Dáil Éireann Debate, Thursday - 1 February 2024
154. Deputy Brendan Griffin asked the Minister for Finance if he will consider a finance Bill to re-introduce the 9% VAT rate for catering and tourist accommodation, as was done seamlessly in May 2011; if he appreciates the crisis in hospitality at present; and if he will make a statement on the matter. [4551/24]
View answerGood, I will do the lotto tonight because it is not often we get down to Question No. 154. This relates to the 9% rate of VAT. I have long held the view that to be competitive internationally and within our own domestic economy, the most that should be charged for our hospitality and tourism sector is the 9% rate of VAT. The Minister had a decision to make. His Department does not have easy decisions but I believe it was the wrong decision, quite frankly, to increase to 13.5%. It is effectively a 50% increase in the VAT bill for tourism and hospitality businesses. We see many of them are really struggling at the moment. We did have an exceptional mini-budget in May 2011. I do not think it would be a bad idea to repeat that process and reduce the rate to 9%.
As the Deputy knows, the 9% VAT rate was due to expire in February 2023 and the Government took a decision, on an exceptional basis, to extend it for a further six months to the end of August 2023. It reverted to the normal rate at that point in time. That was the agreed position of the Government and remains the agreed position of the Government. To be clear in terms of where Ireland stands, because I have seen different commentary on this issue, Ireland's VAT rate on food services, cafes and restaurants is eighth in the EU at 13.5%. A further six countries have a rate of 12% to 13%. In other words, 14 countries have a rate of 12% or higher. The rate in Northern Ireland, over the Border, and in Great Britain is 20% compared with our 13.5% rate. Germany had a low rate of 7% during Covid-19. That expired and went back up to 19%. The main issue being raised with me by businesses at the moment is not around lack of demand, many of them are busy, but access to labour is a key issue. The consistent issue they are raising is the accumulation of various costs that have been imposed, some through direct Government policy decisions. That is an issue that we as a Government, collectively, across a number of Departments, have to take on board, have to reflect upon when it comes to future policy decisions over the period ahead. VAT was used on a number of occasions in recent years to stimulate demand. By reducing VAT, the price to the end consumer reduces and it stimulates demand. That is not the fundamental problem that businesses are facing now. The fundamental problem is a viability challenge because of the level of costs that they are incurring. That is the Government's position on the issue. We have debated a number of times this morning tax debt warehousing. I will shortly come forward with additional measures to introduce further flexibilities to support businesses, many of them in the hospitality sector. In total about €1.7 billion is owed in regard to tax debt warehousing. I will be finalising new measures with new flexibilities to support businesses that have tax debt warehoused.
I appreciate there is a range of bills that have to be paid by businesses, as someone who was formerly self-employed and used to pay a VAT bill, I can say there is a huge difference at the end of a period in having to pay €10,000 or having to pay €15,000. Effectively that is what has happened now by increasing from 9% to 13.5% in some cases. I urge the Minister to look at it again. I know that the mandarins in the Department would baulk at the idea of a one-off Finance Bill. They will say that bombs will be going off in Dublin and such things. That does not happen. It did not happen the last time we did it in 2011. It is never the wrong time to do the right thing. In particular, as we are heading into what will be a challenging and difficult season in 2024, this would be the appropriate measure to take to try to stimulate and save many of the businesses that are currently just hanging on.
I urge the Minister and his colleagues to please revisit this issue and give it serious consideration. It would be the right thing to do economically and the right thing to do for all the people working in those sectors and for the employers. It would be sensible.
The Government does not have any plans to change the rate of VAT. It is important to put on the record that no political party in this House that I am aware of has called for such a reduction either. The key issue raised by businesses with me consistently is costs, not a lack of demand. It is the accumulation of various costs imposed on them, many by direct Government decisions. That is what we need to reflect on in the period ahead. The only way a reduction in VAT would improve the viability of a business is if that reduction in VAT, which is a consumer tax, is not passed on to the customer. That is the only circumstance in which a reduction in VAT would offer the business improved viability. The issue is costs, not VAT.
