Vat hike was a knife in the back of the tourism industry
IN THE end, like all good political assassinations, the shafting of Shane Ross was swift and shocking. The blow came from his Cabinet colleagues, and his political fate will be largely unlamented by many, who had waited for this moment to come. Paschal Donohoe didn’t just abolish the 9pc hospitality tax rate, he put a steak knife through it, in an act that has pretty much finished the Tourism Minister.
The industry was aghast. An increase from 9pc to 13.5pc was beyond their worst expectations. Mr Ross was probably just as stunned.
A bastion that many felt had protected Irish tourism, enabling it to rebound from the crash, especially in rural areas, had not just been breached, but ransacked.
Adding to the sense of injury is the frustration that it is unlikely that the increase will ever deliver the €466m that Mr Donohoe was advised it would generate by officials.
In many parts of the country, the 9pc Vat rate was much more than an item in budget wish lists. Each year, lobby groups beat a trail to Leinster House to explain that the rate was a lifeline.
It reinvigorated Irish tourism when it had been knocked on its back. It is not an exaggeration to suggest that it became a regimental banner for rural businesses not to be surrendered as they made their stand to rescue rural Ireland.
It became a single issue on which everyone in the fractured tourism industry could agree, because it was so vital to their survival.
It united the hoteliers and restaurateurs who are normally to be found jealously guarding their fiefdoms through their memberships and fees.
Everything else could be subjected to exhaustive and futile bickering, but the sanctity of the Vat rate had to be recognised as being preserved at all costs.
The all-encompassing Tourism Confederation, headed up by Maurice Pratt and Eoghan O’Mara Walsh, had sent out warning after warning. The airlines, who hate restaurateurs and hoteliers and politicians as one, and never agree with each other, signed up.
Nine per cent HAD to stay.
And when it did not, one wondered what would happen to this unwieldy coalition of private and public, smallholder and shareholder interests.
Paschal Donohoe’s voice cracked a little when he declared the measure would garner €466m.
Maybe he actually believed it. But he knows, as all politicians do, the history of revenue is littered with measures that were supposed to raise more tax but did the opposite.
A good example was the VRT increases ushered in by Garret FitzGerald’s madcap coalition in the 1980s, which reduced the overall VRT take and made the Irish road fleet the laughing stock of our European neighbours.
It is possible, not probable, that revenue from tourism will drop, not rise, as a result of Paschal’s actions.
But it is certain that the small businesses of Ireland will go into defence mode, bolt the door and batten down the hatches.
The frighteners have already been put in place by Brexit, and Mr Ross lost those arguments as well.
And so the extra teenager who might have cherished a hope of being employed will likely be left to draw benefits instead.
Any intention of road-testing a new idea, the long-planned expansion, or an innovation to try and do something different for the international tourist, tired of the same old stuff, will be put back on the shelf.
Outside the hotel and restaurant sector, new indoor attractions, of which there is a dearth, will be slower to commit.
Ireland’s tourism numbers are growing, as Paschal assured the deputies in the Dáil, but our market share in many markets is shrinking.
He should be wary too, of the airlines, who watch and judge from their exalted vantage point.
The increase in tourist numbers from America was driven by airlines who increased capacity, not expensive marketing campaigns. They listen to the messages that governments send out, whether they treat tourism as a serious industry or not.
Just ask the management at Edinburgh or Belfast airports, who had all their trans-Atlantic flights by Norwegian withdrawn last month.
Hoteliers cannot move their assets like the airlines can, although large corporations can choose where to invest and where not.
Yet, the tourism industry has not helped its own case, in many ways.
When the tourism tide came in, as it did in Dublin, and intermittently in other parts of the country, they charged high rates and paid low wages.
The trade union movement, frustrated by the industry’s addiction to minimum wages, joined the opposition.
Tourism was left as some sort of economic oddity, not just at the Cabinet table, but in public life and, when it tried to defend itself against hotel price indices and other inequities, it frequently only made matters worse.
When the battle was lost, blame was apportioned in many directions.
No doubt this time next year, when either Paschal Donohoe, or his successor, stands up in the Dáil to explain why the Vat increase failed to deliver anything like the figures promised, he will do as all politicians do – blame someone else.
The small businesses of Ireland will go into defence mode, bolt the door and batten down the hatches