The Tourist industry looks to the Budget for two particular signals: curbing inflation and increased funds "ringfenced" fir international marketing.
An independent economic study into the impact of tourism on the economy recently highlighted the impact of rising inflation on competitiveness generally. Since the mid-1990s Irish inflation has outstripped the rate of price increases both in competing markets and in those countries from which we aspire to attract visitors.
By May, 2002, average consumer prices were 21.7 per cent higher in Ireland than in 1996. Over the same period average retail prices rose by just 11.3 per cent in the EU overall and by 9 per cent in Germany and 8.4 per cent in France.
In addition, the unfavourable exchange rates between the euro and the dollar and sterling mean that visitors from Britain, our main market, and the United States are no longer insulated from the effects of high domestic inflation.
Many of the input costs which impact on the tourist industry have been increasing at above the average rate. These costs are damaging the international competitiveness of tourism. One specific taxation measure which would be beneficial is a reduction of VAT on tourism services to below 10 per cent. At 12.5 per cent Ireland has the second highest level of VAT within the euro zone on hotel, restaurant and approved accommodation services, more than twice that in France, the Netherlands and Portugal.
Finally, as an internationally traded industry in an extremely competitive market environment, it is essential that funds for international marketing are increased. The Irish Tourist Industry Confederation welcomes the decision, signalled in the Estimates, that these funds are to be increased by 20 per cent for next year.
The Minister for Tourism has redistributed funding from other tourist activities to strengthen overseas marketing and he has further indicated his commitment to re-orient the funds available to him towards international marketing in the future. This is a positive step in the right direction, which has been welcomed by the Industry.
