The IHF, in it’s pre-budget submission to Minister for Finance, Charlie McCreevy T.D., has stated that Ireland "will be left behind" over the coming years unless urgent action is taken to improve competitiveness in global tourism. The IHF is requesting that immediate strategic measures be undertaken to address the serious competitiveness issues facing the tourism sector and to assist the sector’s return to a path of growth.

The IHF’s five budget proposals are as follows:

• Reduction of the hotel VAT rate from 13.5% to 10%

• Availability of hotel and restaurant VAT as a business input

• Restoration of Pre-Budget 2003 excise rate on spirits

• A cap on local authority commercial rates and charge increases, to 50% of the previous year’s average inflation rate

• Allocation of an additional €40 million to domestic and international marketing

Jim Murphy, President of the IHF, stated that these measures should be the first step in an integrated development plan to enhance business confidence and to improve the fundamentals of the tourism industry.

"The position of the hotel and tourism industry remains difficult, with substantial uncertainty over projected growth in 2004. Within a stagnant international economic environment, a number of fundamental budgetary measures are urgently required to stimulate growth and safeguard the industry’s 150,000 jobs," states Mr Murphy. "World tourism is expected to double in the next 20 years,

however unless Ireland’s competitiveness is bolstered it will be left behind as other countries reap the rewards of a tourism upsurge."

In its submission the IHF stresses that Ireland has become a high cost economy where high inflation rates, increases in PRSI contributions, local authority charges and rates increases, insurance cost increases, and a VAT increase in the last budget are collectively threatening the competitiveness and long-term gains of the industry. Measured in a common currency the Irish compensation per employee rose by 16.8% between 2000 and 2002 compared with 6% in the UK and France and less than 4% in Germany and the US. The submission also highlights that the tourism industry makes significant contributions to the economy of €4 billion in foreign exchange earnings, €2.3 billion in exchequer contributions and 4.5% of GDP.

However, the Federation warned that it will not be able to sustain this momentum unless certain key issues are addressed quickly. According to Fáilte Ireland’s June 2003 Tourism Barometer, 55% of hotels and 69% of guesthouses suffered a decline in customer volumes in January to May this year.

In the first of its proposed budgetary measures, the IHF is calling on the Government to reduce the hotel VAT rate to 10%, which would restore a degree of comparability with other EU countries. Ireland currently has the fourth highest accommodation VAT rate (13.5%) in the EU, double that of France (5.5%), Spain (7%) and Portugal (5%) and exceeded only by the UK, Denmark and Germany. Within the Eurozone Ireland’s rate of VAT is the second highest, exceeded only by Germany whose dependence on tourism is much less than Ireland’s.

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Pictured at the launch of the ‘Choice Zone’ exhibit at Guinness Storehouse is An Taoiseach Mr. Bertie Ahern T.D. with Mr. Brian Duffy, Managing Director, Diageo Ireland. (see p3)

The Minister for Transport, Mr Seamus Brennan TD, has advertised for a team of consultants to oversee and advise on the break up of Aer Rianta.

According to the notice, advertised on the Government’s official tenders website, the consultants will advise and assist the Minister on a range of issues relating to the breakup. The notice states that Dublin, Shannon and Cork will become autonomous authorities but will remain in State ownership. The notice also states that legislation governing Irish
airports, the Aviation Regulation Act 2001, will have to be revised to take account of the proposed new airports' structure.

It says several issues are likely to arise in that context pertaining to corporate finance issues, accounting and tax issues, and economic regulation.

The Aer Rianta contract will be of eight months duration and up to 10 parties may be short-listed before the final decision is made by the Minister.

Jetmagic announced three new routes into Cork airport from the UK. The Cork based airline will now fly to Liverpool, Edinburgh and London City airport. Services from Cork to Edinburgh and Liverpool will operate twice
daily Monday to Friday and from Cork to London City three times daily Monday to Friday. All three routes feature a morning flight in both
directions as well as an evening return and will commence in September. Jetmagic chief executive Mr Patrick Raftery commented that the airline’s pre service launch statistics indicated an enormous level of interest in all three routes.

