Tuesday, 8th March 2005

IRELAND’S VAT REGIME CRIPPLING TOURISM GROWTH

IHF Conference Told

The hotel sector today called on the Government to immediately re-assess the current rigid fiscal policy on VAT, which is seriously hampering tourism growth in Ireland. Delegates at the Irish Hotels Federation (IHF) 67th Annual Conference in Cork are seeking a reduction of VAT on hotel accommodation from the current rate of 13.5% to a more competitive VAT rate of 10%. Ireland currently has the second highest VAT rate in the eurozone for hotel accommodation charges (2nd only to Germany), and compounding the issue is that this high VAT rate is non recoverable for legitimate business expenditure.

John Power, Chief Executive, IHF, described Ireland’s VAT regime for the hotel sector as a time bomb for Irish tourism, which can only inhibit the industry’s growth potential.

“The 13.5% VAT rate applied to accommodation and meals is a blockage to competitiveness and growth in its own right. However, coupled with the fact that the Irish tax system prohibits the refunding of VAT on corporate hotel and restaurant expenditure, this regime puts the Irish tourism sector at a distinct disadvantage to other competing destinations. For example, business travellers in Britain can reclaim up to one sixth of the cost associated with meetings and conferences, a fact that the British Tourist Authority continually emphasises in marketing the country as a location for international conferences. Against that scenario, Ireland is finding it increasingly difficult to compete” he states.

“The Government is currently accepting tenders for the construction of a National Conference Centre, which has the potential to attract an additional 50,000 conference visitors to Ireland each year, or in revenue terms, a boost of ˆ60 million to the economy. Yet the Government must compliment this much needed piece of infrastructure with a VAT regime that will be attractive to business travellers. Otherwise it is simply a case of giving with one hand, while taking away with the other. The global business tourism market is worth ˆ40 billion, yet Ireland cannot hope to win a substantial proportion of this market if we don’t compete on an equal footing with other countries,” Mr Power continues.

The IHF states that the future of Irish tourism, which has doubled in size over the past decade, is dependent on controlling the cost base and delivering value to domestic and overseas visitors, but the Government must play its part in helping to achieve that objective. It is urging the Minister for Finance to reduce the 13.5% VAT rate and introduce measures to allow VAT on business expenses, incurred on hotel and restaurant costs, to count as inputs for VAT registered businesses.

“Tourism revenue remained static in 2004 at ˆ5.2 billion, despite a 3% increase in visitor numbers over the previous year. This is a worrying trend, at a time when the industry is targeting ambitious growth targets to reach 10 million visitors by 2012. The Minister for Finance must place an immediate priority on amending the VAT regime for hotels. Government reports have acknowledged the tourism sector as being the most important Irish owned sector of enterprise, national and regional wealth creation and employment generation. Immediate action must be taken to allow the industry perform to its fullest potential,” concluded Mr Power.

FOR FURTHER INFORMATION:

Siobhan Molloy / Niamh Boylan Tel: 01 6760168 (Dublin office)
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