Vol. 398 No. 6
8 Mr. Moynihan asked the Minister for Finance, view of the serious adverse consequences for Irish tourism of current European Commission proposals on VAT harmonisation in the Single European Market, the action he proposes to take in order that the rate of VAT is maintained for hotels and restaurants after 1992.
Following decisions taken at the December 1989 ECO/FIN Council meeting, the reduced VAT rate is to be reserved in particular for essential goods and services meeting a social or cultural policy objective. Final decisions on the scope of the reduced rates which member states will be able to apply are to be taken before 31 December 1991.
The list of categories initially proposed by the Commission for inclusion at the reduced rate does not include tourism services.
However, in the discussions which have taken place under the Irish Presidency on the precise scope of the reduced rate, a number of aspects of tourism services have been raised for possible inclusion at the reduced rate. Final positions on specific activities will not be taken until the overall picture on the total package and of course, the budgetary implications for individual member states, becomes clear.
The Minister's reply could well send shivers through the hotel and catering industry. Will the Minister accept the successes achieved in expansion, investment and employment could well be put in jeopardy if there is a restoration of the 15 per cent VAT rate on the accommodation and food sectors in the tourist industry?
I do not think that the Deputy — or anybody else — is entitled to anticipate what may be in the end results of negotiations which are in progress. However, I assure the Deputy that I will endeavour to protect important national economic and budgetary interests at all stages of the negotiations. It will be quite some time before the final package emerges and neither I nor anybody else can foresee what will happen. I am not prepared to speculate — and nobody else should speculate — on the likely result.
Will the Minister accept the recent Manpower survey of the hotel and catering industry which indicated that, since 1984, job creation increased by 31 per cent? The hotel and catering industries attribute that substantial rise to the reduction in VAT from 23 per cent to 10 per cent in 1984 in respect of accommodation and from 23 per cent to 10 per cent in 1986 in respect of food. Will he accept that the growth accelerated because of the reduction in tax and that any increase in rates would produce a negative result?
I am aware of the importance of the tourist sector to the whole economy. The Government also recognise that and they have a distinctive policy in relation to the development of tourism over a five year period. I hope that this year's budget made some contribution towards reducing prices as a result of the reduction of the standard rate VAT from 25 per cent to 23 per cent. It is the Government's policy to continue, as resources permit, to reduce the level of taxation and to try to get down to low levels which will benefit not just the consumer but tourism as well. We have raised certain aspects of the tourism services at the negotiations. Indeed, we are not alone in this respect. The Deputy can be assured that these interests will be well catered for at the negotiations.
Táimíd ag dul ar aghaidh.
May I——
We never seem to reach finality. Question No. 9.
