Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

Go raibh maith agat, a Chathaoirligh, agus cuirim fáilte roimh an rún seo. Níl dabht ar bith ach go bhfuil ár gcomhlachtaí beaga ag streachailt agus go bhfuil siad mar chnámh droime eacnamaíochta, go háirithe in earnáil na turasóireachta. D'fhulaing siad go mór le cúpla bliain anuas.

Our hospitality and tourism sector, which is the backbone of our economy has suffered from a very difficult three years. As a result of the pandemic, so many were forced to close their doors and they endured a dramatic drop in footfall, unlike anything we have ever experienced. That is the reason I and my party wrote at the time to the Minister of Finance calling for the introduction of a scheme to support the wage bill of businesses. It was an unprecedented step that was taken here and right across Europe and elsewhere. It is also the reason my party supported the reduction in the VAT rate for the hospitality and tourism sector in November 2020, which was in place for almost three years. That was the right response in extraordinary circumstances.

Since then, our SMEs have endured an unprecedented energy shock and increases in input costs that put a strain on the viability of many small businesses. As we know, the temporary business energy support scheme, TBESS, rolled out by the Government to support small businesses with their increased costs, was an abject failure. It was too complicated and convoluted. It is no surprise that only a small fraction of the money allocated to it made its way into the accounts of small businesses. More recently, we have seen the cost of doing business rising for many small- and medium-sized businesses across the State, including in the hospitality and tourism sector. As many speakers stated, this sector is a critical source of employment in every region and county, including my own county of Donegal.

The motion before us has a particular focus on VAT. It calls for an immediate cut in VAT for restaurants, hotels and the wider hospitality and tourism sector. I have a number of important points to make. As we know, VAT reductions are a blunt policy instrument, which can have one of two aims, either to reduce prices for consumers or to increase the cash margin of firms that enjoy them. We know that the review undertaken by the Department in 2018 found little evidence that the reduced rate that was in place from 2011 to 2019 was passed on to consumers. This leads me to the prices we have seen in the accommodation sector in some parts of the State. I have raised this issue before in this House and it is worth restating. In this, our capital city, utterly extortionate prices are charged by hotels far too often. People have been in touch with me about their experiences. It is ridiculous that some people have been in contact saying it was cheaper for them to book a flight to Lisbon to go to a Taylor Swift concert than to jump on a bus and go up the road and see that concert in Dublin, while staying in a hotel in this city. That is absurd, but it is what is happening with hotels in this city. The question we must ask ourselves is whether hotels in this city would reduce their prices if VAT were reduced or if they would pocket the money and continue to charge rip-off prices.

Things are not the same throughout the State, however. The situation is very different in the regions. In Donegal and many other counties, small businesses in the hospitality and tourism sector are struggling. They are a critical part of the tourism offering and an important source of employment. Before the pandemic, the tourism sector supported 260,000 jobs in 20,000 businesses, most of them SMEs supporting rural and regional economies. They have faced rising business costs, which will continue in the years ahead. That is the reason the Government should explore options to introduce a targeted financial package to support them. This can best be done in the form of a PRSI rebate to support them with, among other things, rising labour costs. That would support those most impacted and the most vulnerable.

As I have said before on the issue of VAT, we need a comprehensive review of the rate of VAT applied to the hospitality and tourism sector. We have the third highest rate of VAT on accommodation across Europe and the eighth highest for restaurants and catering. What impact does this have on our tourism offering and our competitiveness? We need an informed analysis of whether the current regime is appropriate. The motion also calls on the Government to consider operating different VAT rates in regions across the State. I welcome the clarification from the Minister that this is not permissible under EU law.

I welcome the opportunity to speak. I also want to state that I have an interest in this matter as I am a director of a music festival, which would benefit from a reduction in the VAT rate. It has benefited in the past. It is a not-for-profit event that is run by the community. I want to put on record that I am a founder member and a director. The hospitality and tourism sector is an important source of employment in many counties, including my own, and we need to foster the success of the tourism offering. I welcome the Minister's commitment to a comprehensive review in advance of the budget and for it to be published so we can more clearly examine whether we have the appropriate rate. There is no doubt that we need more supports for the tourism and hospitality sector.

See this speech in context