Sandra McLellan (Cork East, Sinn Fein)
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58. To ask the Minister for Transport, Tourism and Sport the potential ramifications for the tourism and hospitality sector of an increase in VAT above the current 9% tax rate; if his attention has been drawn to the potential that this would have for job losses; if he has engaged with the tourism industry regarding same; and if he has had any discussions with the Department of Finance regarding the VAT rate and retaining it at its current level. [41172/13]

Michael Ring (Mayo, Fine Gael)
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This question is about the VAT rate for the tourism and hospitality sector. I am very conscious that the tourism and hospitality industry would like to see the 9% rate continue throughout 2014 and beyond. I am supportive of retaining a reduced rate but I am conscious that this can only be justified on the basis of clear evidence of the impact of the reduction and in light of the overall budgetary position.

In that regard, the Minister, Deputy Varadkar, and I have been in touch with the Minister for Finance, who is responsible for taxation policy, advising him of the benefits that we believe have accrued as a result of the initiative and advising him that, in our opinion, there are very strong economic grounds for maintaining the 9% rate. Our officials have since met with the Department of Finance, as recently as last week, to point out the positive outcomes from the initiative and to make a case for the maintenance of this reduced rate. That said, I am conscious that proposals to maintain the 9% rate will have to be considered in the context of the challenges presented by the forthcoming budget.

Sandra McLellan (Cork East, Sinn Fein)
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There is major concern in the tourism and hospitality sector at the prospect of VAT rates being increased from the current 9% to 13.5%, a substantial increase. I have been lobbied, as has the Minister of State, by the tourism and hospitality sectors in this regard. They make a good case.

It is the view of Retail Excellence Ireland that far from raising revenue, reversion to the higher rate of tax will cost the Exchequer some €173 million and perhaps as much as 13,500 jobs. Has the Minister of State, Deputy Ring, met many of the tourism and hospitality bodies and can he outline the nature of these discussions? I am glad he stated that he has met the Minister and outlined the case to him because Deputy Ring was keen earlier on in government to emphasise the importance of the reduction to the 9% rate.

According to a recent report, the change in VAT has cost the State €88 million in net VAT receipts. However, according to the Department of Finance assessment of the success of the intervention, the employment gain equates to €261 million in increased Exchequer employment taxation receipts and social welfare savings.

Michael Kitt (Galway East, Fianna Fail)
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I am sorry, I must call the Minister.

Sandra McLellan (Cork East, Sinn Fein)
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I will just conclude. When the VAT receipts reduction is deducted from the employment gains, the net impact to the Exchequer is a benefit of €173 million annually. Does the Minster of State accept these figures?

Michael Ring (Mayo, Fine Gael)
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First, I take this opportunity to compliment the Minister for Finance, Deputy Noonan, who two years ago was brave enough to reduce the VAT rate, from 13.5% to 9%. People forget that in those very serious economic times he had the vision and foresight to do so.

I hear people talking and I have met the hospitality sector. I have met the publicans and the hoteliers and, of course, they all want the VAT rate to be left at 9%. I have full confidence in Deputy Noonan. He will do right by this sector. He did so in the past. As I stated, the rate came down, from 13.5% to 9%, when people were only looking for a rate of 11% or 12%. I compliment him on that. From that, we have created more than 10,000 new jobs. I would be hopeful that Deputy Noonan will be in a position to leave it at 9%, but that is a matter for himself.

Sandra McLellan (Cork East, Sinn Fein)
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I thank the Minister of State for his answer. I understand he is favourably disposed to the need for the lower rate to be maintained but I hope for the sake of the tourism sector that he will be able to attempt to persuade the Minister that this should be the case.

Michael Ring (Mayo, Fine Gael)
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Deputy Noonan is a good Minister. He is one who knows what is happening on the ground. He certainly responded in the past when the circumstances were even more difficult and I hope he will do the same again. Since then, Germany, France and Switzerland have reduced their VAT rate because they see how important tourism is to the economy and the country. The fact that the sector could create 10,000 jobs has proven that this has worked.

On what the Minister has done, there was a cut, we believe, of approximately €170 million rather than of the higher amount, and Deputy McLellan is quite correct in saying so. We also made a €50 million saving in social welfare where the unemployed came off the social welfare system and got jobs in the hospitality sector.

Deputy Noonan will do right by the country. I have full confidence in him. I had confidence in him when he went to Europe and got the deal for us and no doubt he will deliver on this one.