Budget 2018: Relief in tourism industry as 9% VAT rate maintained

The tourism industry expressed relief after retaining its special 9 per cent VAT rate, which State officials had suggested might be scrapped in Budget 2018.

The Government also announced a 2.75 per cent increase in funding for tourism marketing for next year.

Trade unions had wanted the VAT rate increased to raise cash for public spending, while sections of the tourism industry were being criticised for implementing sharp price increases while calling for the discounted rate to be retained.

Minister for Finance Paschal Donohoe said he had decided against raising the rate back to its original 13.5 per cent, but he acknowledged that some industry segments, such as the booming Dublin hotel sector, had a diminished entitlement to State help.

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“While I note that prices in Dublin continue to rise, I have said before that VAT policy cannot be decided on the basis of one location, only but in the context of the national interest,” said Mr Donohoe.

He noted the uncertainty for the industry created by Brexit as another reason for leaving the special rate intact.

‘Tourism offering’

The Minister said €112 million was being made available "for funding to enhance further our tourism offering and market our country abroad". This appears to be a reference to the budgets of State agencies, Tourism Ireland and Fáilte Ireland, and is an increase of about €3 million on last year.

Fáilte Ireland, which markets Ireland to domestic tourists and oversees the development of the industry, welcomed the retention of the 9 per cent rate, but warned the industry that it would have to also implement price restraint.

“The continuation of this measure will help sustain growth but it must also be accompanied by a renewed effort on the part of the industry to maintain competitiveness and avoid price inflation,” it said. “An emphasis on greater competitiveness, allied with the lower VAT rate... will create the necessary environment to generate additional revenue and deliver more jobs.”

The Irish Tourist Industry Confederation welcomed the retention of the rate, but criticised the State for ignoring its request for a €20 million Brexit-fighting fund to help tourism businesses diversify away from the UK.

The Restaurants Association of Ireland and the Irish Hotels Federation also welcomed the rate retention.