Jimmy Deenihan (Kerry North, Fine Gael)

I compliment my colleague, Deputy Hogan, on his introduction of this timely motion. The high cost of doing business has been acknowledged in several public policy reports. Over the past number of years, the Irish inflation rate has exceeded that of most other EU economies. While the current level of inflation in Ireland is in line with that of the euro zone and the United Kingdom, the cost base is significantly higher due to higher inflation in the past.

Price increases are being sought or have already been approved for electricity and other energy and postal services. For example, while inflation this year to date has been 2.2%, an examination of the increase in prices that will affect the tourism industry will show that water supply, refuse and other services increased by 21.3%. Energy products, including electricity, increased by 15.7%. In other areas that would not obviously affect tourism, health costs increased by 6.6% and hospital services increased by 13.2%, all of which are above our rate of inflation. As Deputy Ring said, the increase of 21.3% in local service charges certainly makes the tourism industry very uncompetitive vis-À-vis others.

We talk about rip-offs across the country every day. There is a difference between people who are ripping off and those who must overcharge due to pressure and the Government's stealth taxes. It is important to make this distinction as people are forced to charge more due to their overheads. It must be accepted that most of the operating environments, such as interest rates, exchange rates, international growth and oil prices, are all outside the Government's control but domestic policy is fully within its control. The current policy of low profit tax and low income tax levels is essential to the Government's fiscal policy and is something on which most parties in this House agree.

Other aspects of fiscal policy are very much against the interests of the tourism industry in particular. Ireland has among the highest alcohol excise taxes in the EU and the world. A study carried out last year by an individual at UCD showed we placed more excise duties on wine and beer than anywhere else in the world, which inflates prices in tourism. There are high and continuously growing local government taxes and charges, which I have mentioned.

Regarding VAT rates, which I hope the budget will address, Ireland has the second highest in respect of hotel accommodation within the euro zone, second only to Germany, which is at 16%. In the international community, it has the sixth highest VAT rate in hotel accommodation. Ireland's disadvantage, especially in the area of business tourism, is that business people who come here cannot reclaim their VAT whereas they can in Northern Ireland. The national conference centre was announced today but people will not come here unless the VAT regime is changed.

Ireland has followed a fiscal model of low profit tax and low income tax, which we all support, but we must change in respect of indirect taxation. The Competition Authority has a critical role to play in this area. We must lower our energy costs and increase competition, such as in the wind generation sector. Currently, wind energy is not attractive here due to the costs of entering the ESB grid. Were there lower rates, more energy would be generated. Energy costs are one of the reasons this country is less competitive. The Competition Authority has a significant role to play in the regulation of costs such as the cost of drink.

Deputy Hogan's motion notes:

The publication by the Competition Authority of an annual report on the implications of State action for competition in the provision of goods and services which identifies areas where the State, either through direct involvement in the economy, or through regulatory systems, has restricted, inhibited or prevented competition. . .

It is important that the State takes its share of responsibility at this stage. I hope the Government will accept Deputy Hogan's proposal.

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