Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The 9% reduced VAT rate for tourism-related services was introduced in July 2011 as part of the Government's jobs initiative. The measure was designed to boost tourism and create additional jobs in that sector.

With regard to the economic impact on the tourism sector due to the introduction of the 9% VAT rate, the most recent data available from the CSO on economic growth broken down by sector relate to 2012 and show that there was a year-on-year growth in gross value added for the accommodation and food services sector compared to 2011. Expenditure by overseas travellers to Ireland recorded an increase of 0.6% in 2012 over 2011. In addition, quarter one of 2013 recorded an increase in expenditure of 12% compared with the same period last year. There is a clear impact in terms of employment in the accommodation and food service sector which increased by over 13% between quarter 2 of 2011 and quarter 2 of 2013 – an increase of 15,000 jobs in the sector. For the period May 2013 to July 2013, the number of trips to Ireland increased by 7.6% over the figure for the same period last year. In the period January to July, the number of trips to Ireland increased by 6%.

In line with best international practice, the 9% VAT rate was introduced as a temporary measure and is due to expire at the end of December 2013, at which point it will revert to 13.5%. Retaining the 9% rate would be very costly to the Exchequer and would require an increase in taxation or a reduction in expenditure elsewhere. Any proposal to maintain the 9% VAT rate will be considered in the context of the budget.

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