Wednesday, 4th December 2002

HOTELIERS RESPOND TO 2003 BUDGET

REMOVAL OF CAPITAL ALLOWANCE WILL END INVESTMENT IN HOTELS -
VAT INCREASE DAMAGING COMPETITIVENESS, SAY HOTELIERS

The Irish Hotels Federation (IHF), representing almost 1000 hotels and guesthouses nation-wide, has expressed disappointment at some of the measures announced in today's budget. The IHF stated that the reduction in the Capital Allowance write-off for hotels from 7 years to 25 years will virtually end the development of new hotels in Ireland and will be a major disincentive for existing hotels to upgrade their properties. This will result in a deteriorating hotel product, which in the long term will do serious harm to the tourism industry. The IHF is calling on the Minister to review this measure before submitting the Finance Bill.

The Federation also expressed disappointment at the increase in VAT from 12.5% to 13.5%, which will also further erode Irelands competitiveness. The increase now places Ireland with the second highest VAT rate in the Euro zone, with other European countries having almost half the VAT rate for accommodation with Spain at 7%, France 5.5% and Portugal 5%.

President, of the IHF, Jim Murphy said that both the reduction in capital allowance write-off and increase in VAT are both counterproductive measures in safeguarding Ireland's competitiveness. " The cost of doing business in Ireland is already extremely high, and this will now be increased with the rise in VAT. Furthermore, we are extremely concerned that the change in the capital allowance write-off will radically affect the level of investment, both domestic and foreign in the tourism sector," added Mr Murphy.

However, the IHF welcomed the additional €209 million, which the Minister for Finance allocated towards National Roads infrastructure and the extra €5 million allocated to further tourism marketing activities in the recent estimates. "This additional funding is encouraging and is a positive step in improving access for tourists and citizens alike," concluded Mr Murphy.

For Information:
Brian Harmon/Colette Walsh
Weber Shandwick|FCC
Tel: (01) 676-0168 / 086 264-3100