Reprieve from until September VAT increase

The hospitality industry has welcomed the government’s decision to extend the 9% tourism VAT rate and reform the energy support scheme for businesses. The government has been adamant that this will be the last extension and that the rate will increase at the end of the summer. That’s despite the fact that at 13.5%, Irish consumers will be paying the second highest tax rate in the EU for dining out and staying in hotels.

Denyse Campbell, President of the Irish Hotels Federation (IHF), said that the measures announced

30% now give tourism businesses greater certainty as they grapple with the impact of the cost-of-living crisis on Irish consumers and key overseas markets. “The announcement is a clear recognition by the government of the challenges facing tourism and hospitality, Ireland’s largest indigenous employer which currently supports over 250,000 livelihoods. It will go a long way in helping to sustain the recovery of our industry at a time when businesses and consumers are facing significant economic and financial headwinds.”

She added that a vibrant tourism industry is one of the most effective ways to spread employment opportunities and prosperity throughout the entire country.

“That is why the decision to extend the 9% VAT rate is so critical for communities and regions that rely on tourism as a major employer and driver of economic activity.”

Ms Campbell noted that most European countries apply a reduced VAT rate to tourism accommodation.

“When you look at the tourism VAT rates among our key European competitors, it is clear that the 9% rate is the right rate for Ireland. At 9%, Ireland is in line with our European neighbours, in particular those countries where tourism plays a key role in their economy.”

Changes to the TBESS energy support scheme designed to provide greater assistance to businesses experiencing exceptional increases in energy costs have also been welcomed. The threshold for qualification is set to be cut - companies will now be able to claim relief if their energy costs have gone up by 30%, versus 50% under the earlier version of TBESS. These changes will apply retrospectively from the start of last September. The level of relief is also set to increase from 40% to 50% of eligible costs from March 1st. The payment will remain subject to a monthly limit, but will also rise from the current €10,000 to €15,000 per month, per trade or profession from next month. Payment will be subject to an overall cap of €45,000, up from €30,000 where the business is carried on from more than one location. The government is also looking at introducing a new grant to help businesses that use LPG, kerosene or fuels other than natural gas or electricity.