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Tourism Industry

Dáil Éireann Debate, Wednesday - 28 March 2012

Wednesday, 28 March 2012

Ceisteanna (4)

Timmy Dooley

Ceist:

4Deputy Timmy Dooley asked the Minister for Transport; Tourism and Sport the number of jobs in the tourism sector created by lowering the rate of VAT for certain sectors as announced in the jobs initiative; and if he will make a statement on the matter. [17164/12]

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Freagraí ó Béal (7 píosaí cainte)

The Deputy's question relates to the number of jobs created in the tourism sector as a result of the lowering of the VAT rate for the tourist industry. As the Deputy will be aware, the jobs initiative introduced a reduced 9% VAT rate from July 2011 on a range of services, including hotels, restaurants and the leisure industry. The Government also halved employers' PRSI for those on modest wages and introduced a visa waiver scheme, which makes Ireland more accessible for tourists from important emerging markets.

It is too early at this stage to definitively assess the impact of these measures on tourist numbers or employment in the sector.  We will need to consider the figures over a longer period to properly assess the impact of the initiative. It will be later this year before a view can be formed on the effect of these measures on competitiveness and employment. I am, however, pleased to report that overseas visitor numbers increased by 7.8% in 2011 by comparison to 2010. This growth has continued into 2012, with trips to Ireland for the first three months up to February 2012 having increased by 2.7% as compared to the corresponding period of December 2010-February 2011.  I am also encouraged that seasonally adjusted employment as measured by the CSO in accommodation and food services increased by 11,000 during the nine month period to end December 2011.

Improving the perception among domestic and overseas visitors that holidaying in Ireland offers good value for money was an important part of the jobs initiative. In this regard, I draw the Deputy's attention to the most recent Consumer Price Index which shows that in the year to February 2012, the price index for restaurant and hotels was down 0.3% and for recreation and culture related products and services was down 0.9%. As such the sector is becoming more competitive. The overall CPI was up 2.1% during the same period. These price reductions were driven by a wide number of factors, including the VAT reduction, and are showing the increased competitiveness of the Irish tourism market.

I welcome the Minister's clarity on this issue. However, his colleague, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, stated on 25 January in reply to a question from my colleague, Deputy Willie O'Dea, that the number of people working in the tourism sector had as a result of the VAT reduction increased by 6,000 and, therefore, the initiative was working.

The Minister's response is in line with that which he gave in an ad hoc questions and answers session to the Irish Hotels Federation when he advised it that seeking an extension of the lower rate of VAT just because the industry was struggling was not a strong enough case. The Minister stated that it was necessary to show that jobs were being created and followed this up by saying that he was not sure this was the case in terms of the VAT reduction. Like others, I believe it is difficult to indicate if an increase or reduction in VAT would have the impact expected. Therefore, I welcome the figures outlined by the Minister in his reply. There appears to be a bit of spinning, although on behalf of the Minister’s colleague, Deputy Bruton, rather than by him.

The Minister appeared to indicate that the VAT reduction might not remain in place for 2013. He will recall that it was factored in for 2013 in the jobs initiative. The raid by Government on the private pension fund of €450 million per year is also factored in for 2013. Is it the Minister's expectation that if the VAT reduction does not remain in place for 2013 the Government will not be raiding the private pension fund to the extent projected?

The Minister, Deputy Bruton, referred during an interview to an increase of 6,000 people in employment in the tourism sector. The situation has improved further since the most recent figure became available. To date, there has been an increase of 11,000 in the number of people working in the food and accommodation sector. However, this represents only a partial recovery on the large number of jobs lost in this past year. It would be facile to suggest that the reduction in VAT necessarily resulted in that increase in employment numbers. However it is a good sign nonetheless, by which I am encouraged.

The point I made to the hoteliers is a valid one, one which applies to the tourism industry as a whole, namely, industries will not get concessions because they are struggling - everyone is struggling. Concessions will only be given to industries which can deliver results in terms of increased revenues to the State and increased employment. It is hoped the industry will take this on board in terms of its hiring policy during the summer. The more people hired the more likely it is to retain the VAT reduction in 2013.

Will the Minister accept that if Government sets out on a course and indicates a certain provision will be made for three years, that it would be entirely wrong to cut that provision after only two years? Will he further accept that his comments, while well meaning, do not provide the type of certainty which people in this industry need. Much of the tourism sector depends on advanced bookings and on putting in place a strategy for the years ahead. The jobs initiative provided certainty in terms of confirming the Government would provide a particular support to the industry for a three year period, in respect of which the revenue was identified, namely, the raid on the pension fund. The Minister now appears to be raising some doubts about whether the reduction will remain in place for 2013. Perhaps he will confirm that he expects that the Government will continue on the course set out in the jobs initiative.

The plan is that the reduced VAT rate of 9% will continue until the end of 2013. As stated by the Deputy, that is what is promised in the jobs initiative and the legislation and is what is stated on the Revenue website. The industry should work on the basis that the reduced rate will continue until the end of 2013, the year of The Gathering. Having said that, I am not writing the budget now.

I accept that.

I do not want to give people an assurance which may change. We do not know what will happen between now and budget day or what will happen to the economy, the deficit or in regard to other matters. I do not want to be strung up by the Minister for Finance for making promises on his behalf. The intention is that the lower rate will continue to the end of 2013.

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