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The Irish Hotels Federation (IHF) has said claims that reducing the hospitality VAT rate would cost the state €1bn (£86m) a year are “deeply misleading”.
According to IHF chief executive Paul Gallagher, discussions with the government before and after the general election had always focused on food services and not hotel accommodation.
Figures from the government’s Tax Strategy Group show the cost of applying a 9% VAT rate to food and catering services would be €674.6m (£582.4m), with the IHF stating that the cost would be lower again if the reduced rate applied only to food services.
Gallagher said: “To suggest anything else was on the table is disingenuous. It is time for a more honest, balanced debate – one that recognises the economic and social importance of hospitality food service businesses and gives them a fighting chance to survive.
“The true cost involved is significantly lower than the widely quoted figure cited by the Government in recent days.”
The trade body also argued that the government’s position risked “driving a wedge between the public and the hospitality industry” by presenting VAT as “a giveaway to businesses”. This is because the reduced rate would apply to prepared meals sold in restaurants, takeaways, commercial kitchens and on transport.
Gallagher added: “The real beneficiaries are small food businesses, many of which are operating on the brink of survival due to extreme food cost inflation and shrinking margins.
€64m (£55.2m) of the VAT benefit would apply to the hotels sector. Reducing VAT on food serices is not a handout – it is a vital intervention for a sector that supports over 270,000 livelihoods and contributes significantly to the economy.”
Tourism employs about 270,000 people across Ireland, of whom 69,000 work in hotels and guesthouses, according to IHF figures. About 70% of hospitality jobs are outside Dublin, and the industry generates €10bn (£8.6bn) in annual revenue and contributes more than €2.9bn (£2.5bn) in taxes to the exchequer.
