The President of the Irish Hotels Federation Mr Jim Murphy has told delegates at the IHF annual conference, that the Federation is seeking the Minister for Finance to immediately suspend and reverse the 1% VAT increase on accommodation until the beginning of the 2004 season.

"Ireland now has the second highest VAT rate in the euro zone and while other countries are moving towards reducing VAT, Ireland unfortunately appears to be taking a step back by increasing VAT to 13.5%", said Mr Murphy.

Mr Murphy said that not only was the increase unforeseen, the Minister has not made any allowances for bookings made prior to the introduction of the new rate of VAT.

"The hotel and guesthouse sector contracts forward a significant segment of its business over a 12 to 18 month period and is now locked into VAT inclusive prices which it must honour. Not only does Ireland now have the second highest rate of VAT in the euro zone but it is double the level of VAT of Spain (7%), France (5.5%) and Portugal (5%)."

According to Mr Murphy, many hoteliers are angry that VAT was increased without any prior warning, leaving many hotels to honour bookings made months ago and having to absorb the VAT increase as a cost. He also encouraged all hoteliers and guesthouse owners to separately highlight the VAT breakdown on all bills issued to customers.

"We are urging members to highlight VAT separately on all bills issued to customers to show them exactly the level of VAT the Government is taking. There has been much media comment on the alleged prices charged by hoteliers, however many patrons have been completely unaware of the 'built in' VAT element on accommodation charges. This pricing transparency highlights that Government taxation policy is a major contributor to hotel prices", added Mr Murphy.

"The tourism industry is now being urged to tighten its belt by the Minister for Tourism and provide competitive pricing while the Minister for Finance is endeavouring to further erode the sector's competitive advantage by increasing VAT. The Government can't have it both ways", said Mr Murphy.

For further information contact:
Siobhan Molloy / Niamh Boylan
Weber Shandwick FCC
Tel: 01 676 0168 or (086) 817 50 66 / (086) 380 9191
Email: nboylan@webershandwick.com

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