Republic of Ireland reveal increase in tourism-related VAT
Following the announcement of the Republic of Ireland’s 2019 Budget, there has been a backlash from the tourism industry against the rise in VAT on tourism-related services from 9% to 13.5%. In his budget address, Minister for Finance claimed that a review of the cut to 9% in order to stimulate the tourism industry in 2012 had ‘done its job’, and the increase to 13.5% would raise €466m in 2019. The Minister revealed he was conscious of the challenge to the industry this provided, and has therefore allocated €35m to the department of Transport, Tourism and Sport for a more targeted support, including €4.5m for regional initiatives as well as nearly €10m for further development of the greenway network.
This raise means that the VAT rate for tourism is now higher in the Republic of Ireland than in 26 other countries in Europe. Deloitte predicted that while the tax hike will mainly affect hotels and restaurants, other areas that will be affected include cinemas, theatres, hairdressers, museums and art galleries; the Restaurant Association of Ireland chief executive Adrian Cummins believes that the increase will “cost 5,000 jobs in restaurants, cafes and bars serving food”, and that it will cost the industry €440m over the coming year. Due to the capitals’ high-level of tourism, Dublin will be the most able to handle the higher prices, while the worst affect areas are said to be the Midlands and the Border regions.
One of the most worrying aspects for the tourism industry is the looming prospect of Brexit, which would come only two months after the VAT increase comes into effect on the 1st of January 2019. Michael Lennon, the Head of the Irish Hotels Federation, revealed that the industry is already facing difficulties due to Brexit and the fall in the value of Sterling, with UK tour operators making up 30% of business for many hotels. One problem is that with some bookings made up to two years in advance, the prices have been locked in and the hoteliers will have to pick up the extra cost of the VAT increase. The uncertainty surrounding the industry following the VAT raise is almost guaranteed to continue well into 2019.
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