Economy

McGrath ‘cannot guarantee’ retention of 9 per cent VAT rate for tourism

Outgoing Killarney Chamber president says raising rate will mean holidaymakers having to pay third highest tourism VAT rate in Europe

Minister for Finance Michael McGrath told those gathered in Killarney that Ireland’s economic recovery had 'exceeded all expectations'. Photograph: Gareth Chaney/Collins Photos

Anne Lucey
Fri Jan 13 2023 - 17:29

Finance minister Michael McGrath will look “carefully” at continuing the 9 per cent VAT rate but he cannot guarantee the measure, reintroduced to support the hospitality industry during Covid-19, will be retained, he told the Killarney Chamber of Tourism and Commerce President’s lunch in Killarney on Friday afternoon.

The lower VAT rate for the industry, which was withdrawn in 2019 before being reinstated in 2020, would be looked at “in the round” along with the business energy and other exceptional supports, the minister said.

“We have a number of decisions to make before the end of February,” Mr McGrath said on the VAT question. He was responding to outgoing Killarney Chamber president Niall Kelleher, who called for the lower rate to be maintained “well beyond February 23rd″.

“The reality is that hospitality needs that support, it needs that small break if it is to regain lost ground and if the 13.5 per cent rate is reintroduced, it will create a major disadvantage as consumers and overseas visitors will be paying the third highest tourism VAT rate in Europe if visiting here,” Mr Kelleher said.

READ MORE

The chamber president also called for “a practical plan” and improved communication with accommodation agency IPAS to meet the challenges facing Killarney in its struggle to cope with the volume of refugees and asylum seekers.

“It is not fair on the service providers who are under strain and if the current trends continue it can only lead to a systems failure,” Mr Kelleher said.

Meanwhile, over 10,000 businesses have registered for the temporary business energy support scheme, far fewer than anticipated, and there have been 4,000 claims so far, Mr McGrath told the meeting. However businesses had until the end of January to register and claim. He said he will be reviewing the scheme and would welcome feedback, he added.

Ireland’s economic recovery had “exceeded all expectations” and would continue in the year ahead despite the challenges globally, he predicted.

It was his “firm expectation” that inflation would continue to fall, although the cost of living will remain high for some time and there will be pressure on households, with required.

The challenges were very real and interest rates would rise further but energy prices appear to have stabilised, Mr McGrath said.

“No one knows when the terrible war in Ukraine will end,” he added.

He acknowledged the role Killarney and Kerry had played in welcoming and accommodating both refugees and those seeking international protection.

“I know it has not been easy,” Mr McGrath said, referring to “the challenges” Killarney had met.

Over the weeks ahead, it would fall to accommodation providers to decide whether they would extend their contracts.

“There will be consequences either way,” Mr McGrath said.

If the contracts with hotels were not renewed, IPAS would be under more pressure; if the contracts are extended there will be knock-on effects on beds for tourism, the minister said.

Additional Government supports will focus on communities that have opened their doors and carried the heaviest burden, Mr McGrath said.

Asked about the cost of the Ukrainian refugee programme, he said €2 billion was provided in the budget at the end of September to meet the cost for 2023 to cover accommodation, social welfare, education and healthcare for Ukrainians.

“It is only an estimate,” Mr McGrath said. Another €1 billion was spent last year on meeting their needs. He said there was a moral, as well as a legal, duty to look after people from Ukraine.

Asked about the different supports for international protection applicants, who get euro 38.80 per week while those from Ukraine can avail of the full social welfare rate, Mr McGrath said the EU made the decision in relation to the support for the people from Ukraine.

LATEST STORIES