Jim O'Keeffe
Question:26 Mr. J. O'Keeffe asked the Minister for Finance the tax incentive proposals, if any, he has to encourage the development of the tourist industry.
Written Answers. - Tourism Industry Tax Incentives.
A considerable level of assistance is provided through the tax system and by way of direct grant aid to encourage the development of the tourist industry. As regards tax incentives and related measures, beyond what was included in this year's Finance Act and what is currently available, I have no additional tax-related proposals at this time to further encourage the industry but the matter will be kept under review.
That said the Government are fully aware of the potential of the tourist sector for additional large scale job creation. That recognition is reflected in the targets set by the Government for further significant growth in visitor numbers, revenue and, consequently, employment to be achieved by the end of the National Development Plan period. In that regard, the Government's stated aim is the creation of some 35,000 jobs in this sector over the next six years.
The Government is also committed to proceeding with the implementation of key recommendations of the Report of the Tourism Task Force on the basis set out in the Programme for a Partnership Government. The Task Force recommended that, fiscal policy permitting, special consideration be given, among other things, to reintroducing accelerated capital allowances for tourism investments. In that context the Government has undertaken to examine the recommendations of the Tourism Task Force with a view to implementation over a five-year period, subject to budgetary and general policy considerations.
In that regard progress has already been made. The importance of the hotel sector as an area of investment which actually gives rise to significant long term employment creation has been recognised for some time by the fact that the tax code provides a capital allowance regime for hotels which is much more favourable that is the case for industrial and commercial buildings. While the reintroduction of full accelerated capital allowances, as recommended by the Task Force, is not contemplated either now or in the future, I decided in the budget to further improve the capital allowances regime for hotels and holiday camps so that investments can be written off for tax purposes over seven years as opposed to the previous 10 year write-off period.
The Task Force also recommended that a reduced VAT rate apply to tourism services. This in fact is now the case for virtually all tourism-related services. Hotels and all other forms of holiday accommodation, restaurant meals, car hire, commercial sports and leisure facilities, and tour guide services are all at the reduced rate of VAT of 12.5 per cent.
Furthermore, in the 1994 budget, I announced that full relief from VAT would apply to certain luxury coaches used primarily in the tourism sector, for which up until then only partial relief was available. In addition, the 1994 Finance Act streamlined the VAT regime applying to funfairs and amusement parks by providing that, from 1 July this year, all such facilities will be liable to the reduced rate with the exception of gaming activities and amusement machines. Up to now, only travelling shows qualified for the reduced rate.
Other tax-related developments introduced in recent years which act to encourage the progress of the tourism sector are also worth pointing out to the Deputy. The business expansion scheme, for example, which was extended in the 1993 Finance Act for a further three years, is available for a wide range of non-accommodation tourism and leisure facilities. In addition a range of tourism services are "qualifying trading operations" under the seed capital scheme, I introduced last year.
The development of tourism is also assisted through tax relief being provided where significant buildings and gardens are open to public access. Relief is provided in respect of the cost of maintenance, repair or restoration of buildings and gardens which are of intrinsic significant scientific, historical, architectural, aesthetic or horticultural interest. I introduced important changes this year, aimed at further improving public access to and public knowledge of any buildings or gardens availing of this relief.
In 1993, I introduced a scheme of partial repayment of vehicle registration tax for cars in the short term car hire fleet, so as to effectively relieve these cars of VRT for as long as they remain in the fleet. Also, I introduced special extended deferment arrangements for the payment of VRT in the case of cars purchased by the hire operators. These arrangements, together with the reduction in the rates of VRT this year, are undoubtedly of significant benefit to this important tourism related sector.
Apart from specific measures some of which I have just outlined, other more general measures are of equal benefit to the tourism sector. Tourists, for example, tend to be heavy consumers of excisable products, particularly alcoholic beverages and petrol. Therefore, the industry, has been a beneficiary of the restraint shown in recent years whereby taxes on these products have been reduced very significantly in real terms.
Equally the tourism sector has gained from the reduction in the standard corporation tax rate which has fallen from 50 per cent to 40 per cent in recent years. It has also benefited from the general tax measures introduced in the income tax area designed to ease the burden on earned income and to reduce the direct cost to employers in respect of low-paid workers.
All in all, therefore, much has and continues to be done in the tax area to foster this important sector of the economy.