VATincreaseis a‘devastating blow’forhotels

BITTER disappointment has been expressed by Wicklow hoteliers in response to the VAT rate increase announced in the Budget.

According to Brian McNamara, Chair of the IHF Wicklow branch, the increase to 13.5 per cent is a ‘serious jolt to the tourism industry in Ireland and represents a reckless failure to recognise its economic potential and importance, particularly to rural Ireland’. He urged the Minister to defer the increase until there is clarity over Brexit and to allow existing contracts for group bookings to be completed as prices are already agreed.

‘Ireland will now have a higher tourism VAT rate than 26 countries in Europe with which we compete. We are already a very high cost economy by international standards so it is astonishing that the Government is now imposing additional taxes on tourists and making our country less attractive as a destination,’ he said.

He warned that the hike will damage tourism across the country but rural businesses will be hardest hit.

‘Regional businesses will bear the brunt, as about €300m of the €466m in additional taxes will be taken from the rural economy, which has been slower to recover from the economic crisis. This is a devastating blow for the many tourism businesses that struggle to break even or stay open outside the peak season,’ he said,

Mr McNamara said the industry is already facing enormous difficulties due to the uncertainty around Brexit and weakened Sterling.

‘UK tour operators, for example, represent up to 30 per cent of the business for many hotels in Dublin and across the country. This business is highly competitive, with Irish hoteliers competing internationally. Margins are slim and vulnerable to any price fluctuation. With bookings made up to two years in advance, prices in many cases are already contracted, meaning hoteliers will have no choice but to pick up the cost of this VAT increase. For some, it may wipe out their margin altogether,’ he said.

He acknowledged the Government’s foresight in introducing the nine per cent VAT rate in 2011.

‘ The Government recognised the tourism industry’s ability to deliver on jobs across the country and we delivered, year after year, creating over 65,000 new jobs.

‘Today the tourism industry supports over 235,000 jobs in every county and town, over 70 per cent of which are outside Dublin, generating over €2 billion in taxes for the exchequer each year. It is deeply disappointing and frustrating that despite the strong response of the tourism industry to the nine per cent activation measure, it’s economic contribution and potential is no longer of importance to Government policy,’ he said.