Tuesday, 5 November 2019

Questions (130)

Anne Rabbitte


130. Deputy Anne Rabbitte asked the Minister for Finance if research has been carried out on the impact budgetary changes in recent years have had on the tourism sector; and if he will make a statement on the matter. [44544/19]

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Written answers (Question to Finance)

A “Review of the 9% VAT rate: Analysis of Economic and Sectoral Developments” was published by my Department in July 2018, in order to better inform any decision in relation to the 9% reduced rate going forward. In addition to assessing the relevance, cost, value-for-money, and impact to date of the 9% VAT rate, the Review also looks at the estimated impact on the relevant sectors were the rate to be increased.

The Review found that tourism expenditure is 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. Growth is also expected to continue in the medium term. This positive economic outlook means that the income channel of demand is likely to ensure that economic activity within the tourism sector remains strong. The Review concludes that the VAT rating applied to the tourism sector should not greatly impact demand or employment in the sector. The Budget decision to increase the VAT rate was made following this analysis.

I am aware that Revenue has published analysis of trends in tax receipts and employment for businesses paying VAT at the 9% rate. This report is available at link https://www.revenue.ie/en/corporate/documents/research/vat-9-rate-analysis.pdf

Given the impact of an increase in the VAT rate on the hospitality sector has only recently been reviewed by my Department and the Revenue Commissioners, there does not seem to currently be a case for reviewing the impact of the increase. All economic activity will be reviewed in the normal way as part of the budgetary cycle.