Dáil Éireann Debate, Thursday - 5 October 2023
209. Deputy Michael Fitzmaurice asked the Minister for Finance if his Department has conducted a balancing exercise to determine the impact of the reversion of temporary VAT rate of 9% to the current VAT rate of 13.5% for tourism-related activities, in the context of reduced employment, closures, and so on; and if he will make a statement on the matter. [43338/23]
View answer210. Deputy Michael Fitzmaurice asked the Minister for Finance if his Department has not conducted a balancing exercise to determine the impact of the reversion of temporary VAT rate of 9% to the current VAT rate of 13.5% for tourism-related activities, in the context of reduced employment, closures and so on, if it will do so; and if he will make a statement on the matter. [43339/23]
View answerI propose to take Questions Nos. 209 and 210 together.
As the Deputy will recall, I extended the 9% VAT rate for the tourism and hospitality sectors to 31 August 2023 from the previous end date of 28 February 2023. It reverted to the 13.5% VAT rate on 1 September 2023. The estimated cost of the final extension of the measure is €300m. This extension struck a balance between the cost to public finances and the provision of support for these sectors.
I made it clear at the time of the most recent extension that it was not intended to further extend this 9% reduced rate after 1 September 2023. As you may know, officials from my Department compiled a ministerial briefing on a number of measures, including the temporary 9% VAT rate. This briefing included an economic assessment of the measure. This considered the macroeconomic backdrop to any extension of the 9% rate, noting that the economy has rebounded strongly from the pandemic and that economic activity is now above pre-pandemic levels. The briefing also noted that the reduced rate is both regressive and very costly, and that this cost represents a transfer from taxpayers to the sectors which it covers.
The Government accepted the Department’s economic assessment, which found that there was no longer an economic case for the temporary 9% rate, and, therefore, decided upon a reversion to the 13.5% VAT rate. Specifically, the Government decided that the 9% VAT rate for the tourism and hospitality sectors would only apply until 31 August 2023. This decision was made in recognition of the employment provided in the sectors to which the 9% rate applies, as well as to give businesses a transition period to adapt to the changing economic and policy environment.
