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

Reviewed. The review was published in July 2018 and the budget decision to increase the VAT rate was made following that analysis, which indicated that the majority of activity at the 9% rate is driven by income growth more than price and that the retention of the rate provides little additional benefit relative to its cost. The review of the 9% rate found that tourism expenditure is more sensitive to income growth and economic cycle than to price changes.

The economy is performing well, with high levels of employment and strong demand in the tourism sector and growth expected to continue in the medium term. This positive economic outlook means that the income channel of demand is likely to ensure that the economic activity within the sector to which the 9% VAT rate applies remains strong. In this context, it is believed that the VAT rate applied to the tourism sector should not greatly impact demand or employment therein. In this circumstance, there does not appear to be a case for a review of the impact of an increase in the VAT rate on the hospitality sector within the next ten months.

A number of the issues raised are relevant issues but they are not relevant in terms of the VAT rate within the hospitality sector. There are areas that are struggling and areas that are performing well. There are pockets of rural Ireland that are performing well and other areas that are not doing as well but this is not due the VAT rate because the same rate of VAT applies in both instances. It is the product available that brings people to particular areas.

There are 2.27 million in employment in this State. We have never had more people working. When people are working, they are able to spend more and to pay a little extra VAT. Taking the example of a coffee and a scone that costs €5, the increase in VAT is 22.5 cent. I do not believe a 22.5 cent increase would cause anybody to not buy a coffee and a scone. There is a legitimate question about the regionality of the tourism sector but it is a different question than the VAT rate.

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