Dáil Éireann Debate, Tuesday - 1 March 2022
249. Deputy Colm Burke asked the Minister for Finance if an analysis has been undertaken by his Department on the impact of the reduced VAT rate on the tourism sector which is of great assistance due to the impact of Covid-19; and if he will make a statement on the matter. [10976/22]
View answerAs the Deputy may recall, I previously asked my Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of Budget 2019.
The “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 looked at the estimated impact on the relevant sectors were the rate to be increased.
The Review found that tourism expenditure was more sensitive to income growth and the economic cycle than price changes. The Review concluded that the VAT rating applied to the tourism sector should not greatly impact demand or employment in the sector.
Furthermore, the Revenue Commissioners also published a report on the 9% VAT Rate in June 2018 which analysed 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 benefitting from the reduced rate in the accommodation and food sector in the year following the introduction of 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.
I am advised by Revenue that an estimated €820m in VAT was collected at the 9% rate during the period from 1 November 2020 to end December 2021 (the most recent available data). An estimated additional €410m would have been collected had the rate remained at 13.5% over the period.
