Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

The 9% reduced rate of VAT is reviewed annually in the context of the budget, including the costs and economic benefits and the additional revenue that could be raised by bringing the rate back to 13.5%. Revenue's most recent estimate for reverting the reduced 9% VAT rate back to 13.5% is that it would bring in extra revenue of €491 million. A 1% increase or decrease would yield or cost €109 million. The estimated cost to the Exchequer of the reduced 9% VAT rate, since its introduction in 2011 to end 2016, is of the order of €2.2 billion.

In terms of economic benefit, employment in the accommodation and food service sector has grown significantly since the introduction of the 9% VAT rate. Employment in these sectors has increased gradually each year since 2011, with an increase of over 35% in the period of Q2 2011 to Q1 2017 – an increase of 40,500 jobs in the sector. The rate of increase in employment in this sector was significantly greater than the overall level of employment increase. In terms of overseas trips to Ireland by non-residents, the number of trips increased from 6.5 million in 2011 to 9.6 million in 2016, an increase of 48%. However, these benefits could be attributed to other factors, such as the general and strong recovery in the economy and better economic performance in the target markets.

I decided in budget 2018 not to make any change to the 9% VAT rate as it continues to benefit the tourism sector throughout the country and any change in the rate could impact greatly on the tourism sector outside of the capital. I am also conscious of the impact the decline in the value of sterling is having on UK visitor numbers and how any increase in the VAT rate might exacerbate this.

While it is noted that hotel prices in Dublin continue to rise, this is partly a function of supply which is being addressed. Furthermore, because of EU fiscal neutrality constraints, different VAT rates cannot apply to different geographical areas in the country. In this context, VAT policy must be decided in the context of the national interest.

However, I accept the position of the Deputies that the 9% VAT rate must be subject to ongoing analysis. In this context I have asked my Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of next year's budget. This will better inform any decision in relation to the reduced rate going forward. As this analysis will not be finalised within the timeframes suggested in the amendments, I cannot accept the Deputies' amendments but I can assure them that their concerns will be included in the study to be undertaken by my Department.