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VAT rate cut is 'a positive step' to boost tourist trade

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Hotelier John Burke in Spanish Point, Co Clare

Hotelier John Burke in Spanish Point, Co Clare

Hotelier John Burke in Spanish Point, Co Clare

Thousands of Irish tourism and hospitality businesses have been thrown a lifeline in the shape of a 9pc VAT rate.

The new rate, to be reduced from 13.5pc on November 1, is a temporary measure until December next year, and a response to the "unprecedented challenges" facing the sector, Finance Minister Paschal Donohoe has said.

The cut, flagged in advance of Budget 2021, had been a key lobbying focus since the first March lockdown.

Last night, it received a broad, if cautious, welcome alongside other new tourism supports, including the Covid Restrictions Support Scheme, a €55m business continuity fund, and an extension of the commercial rates waiver to the end of this year.

"These are all positive steps to help tourism and hospitality businesses survive this existential crisis," said Eoghan O'Mara Walsh, CEO of the Irish Tourist Industry Confederation, an umbrella group representing the sector.

"A degree of hope," is how Padraig Cribben, of the Vintners' Federation put it.

"This is the right tourism VAT rate," said Elaina Fitzgerald Kane, president of the Irish Hotels' Federation.

The reduction will help Irish competitiveness and sustain jobs and communities across the country, she added.

However, she also said it should be a permanent measure "for a minimum of five years".

Contracts with tour operators, for example, are agreed two years in advance.

"It's a small change in the right direction," said hotelier John Burke of the Armada Hot-el at Spanish Point, Co Clare.

Hospitality venues like his are under "huge strain", Mr Burke said, hoping the cut would help bring in business "and achieve at least median occupancy".

However, for many, he cautioned, "this small step will unfortunately come too late".

Deeper

Austin Hickey, a director with business advisory firm BDO, said the VAT reduction would give "an immediate cashflow benefit" to tourism businesses.

However, "it will only be when international tourist activity commences and normal business returns that the tourism sector and wider economy will see the full benefit of the reduction", he added.

Others had argued that the VAT cut should go deeper, to 5pc or even zero, to reflect the devastation suffered by hotels, restaurants and other tourism businesses at the economic coalface of Covid-19, dealing with rolling lockdowns and facing little prospect of overseas visitors.

Nor will a VAT reduction be of immediate benefit to businesses that are closed.

Tourism and hospitality businesses also broadly welcomed Budget 2021's extension of commercial rate waivers and employment supports to the end of this year, but again, with qualifications.