Following another great performance on TV3 last night, this question is from Deputy Michael Healy-Rae. The Deputy has 30 seconds.
Wednesday, 19 June 2019
Oral answers (64 contributions) (Question to Finance)
26. Deputy Michael Healy-Rae asked the Minister for Finance if a survey will be undertaken of the hospitality sector before a decision is made on retaining the 13% VAT rate in view of the effect on business to date. [25794/19]View answer
The Government made a decision to increase VAT on the hospitality sector and said it would review it and that it would work with and engage with the organisations representing all aspects of the tourism sector. In light of statistics and what we know of the effect of the rate, can the Minister look at the situation again and keep the promise he made?
The second reduced 9% VAT rate was introduced on a temporary basis as part of the jobs initiative from July 2011 to December 2013 and was aimed at boosting tourism and the creation of additional jobs in that sector. The rate was designed to be temporary, but was maintained in subsequent budgets. In 2016, in A Programme for a Partnership Government, we committed to maintaining the 9% VAT rate. I decided in budget 2018 not to make any change to the 9% VAT rate. However, I accepted that the rate must be subject to analysis. In this context, I asked my Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of budget 2019.
The review in question was published by my Department in July 2018, in order to better inform my decision-making.
The review found that tourism expenditure was more sensitive to income growth and the economic cycle than price changes. The economy is currently performing well, with high levels of employment and strong demand in the tourism sector. This positive economic outlook means that the income channel of demand is likely to ensure that economic activity within the sector remains strong.
Furthermore, the Revenue Commissioners published a report on the 9% VAT rate in June 2018 which analyses the output and employment impact of the 9% VAT rate using Revenue data. The analysis found an estimated increase in employment of, on average, 1.8 employees for each firm benefiting from the reduced rate. However, beyond the short term, they were unable to distinguish the impact of the rate on employment from the impact of other factors in the economy.
Given the impact of an increase in the VAT rate on the hospitality sector has only recently been reviewed, there does not seem to currently be a case for reviewing the impact of the increase. I will continue to engage with any sectors of our economy and Members of the Oireachtas on issues about which they have a concern.
I will relate the experiences of people on the ground. I come from the county that is probably the tourism capital of Ireland if not the world and Killarney is the tourism capital of Europe if not the world. Places of note in my county include Kenmare, Dingle and the entire Ring of Kerry. All parts of Kerry are deeply involved in tourism and the hospitality sector. On behalf of those places, I wish to highlight the fact that there are businesses that are struggling. In a great town such as Killarney, the figures are back, the businesses are back and the revenues are back. However, family-owned businesses throughout the Ring of Kerry, from the Maharees to Sneem, Castlecove, Waterville and Cahirsiveen, are struggling because they borrowed money to improve their businesses and now they are saying that this rate is having a detrimental effect on them. They are asking the Minister to keep his commitment and look at the matter again.
The Minister may also have a capital of tourism he would like to promote.
I fear that singling out one part of the country would mean I will have to name them all. The recent Central Statistics Office figures for overseas visitors to Ireland show that there was an increase of 6% in the first quarter of this year. In the first 12 weeks of the year, we had more tourists coming to our country than a year ago. I accept the huge effort that goes into running tourism businesses and delivering services across the country but we now have companies, big and small, that are evaluating their performances against the level of performance of a year ago, which was at an all-time high. If there is a decline in business performance against a base that was at an all-time high and the expectation is created that we have to change tax measures in response, we will end up with tax policies that contribute to our economy overheating. If that happens again, the people who will pay the price will be the businesses to which the Deputy refers.
At the end of May, tax from VAT was €392 million ahead of where it was a year ago, which shows that consumption is being maintained, despite the fact that the rate has gone up.
My argument against what the Minister said is factual and soundly based. He stated that previous Ministers reduced the VAT rate as a temporary measure to help the struggling sector at that time. Instead of the Minister indicating that it is a permanent increase and cannot be revisited, I am holding him to account for what he said in this House previously. We devoted 74 days to formulating the programme for Government. I was with the Minister throughout that process. One of the commitments made was to the tourism sector. The Minister's then party leader was deeply and sincerely committed to the sector. I am asking the Minister, the Taoiseach and their Government colleagues to honour their commitment to tourism and to help people, in County Kerry and throughout the country, by saying that they will keep this under scrutiny and are not saying "No" to reducing it at some point.
I acknowledge that the Deputy was in the room for 74 days but, ultimately, he decided not to join.
That is not factual.
It is one thing acknowledging how much time he spent in the room but he decided not to join.
The Minister must not say that on the record of the Dáil. He has to withdraw it.
I am not sure what I said to bring the Deputy to his feet in this way. I am simply pointing to a fact. He decided not to join.
