rate is driven by income growth more than price, and that the retention of the rate provides little additional benefit relative to its cost, the Minister has decided to return these items to the 13.5% rate. In the case of newspapers and sporting facilities, however, VAT will be retained at the 9% rate to assist national and regional newspapers to remain competitive and to meet the challenges of the modern media landscape. The 9% VAT rate is being retained for sports facilities to encourage healthy activity through facilities remaining affordable across the sector.