Violet-Anne Wynne
Question:97. Deputy Violet-Anne Wynne asked the Minister for Finance if he will comment on the decision to remove the 9% VAT rate for tourism and hospitality; and if he will make a statement on the matter. [53599/23]
View answerThursday, 1 February 2024
Questions (97, 106)
Alan Dillon
Question:106. Deputy Alan Dillon asked the Minister for Finance if he will consider reducing the 13.5% VAT rate for restaurants and hospitality; and if he will make a statement on the matter. [4493/24]
View answerWritten answers
I propose to take Questions Nos. 97 and 106 together.
At the outset, the Deputy should note that the VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate (23% in Ireland), unless they fall within categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT. Tourism and hospitality fall within Annex III thus explaining why they have been subject to these lower rates for a considerable period of time. The lower VAT rates that apply in this country are 13.5% and 9%.
As the Deputy will be aware the 9% VAT rate applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5% rate. The 9% rate was introduced on 1 November 2020 in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic.
The economic rationale for a VAT rate reduction at that time as it was in 2011 when it was also reduced to 9% was to lower consumer prices, encouraging higher demand, more output and an increase in employment.
However, it is important to remember that VAT reductions, even temporary VAT reductions, do have a cost to the Exchequer. The estimated cost of the 9% VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a very substantial support by the Government to the hospitality and tourism related sectors.
It is possible to have separate VAT treatment for tourism and hospitality under the EU VAT Directive. However, Revenue have indicated that there are practical operational concerns in having different VAT rates applying to hotel accommodation and meals given how the sector operates, with various packages ranging from bed and breakfast accommodation through to all-inclusive board and lodging packages.
The Government obviously wants to maintain a healthy and profitable environment for the sector going forward. However, in making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.
I have no plans to reduce the VAT rate for the tourism and hospitality sector to 9%.