‘The Classic Beatles’ at the launch of the new Jetmagic Cork to Liverpool service

Citylink has announced an extension of its Galway-Shannon Airport Direct Coach service. The service, which was originally planned to operate in the summer season only, will now continue with four services daily in each direction, departing Galway from 06.00 until 16.00 and Shannon Airport from 08.30 until 19.30 daily. The timetable has been integrated with
the flight arrival and departure schedule at Shannon Airport to ensure optimum customer convenience.

Allen Parker, MD, Citylink states that "Demand for the service has exceeded all expectations. Since its launch on 5th June this year, the direct Galway/Shannon Airport route helped to open up the region to visitors as well as providing a much-needed convenient service for local people and we are really pleased with the response to date.
People who rely on public transport want a convenient, regular and quality standard service and that is what Citylink is about. We are totally customer focussed and design our services around consumer demand."

Citylink has also launched an online campaign to raise public support for more choice and better value in public transport in Dublin. The website www.citylink4me.ie gives the people of Dublin an opportunity to finally have their say in choosing which bus routes they would like to see operational. The aim of the campaign is to provide a network of fast and frequent services across the country at value for money fares.

Air Wales has announced the further expansion of it’s services with the launch of additional direct flights between Dublin, Cork and the UK
from September 1st.

Air Wales will now operate three flights to Cardiff and a fourth from Cork every weekday. Weekday flights from Dublin to Cork will also increase from
two to three flights daily.

Air Wales Chief Pilot Helen Watson with some members of the cabin crew, alongside the aircraft.

After a late start this year, the numbers of tourists visiting Ireland is on the increase according to Fáilte Ireland. There are more British and
European visitors since last year but the numbers of US visitors still hasn’t returned to pre- September 11th levels.

Although there are no figures yet for this year, Mr Malcolm Connolly, general manager of corporate development at Fáilte Ireland, said that figures for the number of Irish people holidaying at home were strong. Hotels have done better this year than bed-and-breakfast establishments and guesthouses as they could afford to lower their prices to attract more trade.

Mr Connolly said that with concerns of international economic uncertainty and the weakening of sterling and the dollar, tourists were "more price-sensitive" than ever. He warned the cost of living in the Republic had
risen above the EU average and the price of drink, eating out, and shopping would have a direct impact on tourism.

The chief executive of the Irish Hotel Federation, Mr John Power, has said although the year had started slowly figures were improving during
August and are set to continue for the months of September and October. The number of inquiries from tourists for early next year was encouraging,
he said.

An interactive exhibit, developed by Diageo as part of its sensible drinking programme, has been officially opened by An Taoiseach, Mr. Bertie Ahern T.D. at the Guinness Storehouse. The 'Choice Zone' at Guinness Storehouse explores six alcohol related scenarios that many people
will be able to relate to. The format is structured to suit the mindset of visitors as they walk through the exhibit via audio and visual cues for maximum impact.

Using film and interactive media, the Choice Zone aims to encourage people to think about and consider their drinking patterns. All six parts of the exhibit (3 film and 3 interactive) are designed to highlight the fact that everyone has a choice about what and how much they drink.

Continued from Page 1

Additionally, the Federation is asking the Government to allow VAT as a business input. Hotel and restaurant costs are recognised as legitimate business expenses in most EU economies, but not in Ireland. An Irish VAT registered company can reclaim the VAT on accommodation and restaurant charges, incurred for business
reasons, in most European countries, but does not benefit from the same treatment at home in Ireland. Likewise Irish hotels
and restaurants are at a competitive disadvantage in dealing with EU business customers, who are registered for VAT, and can claim credit for it for similar expenses in other EU countries but not for business
expenses incurred in the Republic of Ireland.

The IHF is also seeking a cap on Local Authority rates and charges to 50% of the previous year’s inflation rate. This, it believes, could alleviate some of the cost pressures being experienced by its member
hotels and guesthouses. The Federation is seriously concerned that there is no accountability constraint with respect to rates and charges increases and fears possible future increases would further erode the industry’s competitiveness.

