Vol. 431 No. 4
13 Mr. Deenihan asked the Minister for Tourism and Trade if he has met with representatives of the tourism sector in relation to concerns which they have regarding proposals contained in the Finance Bill, 1993, and which will have a financial impact on their business; and if he will make a statement on the matter.
(Donegal South-West): Over the past number of weeks the Minister has met representatives from various sectors of the tourism industry, and among the issues discussed were proposals in this year's budget, and Finance Bill, likely to impact on their business.
The fundamental purpose of the budget was to provide for the orderly development of the public finances in the current year. This, and the other economic management measures taken by the Government since the beginning of the year, have had the effect of substantially reducing interest rates to the benefit of the tourism sector as well as other businesses.
As a result of the Minister's post budget discussions with the industry, the Government decided to defer the increase in the VAT rate on car hire to 21 per cent announced in the budget. The Government also decided to add a deferral scheme to the vehicle registration repayment scheme being introduced in the Finance Bill to help ease the cost to car hire firms of increasing supply of hire cars for the peak season. These modifications should go a long way towards meeting concerns expressed about car hire supply for the coming and future tourist seasons.
The industry has also welcomed the proposal in the Finance Bill to include tourism as one of the eligible sectors under the new seed capital scheme, which should be a significant incentive for small to medium sized enterprises in the sector. The positive, pro-jobs provisions in the Finance Bill will provide a significant incentive to business, together with reduced interest rates, to proceed with developments which will benefit wealth creation and jobs in the tourism sector.
The increase causing most concern relates to VAT on accommodation which has been increased from 10 per cent to 12.5 per cent. I understand this amendment on Committee Stage of the Finance Bill has not yet been reached. Therefore, even at this late stage, I ask the Minister to defer the increase in VAT on accommodation until January. I am sure the Minister will agree that a great deal of brochures, videos and so on have been distributed throughout the market niches advertising accommodation at a certain cost. Those people are now forced to increase their costs to tourists despite the fact that they advertised at lower rates. In some cases they will have to absorb this increased cost themselves.
(Donegal South-West): The Minister for Finance justifies this increase on grounds of budgetary demands. Of course, the House will be aware of the necessity to begin gradual implementation of the EC VAT Directive in regard to which there is a derogation until 1996. Even if the Minister wished to retain the 10 per cent VAT rate on accommodation, it would not be possible within the EC legislative framework. We have a parking rate and a normal rate and the parking rate is 12.5 per cent. We realise the effects of its overall imposition and the Minister took into consideration car hire, the seed capital scheme and the business expansion scheme. I hope that at the end of this season the steps which have been taken will be beneficial and that the imposition of an additional 2.5 per cent on accommodation will not have serious effects.
The Minister of State indicated that the Minister met the tourist representatives and that they had an agenda when they met him. When the Minister gave an account of the Government's policy, did he get the impression that the tourist representatives were happy about the VAT increase, the other increases imposed in the budget and the Finance Bill? Did they protest about the matter?
The Deputy has asked many questions which are clearly the responsibility of another Minister.
(Donegal South-West): In recent weeks the Minister held meetings with a number of organisations such as the Coach Tourism Council, the Chauffeur Drivers' Association, the IFA, the Recognised English Language Schools' Association, the Cottage Holiday Homes' Association, Kilkenny Rural Tourism, the Irish Amusement Trade Association, the Hotel and Catering Institute and the Tour Operators' Forum. Prior to the budget the Minister also had meetings with ITIC and the Irish Hotels Federation, various issues relevant to the tourism industry were raised, but in so far as the budget and the Finance Bill are concerned, the principal issues raised related to VAT on tourist services and the need for relief on the car hire sector to deal with the shortages in supply. I have no doubt the industry representatives were not entirely happy, but they have welcomed the reduction of VAT on cars from 21 per cent to 12.5 per cent. They also welcome the seed capital scheme and the fact that the payment of duty on new cars purchased by operators and resold in the short term has been deferred. In the case of cars purchased between 1 December and 31 August, it is paid on 15 September and on purchases made between 1 September and 30 November it is paid on 15 December. There is no difficulty in regard to cars that remain within the car hire business.
Will the Minister agree that a 2.5 per cent increase is insignificant in terms of the overall package for tourism? We are talking about £2.50 in every £100. That will not have a great impact on customers. In view of the extension of the business expansion and seed capital schemes, will the Minister give an estimate of how important this will be in terms of attracting additional tourists and encouraging the development of additional tourist projects?
(Donegal South-West): The Deputy will be aware that the former Minister set targets which seemed unrealistic at the time. However, they were realisable and created an additional 25,000 jobs in the tourism industry, thus increasing substantially the income from tourism. I have no doubt that to continue with that policy, taking into consideration matters relating to the business expansion scheme, the seed capital scheme, and the VAT on car hire, will be a great benefit to the industry. I am sure it will result in the creation of much needed jobs in this important industry.
Is the Minister satisfied that sufficient cars will be available for hire during the peak summer season in view of the statement regarding concessions given to the car hire industry?
(Donegal South-West): The concessions in the Finance Bill will greatly assist the industry to increase the number of cars available.
