Marian Harkin (Sligo-Leitrim, Independent) | Oireachtas source

I welcome the motion by the Rural Independents because it seeks to address in a practical way some of the challenges faced by tourism and hospitality businesses across the country. I especially welcome the key proposal on reducing VAT rates for the sector to 9%. This is an immediate and practical step that can be taken that would lead to an immediate impact on the viability of so many businesses.

We are accustomed to the Government and Government Ministers bemoaning what they cannot do. They often tell us that they would love to take on board proposals and suggestions put forward by the Opposition and even by their own backbench Deputies. They shake their heads and point to budgetary constraints and fiscal rules. When they really want to smother a proposal they point the finger at EU legislation.

This motion, however, contains a very practical proposal that would allow the Government to apply different VAT rates in areas outside of Dublin, in rural areas, where it could apply a VAT rate a 5%. Tourism is really suffering in regions outside Dublin. This proposal would also would deal with the issues raised by many of our colleagues because it would separate the very profitable businesses from those that are struggling.

The EU is no barrier. We have an EU reduced VAT rate directive that allows for this very situation. We see it applied in Italy, Hungary, Latvia, Lithuania, Malta and Romania. We see it applied in Portugal, a country where tourism is an integral part of its economy. This helps to support tourism in more peripheral areas. Our capital city, Dublin, has much greater opportunity to host national and international major events whether concerts, sporting events and so on. Half of Sligo will be in Croke Park next Sunday to support the black and white. It is because Dublin has those venues and those opportunities to host all these national and international events.

We can see how the further reduced VAT rate is working in other EU countries. At the very least, we need to look at a pilot programme, perhaps for one to two years, where we would have a lower VAT rate on hospitality business. The north west would be an ideal location to see how it works out. First, it is, by definition, rural and peripheral and crucially it is beside the Border with Northern Ireland. A lowering of the VAT rate would be hugely significant in equalising the cost between running a business North and South of the Border and giving those businesses a real chance of survival.

One of the crucial issues for many towns in the areas I represent is that hotels have been taken over to provide accommodation for Ukrainians. Local tourism businesses, whether a local restaurant, an activity centre, a souvenir shop or a local teashop, have all suffered greatly because there is no footfall in the context of national or international tourism. The Government took over these hotels and the very least it can do now is reduce the VAT rate on those tourism businesses that rely partly or largely on the tourists who would otherwise have stayed in the host hotels.

I am thinking of places like Rosses Point, County Sligo, Bundoran, County Donegal, all of north Leitrim, Ballinamore in south Leitrim and many other towns where some or all of the tourism accommodation is no longer available for tourists. To be fair, in Drumshanbo, County Leitrim, the State is concluding the contract to accommodate Ukrainian refugees. However, the way the Department approached the matter, with very short notice for the local hotel and causing disruption to families, is an example of worst practice. Best practice would see people being given an opportunity to find new accommodation, transfer to new schools and, if necessary, find new employment. That did not happen. The way things were done is not acceptable. It has created severe difficulties for many Ukrainian refugees and the local community. With support from the community, many of those living in the local hotel have found some kind of alternative accommodation. However, that is no way to manage the transition. I am not setting out a blanket way of proceeding as we move forward. I am just saying the process must be managed properly.

Given the hotel in Drumshanbo is no longer accommodating Ukrainians, it will, I hope, soon be available for tourists. I ask for engagement on this matter. I have written to the Minister but received no reply. Given the hotel will be available, a reduction in the VAT rate would be very important to kick-start the tourism business in the area. It would be a real incentive. The State would lose money in the short term but, in the long term, a policy change like this would be a real investment in Drumshanbo and other towns. It would help to restart and revitalise many tourism enterprises that have stalled or closed because of Government intervention.

I recently received a letter from a restaurant owner in my constituency. I will not name the business or its location. The letter gives a really good overview of recent Government decisions. It states:

Dear TD,

I am writing to you as the business owner of [a particular business] in [a particular town] and on behalf of ourselves and our colleagues in the industry nationwide. We, along with many businesses in our area, are at risk of closure if VAT is not returned to 9%. We are a husband-and-wife-run business, opened in the last four years. The hotel in our town housed Ukrainian refugees from 2023 onwards and this has resulted in a 20% drop in our business outside of the summer season. We have again seen an increase in our energy costs, no Government supports, along with supplier costs just going through the roof.

This is just one example of the many letters and emails I have received from small business owners. Reducing the VAT rate to 9%, and further lowering it to 5% in peripheral regions, would pay dividends to those businesses, their communities and, in the final analysis, to Revenue.

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