Mr. Tim Fenn:

The IHF is grateful for this opportunity to address the committee on the recommendations set out in the commission report. On behalf of hotels and guest houses throughout the country, I would like to make a number of observations.

First, I would like to mention the VAT recommendations, specifically recommendations 6.8 to 6.11. Unlike other sectors, when setting tourism VAT, it is essential to take account of the VAT landscape across international competitors. VAT is a consumer tax and in Ireland most tourism VAT receipts arise from transactions made by individuals who are not resident within Ireland. Overseas tourism revenue is discretionary expenditure that is highly mobile and influenced by international competition. It is not a captive tax base. The 9% rate is the right one for Irish tourism in a European context. As can be seen from our submission, Ireland's 9% rate is in line with our European competitors. Should the VAT rate be increased from 9% to 13.5% at the end of February 2023, it would place Ireland's VAT rate as the third-highest in Europe and place us at a competitive disadvantage.

Far from being an exceptional measure, most European countries operate a low tourism VAT rate. Since 2011, the reduced VAT rate has been an invaluable sector-specific policy instrument, deployed in a highly effective manner to support tourism. In response to the financial crisis, the reduced VAT rate directly led to the creation of 65,000 new jobs since 2011, making the 9% rate one of the most successful job creation initiatives in modern times. During the Covid crisis, the reintroduction of the 9% rate helped enable the survival of tourism businesses at a time of collapsing revenues due to lockdowns and restrictions. This was the worst economic shock in living memory. Despite the upturn in tourism, the majority of hotels, guest houses and tourism businesses are still in recovery mode. The industry is facing worrying headwinds, with a stark economic environment and worrying uncertainty around future outlook. As such, the 9% VAT rate is a critical policy measure that supports tourism enterprises and enhances our international competitiveness. A global cost-of-living crisis is not the time to introduce cost or growth levers that will only deter consumers from considering Ireland as a travel destination.

I will turn to the proposed accommodation tax, or recommendation 6.12. There are no grounds for an accommodation tax, given the enormous contribution that tourism makes to the economy as our largest indigenous employer. Pre-Covid, tourism supported more than 270,000 jobs and generated revenues of €7.5 billion. It yields taxes equivalent to 23 cent for every €1 spent by tourists. In 2019, this equated to €2 billion in taxes. This is a substantial contribution to the cost of public goods and services consumed. Tourism businesses, including hotels, also contribute directly to the funding of local authority services through commercial rates and levies. There is also the unintended consequence that further adjustments in taxation may lead to additional hotel construction being shelved. As such, additional taxation risks deterring much-needed investment.

A bed tax, by its nature, would likely be imposed on accommodation providers only. This would be inequitable as tourism benefits a range of businesses, from tour companies, visitor attractions and retailers to restaurants and many more. To specifically target one sector would be unfair and would apply upward pressure on hotel prices. It would place Ireland down the list in the eyes of price-sensitive consumers. It sends the wrong message to those looking to visit Ireland for our famous céad míle fáilte. We look forward to discussing these issues with the committee in further detail.