According to the submission, one of the main causes of Ireland’s competitiveness being eroded in recent times is exchange rate movement, which the IHF acknowledges is outside the control of both
tourism entrepreneurs and Government. However, it believes that measures to compensate for the exchange rate are within the competence of the Government.

"An Irish holiday package which required €2,000 expenditure in April to June 2002 cost a US tourist $1,838. Without any Irish domestic inflation the April to June 2003

cost was $2,274, an increase of almost 24%. Similarly for British tourists in the same period, and without any allowance for domestic inflation over the year, costs in Ireland rose by 11.6%. Neither of these cost increases can be attributed to Irish hotel operators. The IHF fully acknowledges that the industry must deal with cost
increases through efficiency and quality measures but strong government support is also crucial. Instead recent Government
policy, in areas such as VAT, excise, energy and postage cost increases, has only served to further fuel the negative impact," argues
Jim Murphy.

In its submission, the IHF stresses the absolute need for Government to continue to support marketing efforts, and proposes a €40 million increase, over the next three years, which would fund specifically
targeted programmes with performance criteria aimed, in particular, at the domestic, US and European markets.

The IHF also proposes a restoration of the pre Budget 2003 excise rate on spirits as the first step in an ongoing process to move towards average European alcohol pricing levels, which are a major part of the
tourism competitiveness package. The Forfás reports on consumer prices show Ireland to be a relatively highly taxed economy as regards alcohol, particularly in comparison to major holiday destinations
such as Spain and Portugal.

"Our industry is urging the Government to take serious consideration of the measures it proposes, in order to assist in a much needed recovery for Irish tourism. Overall, Ireland is becoming an increasingly
unattractive and uncompetitive location for business and this trend must be reversed with determination, vigour and urgency, beginning with the 2004 Budget," concluded Mr. Murphy.

The Shannon Region and its finest golf courses played host to some of Denmark’s most influential tour operators and travel agents when they
participated in the final of the national SAS Leisure Golf Tournament recently.

Sponsored by Tourism Ireland, 12 travel agents and tour operators qualified to travel to Ireland for the final of the tournament, the biggest travel trade
golf event in Denmark, which took place between 22nd - 25th August. The participating companies which included MyPlanet, BTI Nordic, Weco DSB
and Helsinge Rejsebureau, collectively bring thousands of Danish tourists to Ireland each year.

According to Siobhan McManamy, Tourism Ireland Market Representative in Denmark, "This really is a fantastic opportunity for us to show the travel
agents and tour operators first hand what Ireland has to offer. The participants on the trip are extremely important in developing the Danish
market and in increasing Danish visitors numbers to Ireland."

A comprehensive itinerary was devised by Tourism Ireland to provide guests with an opportunity to experience first hand the world renowned golf
courses and unique golfing experience that Ireland has to offer. During their four-day visit they ‘teedoff’ in Limerick Golf and Country Club and Adare
Manor Golf Club and were also treated to local tourist attractions including Bunratty Castle’s Medieval Banquet. The finalists were also given an
opportunity to play in Tullamore Golf Club and completed their round of games at the famous championship links course Seapoint Golf Club,
Termonfeckin, Drogheda, Co. Louth

Overall, Ireland is within the Top 20 as a holiday destination of choice for Danish visitors, however, in niche sectors such as golf holidays Ireland’s
popularity increases and is within the Top 10 choice of destinations with approximately 30,000 Danish visitors traveling to Ireland each year.

Fiona Creedon Tourism Ireland, receives some instruction from Claus Olsen, Radisson SAS hotels, with Gerry Lowe, Shannon
Development, Cimm Barslev, SAS, and Peter Heller, Europaeiske Travel Insurance, at the Adare Manor Hotel and Golf Resort Course.