Deputy, please sit down.
I will not let the Minister tell a lie on the record of the Dáil.
Deputy, please sit down.
The Minister cannot tell a lie on the record of the Dáil.
To respond to the question the Deputy put to me-----
Please withdraw the comment.
Sit down, Deputy.
The Minister has to withdraw the comment.
I will give the Minister one minute to withdraw the allegation.
I ask the Deputy to resume his seat. He is wasting other people's time.
I will sit down to give the Minister the chance to withdraw an untrue allegation.
Resume your seat, Deputy.
Withdraw it. I will not allow the Minister to tell a lie on the record of the Dáil. How dare he?
The Deputy should sit down and address the Chair.
I am sorry but-----
No, sit down.
The Minister should withdraw the lie that he stated.
The Deputy is taking valuable time from other Deputies. I ask the Minister to continue.
He should take back the lie.
It is not Deputy Michael Healy-Rae's role to decide what rules I obey. That is the role of the Chair. The Deputy does not set the rules of this House. They are laid down in Standing Orders and overseen by the occupant of the Chair. Given that a moment ago, the Deputy praised the argument that we should stand by the facts, I simply outlined two facts. The Deputy participated in the Government negotiations and he is not a member of the Government. Before I go on to further address the issue he raised regarding VAT, I will put a point to him. I understand that he is a successful businessperson who understands the demands of the balance sheet of a company. If he runs a promotion that is very successful and he sells more of that good at a lower promoted price than he thought he would, would he decide to keep that promotion running forever? That is a principle that every hotel operator or bed and breakfast in the country understands, as I am sure the Deputy does as a small business owner. That same insight applies to how we must manage our national finances. We ended up with a tax base that was too small to fund the needs of our State because that insight was not adhered to. Deputies Michael McGrath and Pearse Doherty and other speakers raised potential risks with regard to corporation tax and Brexit. We cannot recognise the risks and, at the same time, lack the courage to do something about them.
We will move on.
The Minister made an allegation and I am asking him to-----
I ask the Deputy to resume his seat or I will suspend the House.
I will not let the Minister get away with telling a lie.
The Deputy cannot accuse-----
The Minister stated something as if it was a fact.
Will the Deputy allow me to speak?
The Acting Chairman is not providing me with a chance to respond.
The Deputy should resume his seat.
How can he tell a lie on the record of the Dáil? Can anyone come into this House and tell a lie? He said something as if it was a fact when it was not.
I will have to suspend the House if the Deputy does not resume his seat.
I am very sorry but I want the Minister to withdraw the lie.
There is no point in being sorry.
The Minister said something as if it was a fact when it is not true.
Will the Deputy resume his seat?
I am very sorry but will the Minister withdraw the lie? He cannot say something that is untrue.
There is no point in saying sorry to me. Will the Deputy resume his seat?
What did the Minister say?
I will tell the Deputy exactly what he said. He said that I chose not to participate in Government. One cannot participate if one is not asked to do so. The Minister can understand that. It is like someone asking a girl out to dance. If she says "No", he cannot force her to go to a dance with him. I was not asked to the dance so how can the Minister come in here and say something as if it was a fact and think that he will get away with it? That is not fair, honest or decent. The Minister said something that is a lie. It is not true and I am not going to-----
Will the Deputy resume his seat?
-----have an allegation made about me as if I did something wrong. I ask the Minister on the record of the House to withdraw the lie that he put before the House.
I am left with no option but to suspend the House.
We will move on to-----
I would like to make a point of clarification for the Minister for Finance and the House. During the negotiations on the programme for Government, the then leader of the Fine Gael Party, Deputy Enda Kenny, called me into a room in which-----
We must move on.
I am making a clarification. In that room, the Fine Gael leader stated to me that it would be good if I were a Minister in a future Government that he would put together. I said that he was not in a position to do anything like that as he had not yet spoken to Fianna Fáil, and that it could be discussed at another time. The programme for Government was then developed and the Minister was involved in all of that. Deputy Enda Kenny spoke to Fianna Fáil and the confidence and supply agreement was put together. The incoming Taoiseach never picked up the phone to ring me when he was appointing his Ministers and Ministers of State. As I have said on Radio Kerry, I never got a phone call. That is the truth.
I am moving on.
I am just clarifying a matter. That is the truth and the Minister's statement was factually incorrect.
I have allowed the Deputy to clarify the matter. Deputy Catherine Murphy is waiting to ask her question.
That is all I wanted to say. I appreciate the opportunity to clarify and I apologise to my colleagues for the delay this has caused. The Acting Chairman cannot allow the Minister to tell a lie.
I am moving on to Question No. 27. I apologise to Deputy Catherine Murphy for the delay.