VAT in­crease would be short-sighted

Ir­ish Ho­tels Fed­er­a­tion Kerry Branch Chair­per­son Ni­amh O’Shea ar­gues that the re­ten­tion of the nine per cent VAT rate is vi­tal for the fu­ture of tourism in Kerry.

The Kerryman (Tralee Edition) - - NEWS -

IN 2011 when the live reg­is­ter reached al­most 450,000 na­tion­ally, the Gov­ern­ment had the fore­sight to in­tro­duce a tourism VAT rate to pro­mote much-needed job cre­ation. That mea­sure has been of enor­mous ben­e­fit to the lo­cal econ­omy in Kerry by sup­port­ing growth and mak­ing our tourism of­fer­ing more com­pet­i­tive in­ter­na­tion­ally. Bring­ing the rate in line with the VAT rates of other com­pet­ing Euro­pean coun­tries was the cor­rect de­ci­sion.

It is al­low­ing tourism busi­nesses in Kerry to re­store in­vest­ment in prod­uct development and ser­vice lev­els whilst also aid­ing in­creased ca­pac­ity – all crit­i­cal for the long-term suc­cess of the in­dus­try. And as the big­gest in­vestor in Ir­ish tourism, the ho­tels sec­tor is play­ing a crit­i­cal role. Ho­tels and guest­houses not only pro­vide lo­cal em­ploy­ment op­por­tu­ni­ties, we buy lo­cal ser­vices, source lo­cally pro­duced food and pro­vide a vi­tal in­fra­struc­ture in sup­port of lo­cal busi­ness and com­mu­ni­ties.

The re­turn to the ex­che­quer has ex­ceeded ex­pec­ta­tions. This year, Ir­ish tourism will yield over €2 bil­lion in var­i­ous taxes, equiv­a­lent to 23 per cent of tourism rev­enues and up more than €500 mil­lion per an­num on 2011. Given the right con­di­tions, the tourism tax take is pro­jected to con­tinue to grow strongly, reach­ing €2.7 bil­lion per an­num by 2025.

On the em­ploy­ment front, the nine per cent VAT rate con­tin­ues to be one of the most suc­cess­ful job-cre­ation ini­tia­tives in mod­ern times hav­ing cre­ated over 65,000 new jobs across the coun­try since 2011. Tourism now sup­ports em­ploy­ment for ap­prox­i­mately 235,000 people – in­clud­ing 15,700 jobs in Kerry. The pro­file of these jobs is di­verse and in­clu­sive, rang­ing from highly skilled roles to en­try-level em­ploy­ment that pro­vides great op­por­tu­ni­ties for ad­vance­ment. We are now on track to cre­ate a fur­ther 40,000 jobs over the next five years and it is vi­tal that Kerry sees its share of these new jobs.

What is some­times lost in dis­cus­sions about the econ­omy is that tourism growth is one of the most ef­fec­tive ways to spread em­ploy­ment op­por­tu­ni­ties and pros­per­ity across the en­tire coun­try. With 70 per cent of tourism jobs based out­side of Dublin, tourism’s wide ge­o­graphic dis­tri­bu­tion is crit­i­cal to sus­tain­ing re­gional economies. This is par­tic­u­larly true for Kerry, where tourism con­trib­utes €533 mil­lion to the lo­cal econ­omy each year.

It is es­sen­tial that eco­nomic pol­icy does not be­come de­tached from the re­al­i­ties fac­ing busi­nesses in the re­gions – the en­gine be­hind Ir­ish tourism. We know in Kerry how tourism re­mains very sea­sonal and a lot of our lo­cal hospi­tal­ity busi­nesses strug­gle to break even out­side the peak sea­sons. The much-her­alded re­cov­ery has been very un­even with many parts con­tin­u­ing to lag be­hind fol­low­ing a se­vere loss of ground dur­ing the down­turn.

Our fo­cus should there­fore be on cre­at­ing the right en­vi­ron­ment to sus­tain fur­ther tourism growth. Ap­pro­pri­ate tax­a­tion pol­icy that sup­ports com­pet­i­tive­ness is a key el­e­ment of this. Tourism should be treated as an in­dige­nous ex­port in­dus­try given that 78 per cent of tourism rev­enue is gen­er­ated by visi­tors com­ing into the coun­try and spend­ing money in our econ­omy. This ac­tiv­ity is dis­cre­tionary and would be put at risk by an in­crease in VAT and im­pos­ing hun­dreds of mil­lions of euro in ad­di­tional costs on visi­tors.

The fi­nan­cial cri­sis showed just how vul­ner­a­ble we are to ex­ter­nal eco­nomic events be­yond our con­trol. To­day we face enor­mous risks and un­cer­tainty with Brexit. Some of the sce­nar­ios be­ing fore­cast would have grave knock-on ef­fects for our own econ­omy, par­tic­u­larly at a re­gional level. The im­pli­ca­tions for tourism are stark given our heavy re­liance on the UK – our largest mar­ket, ac­count­ing for over 45 per cent of in­bound visi­tors.

Since the 2016 ref­er­en­dum, the drop in value of Ster­ling has re­sulted in a marked re­duc­tion in the spend­ing power of UK visi­tors and a sig­nif­i­cant drop in num­bers. This is a par­tic­u­lar worry for the tourism sec­tor in Kerry. Added to the poor Ster­ling ex­change rate, any in­crease in VAT could re­sult in a tipping point that risks a sig­nif­i­cant loss of mar­ket share to other des­ti­na­tions.

At a time of in­creased un­cer­tainty it makes no sense there­fore to jeop­ar­dise Ir­ish tourism fur­ther and hin­der our ca­pac­ity for growth. The nine per cent VAT is a key part of the over­all com­pet­i­tive­ness of our tourism prod­uct. It has been a tremen­dous cat­a­lyst for grow­ing tourism in Kerry. In light of the se­ri­ous chal­lenges fac­ing the in­dus­try, any in­crease in VAT would be short-sighted in the ex­treme.

Ni­amh O’Shea is the Gen­eral Man­ager of Kil­lar­ney Park Ho­tel and Chair of the Kerry Branch of the Ir­ish Ho­tels Fed­er­a­tion.


Photo by Don MacMona­gle

Ni­amh O’Shea, Gen­eral Man­ager, Kil­lar­ney Park Ho­tel, Chair­per­son of the Kerry Branch of the Ir­ish Ho­tels Fed­er­a­tion.

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