If you cannot be sure you are putting yourself and your company at risk. Since the introduction of the Company Law Enforcement Act 2001 the position of company director has become more onerous. Many company directors may have heard of the "ODCE" but are not fully aware of the implications that this new legislation may have for them.

WHAT IS THE OFFICE OF THE DIRECTOR OF CORPORATE ENFORCEMENT?

The Office of Director of Corporate Enforcement ("ODCE") was created by the Company Law Enforcement Act 2001. Its mission is to improve the compliance environment for corporate activity in Ireland by:

• Encouraging adherence to the requirements of the Companies Acts

• Bringing to account those who disregard the law The main legal functions of the ODCE are amongst others:

• The prosecution of persons for suspected breaches of the Companies Acts

• The restriction and disqualification of directors and other company officers

• The initiation of fact-finding company investigations

• The supervision of companies in liquidation and insolvent companies

• The supervision of liquidators and receivers

• The regulation of undischarged bankrupts acting as company officers.

Paul Appleby has been appointed the Director of Corporate Enforcement and his staff includes solicitors, accountants and Gardai with fraud investigations experience.

WHAT IS AN INDICTABLE OFFENCE?

An indictable offence is an offence where a jury must determine the guilt of the accused, directed by a judge on foot of an indictment. The ODCE has published a list of over 140 indictable offences.

The list of indictable offences includes the following areas:

• Corporate Housekeeping (e.g. late filing of annual returns, not keeping proper books of account, false statements in any accounts/returns etc.)

• Transactions with directors and officers (e.g. illegal loans to directors, failure to disclose interests in shares of a company etc.)

• Share Capital (e.g. allotment of shares without authority, failure to hold an extraordinary general meeting within a specified time limit where the net assets are half or less of the company’s called up share capital etc.)

• Winding-up, Receiverships and Examinerships

WHAT CAN HAPPEN IF AN INDICTABLE OFFENCE IS COMMITTED?

There are a variety of actions available for use by the ODCE. These actions can be taken against a company and/or its officers. They include:

• Company prosecution

• Personal prosecution of directors/officers

• Disqualification/restriction orders against directors/officers.

To date most cases taken by the ODCE have been in the form of personal prosecutions. Going forward, it is likely that the ODCE will seek applications for disqualification/ restriction orders against directors/officers found to be in default of their obligations.

Additionally there has been a suggestion that a "3 strikes – you’re out" rule may be applied by the ODCE. This would mean that a restriction order may apply to a company director/officer who is responsible for having committed 3 indictable offences. While this may initially seem like a significant breach of the Companies Acts, 3 indictable offences could simply constitute having a group of 3 companies, all of which have lodged their annual return late.

HOW DO I ENSURE THAT I AM COMPLIANT WITH COMPANY LAW?

The onus is on the company director/officer to ensure that they and their company are fully compliant with legislation.

In the past most company directors have relied on their auditors to keep them abreast of company law developments and advise on compliance issues.

With the introduction of the Company Law Enforcement Act, auditors of a company are now obliged, without exception, to notify the ODCE where, during the course of an audit, they become aware of an indictable offence under the Companies Acts.

This "whistleblower legislation" has changed the nature of the relationship between client and auditor with many companies now reluctant to seek advice from their auditors regarding suspected indictable offences.

Many companies are engaging independent specialists to perform a "healthcheck" on the company and the corporate activities of its directors/officers. This allows them to assess the situation with regard to compliance and seek professional advice in relation to any suspected indictable offences.

THE WAY FORWARD

Recent legislation has increased the obligations on company directors/officers. The company and its directors/officers need to ensure that they are fully compliant with companies’ legislation. Time should be taken to become familiar with the list of indictable offences and measures put in place to avoid any indictable offences being committed. Where a suspected indictable offence has been committed appropriate advice should be taken.

Remember, it is a director’s responsibility to ensure compliance with legislation and ignorance of the Companies Acts is not a defence!

Eileen Corrigan, Senior Manager, Business Assurance and Advisory Services, BDO Simpson Xavier. Tel 01-4700182, email: ecorrigan@bdosx.ie