Mr. Eoghan O'Mara Walsh:

I thank the committee for the invitation to speak to this important matter. The ITIC is the main representative body for all tourism and hospitality stakeholders in Ireland across the public and private sectors. We represent carriers, accommodation providers, hospitality operators, visitor experiences and activity operators, among many other tourism businesses.

As committee members will be aware, tourism and hospitality is the country’s largest indigenous industry and biggest regional employer. There are 20,000 businesses in the sector, the vast majority of which are SMEs, and the latest Central Statistics Office, CSO, figures suggest that 250,000 people work in the industry, 70% of which are in regional Ireland.

Tourism was walloped during Covid as no international visitors, the mainstay of the tourism economy, came to our shores for a two-year period. We are thankful the Government recognised this and stepped in with a number of very important measures. Since Covid restrictions were lifted earlier this year, the tourism industry has rebounded strongly and we anticipate that 2022 will bring circa 75% of pre-pandemic international visitor numbers to the country, which is very encouraging. However, there is widespread concern about the months and years ahead as energy costs, softening demand and global economic challenges all point to a difficult period. The Irish Tourism Industry Confederation is estimating a dip in tourism performance next year compared with this year so the recovery will stall. The situation is further complicated by Government’s over-reliance on tourism accommodation bed stock to house Ukrainian refugees and asylum seekers. Some 22% of all tourism beds nationally are contracted to Government at this point and that figure rises to 26% if Dublin is excluded. If this situation continues into next year, there will be no tourism beds in tourism towns up and down the country and thus no tourism activity, meaning job losses and business closures. Tourism operators are prepared to play their part but they cannot be asked to be the primary accommodation provider to the detriment of a broad industry.

I am here today to talk about the commission's report, particularly the tourism and hospitality related-aspects, which are mainly found in chapter 6. Much of the report pertains to other areas but there are some specific recommendations that are relevant to the tourism sector. Some of chapter 6 relates to the tourism VAT rate of 9%. The commission argues that this should be increased to 13.5% as scheduled on 28 February. ITIC is of the view that the 9% rate is the correct VAT rate for the tourism sector and puts us on an even keel with our European competitors, the vast majority of which have tourism VAT rates at this level or, indeed, lower. To increase the VAT rate would make us one of the most expensive tourism destinations across the EU, damage our competitiveness and add further cost to the system at the very time that industry is dealing with escalating costs elsewhere.

An increase in the VAT rate would also be inflationary by its nature, with IBEC estimating that it would add 0.5% to the national inflation rate at a time when Government should be trying to curb prices, not add fuel to a raging fire. The economist, Jim Power, has recently completed a report, which I will happily share with committee members, in which he makes the conclusive economic argument for the extension of the 9% VAT rate. He estimates that an increase to 13.5% will cost 24,000 jobs. The commission’s report states that a temporary VAT reduction should not be used as a short-term stimulus. ITIC would argue that VAT at 9% should be seen as a long-term measure for the tourism industry and should certainly be kept in place until full recovery to pre-pandemic levels is secured.

ITIC does not agree with the introduction of an accommodation tax as this would further damage our value proposition. EUROSTAT figures prove that Ireland is an expensive place in which to run a tourism and hospitality business with labour and electricity costs 32% and 60%, respectively, above the EU average and Ireland having the second highest excise tax and second highest borrowing costs across the EU. To add a bed tax to this formula would only depress demand. Fáilte Ireland estimates that, for every €1 a tourist spends, 23 cent is returned to the Exchequer in direct tourism-related taxes and we think this is enough. A bed tax would be bad for business, full stop.

The commission’s report is extensive and comprehensive and, if there are other tourism-related issues that I have missed, I am happy to answer questions on them. To finish, I will emphasise again that tourism is a key economic sector that should be supported during these turbulent times. Competitiveness is key and any tax increases would retard our recovery, depress demand and affect employment and regional economic balance. I thank the committee for its time. I am happy to answer any questions.