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Ireland: Time for tourism to give up its 9% VAT cut

Wednesday, 27 August 2014   (0 Comments)
Posted by: Author: The Irish Times
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Author: The Irish Times

Why should hard-pressed Irish taxpayers subsidise buyers such as Brehon Capital and Blackstone?

One of the problems with introducing State aid measures to help struggling industries navigate bad times is that when things improve, the measures can prove difficult to unwind.

Take the "temporary” reduction in 2011 of VAT for all tourism-related goods and services from 13.5 per cent to 9 per cent, which has since morphed into a sort of fiscal methadone for the hospitality industry.

The measure was introduced to help stave off a then-looming tidal wave of liquidations among restaurant and hotel owners. But tourism is booming again so logically the 9 per cent rate should be reversed in the upcoming budget.

Inevitably, however, a co-ordinated lobbying campaign has begun to retain it. The Restaurants Association of Ireland has released a report, based on CSO data, which says 31,500 direct and indirect jobs have been created in the tourism industry since the measure was introduced, echo- ing findings in a report for Fáilte Ireland by Deloitte.

The VAT cut helped the industry at a difficult time, but is there any justification for retaining it now? Overseas tourist numbers were up 10 per cent in the second half of the year. The crisis is over for the hospitality industry.

In Dublin, the biggest beneficiary of the VAT cut, try booking a table in a decent restaurant at short notice on a Saturday night, and ask yourself if those (mostly full) restaurants still deserve State aid.

Foreign capital is crawling all over Irish hotel assets. Why should hard-pressed Irish taxpayers subsidise buyers such as Brehon Capital and Blackstone?

Fáilte Ireland chairman Michael Cawley said over the weekend that Dublin needed an "image makeover” to distance itself from the more unsavoury elements of mass tourism. Presumably, he meant the hordes of drunks in the city on any given weekend. If the tourism industry is getting picky like that, you know the case for retaining State aid has fallen down.

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