Open Letter to Government Party Leaders on behalf of Irish Hotels & Guesthouses

On behalf of Irish hotels and guesthouses, I am writing to urge you to retain the 9% tourism VAT rate to assist with the ongoing recovery and rebuilding of our industry over the next twelve months.

Irish tourism has come a long way since the lifting of Covid restrictions last year, making tremendous strides in restoring employment and stabilising tourism businesses the length and breadth of the country. In large part, this has been achieved thanks to vital supports provided by the Government.

However, we still have a lot of lost ground to make up. Tourism businesses now face significant economic uncertainty over the coming months as we grapple with the impact of the cost-of-living crisis – both here at home and in our key overseas markets.

A major concern for us is the financial pressure consumers are under as a result of persistent levels of high inflation as well as soaring interest rates, with more increases to come. This has a knock-on effect on decisions people make when spending on discretionary items such as holidays and breaks away. Tourism and hospitality is particularly vulnerable and is invariably the first to take the hit.

Taxation policy is one of the key tools at the Government’s disposal to create the right environment for growth and recovery. We have seen the results in terms of Ireland’s approach to attracting foreign direct investment which has been enormously successful. Similarly for the indigenous economy, the Government’s approach to the 9% tourism VAT rate has delivered phenomenal results supporting tourism employment and local businesses since its original introduction in 2011.

Over the intervening twelve years, despite a financial crisis and a pandemic, tourism generated approximately €66 billion in revenue for the economy and over €15 billion in taxes for the exchequer – the benefits of which have been felt across every town and county throughout the country. All going well, our industry is now set to support over 270,000 livelihoods by the end of the year.

As you make your decision on the future of the 9% tourism VAT rate, there is a fundamental question we would ask you to consider given our country is already one of the most expensive places in Europe to live and do business in:

“Why should Ireland, as an island destination, have the 3rd highest tourism VAT rate in all of Europe?”

Increasing the tourism VAT rate to 13.5% would mean we would become an outlier among our European competitors in terms of consumer taxes on overseas visitors and Irish people holidaying at home. (Please see enclosed chart for a comparison of European VAT rates on tourism accommodation.)

A rate of 13.5% would result in people paying an additional €400m more in taxes each year on everything from the price of a cup of coffee, to the price of a meal out, a stay in a hotel and the cost of a wedding. That’s a 50% increase in consumer taxes for Irish tourism and hospitality products and services during a cost-of-living crisis.

Such a decision would pose a very worrying risk to our industry, which is Ireland’s largest indigenous employer – and particularly for regions throughout the country that critically depend on tourism to support livelihoods and the local economy.

Increasing consumer taxes is the last thing we should be considering during a cost-of-living crisis given the additional inflationary impact it would have domestically while also making us less competitive in attracting overseas visitors. Consumers are already being squeezed with a real risk they will pull back from spending on tourism and hospitality this year.

Given the risks and challenges our industry is facing, we urge you and your colleagues in Government to continue your support for tourism and retain the 9% VAT rate.

Yours sincerely,

Denyse Campbell
IHF President