Michael McGrath (Cork South Central, Fianna Fail)
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4. To ask the Minister for Finance his views on the operation of the 9% VAT rate; his views on whether it has been successful in supporting jobs in the domestic economy; and if he will make a statement on the matter. [41627/13]

Michael Noonan (Limerick City, Fine Gael)
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The 9% reduced VAT rate for tourism-related services was introduced in July 2011 as part of the Government's jobs initiative. The measure was designed to boost tourism and create additional jobs in that sector.

With regard to the economic impact on the tourism sector due to the introduction of the 9% VAT rate, the most recent data available from the CSO on economic growth broken down by sector relate to 2012 and show that there was a year-on-year growth in gross value added for the accommodation and food services sector compared to 2011. Expenditure by overseas travellers to Ireland recorded an increase of 0.6% in 2012 over 2011. In addition, quarter one of 2013 recorded an increase in expenditure of 12% compared with the same period last year. There is a clear impact in terms of employment in the accommodation and food service sector which increased by over 13% between quarter 2 of 2011 and quarter 2 of 2013 – an increase of 15,000 jobs in the sector. For the period May 2013 to July 2013, the number of trips to Ireland increased by 7.6% over the figure for the same period last year. In the period January to July, the number of trips to Ireland increased by 6%.

In line with best international practice, the 9% VAT rate was introduced as a temporary measure and is due to expire at the end of December 2013, at which point it will revert to 13.5%. Retaining the 9% rate would be very costly to the Exchequer and would require an increase in taxation or a reduction in expenditure elsewhere. Any proposal to maintain the 9% VAT rate will be considered in the context of the budget.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister for his reply. He referred to some of the positive impacts of the lower rate of VAT on the hospitality and tourism sector. It costs around €350 million a year, a very substantial amount of money. That is the gross cost, but I would like to know if the Department has carried out an assessment of the net cost on the Exchequer, in view of the positive impacts to which the Minister referred, in terms of tourism and employment numbers. The net cost is not €350 million and there are various estimates of what it is. It is important, when the Minister is making a decision in the context of the budget, that this information be available.

Second, as the Minister knows, the VAT reduction was part of the jobs initiative which was funded by the pension levy. It was estimated at the time that the Department would take in approximately €1.9 billion. I note that the pension levy, in the last week or so, came in ahead of profile. In 2013 it came in at approximately €512 million, over €40 million more than the Minister had expected to receive. It is clear from the figures provided by the Department of Finance that not all of this money is being spent on the jobs initiative. Somewhere between €200 million and €300 million has not been spent on the measures for which the levy was initially introduced.

Has any decision been made on the 9% VAT rate at this stage? I ask the Minister to give us an indication of the position in that regard.

Michael Noonan (Limerick City, Fine Gael)
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The 9% VAT rate was a pump-priming exercise and like all pump-priming exercises, one primes the pump, the engine fires and when the engine is going, one does not need to prime the pump again. We must measure whether the industry can now go without special measures and, like any other sector, pay the VAT rate which applies to it.

On the issue of cost, part of the jobs initiative was that we would abolish the travel tax, provided the airline companies did a deal to bring extra tourists into Ireland. We could not negotiate this and as a consequence, the travel tax receipts have been retained within the system. That accounts for a significant portion of the discrepancy. It is true that the pension levy figure is above the estimate, on the basis of the returns published yesterday. That is because the capital value of pension funds in 2012 rose by 11% or 12%. The Deputy will be aware that the equity market internationally has moved which means that there is now a bigger base. We would recover our money by putting up the VAT rate to something less than 13.5%. The cost was €350 million, but because of the expansion of activity in the sector, we could recover the money by not quite going to 13.5%.

Michael McGrath (Cork South Central, Fianna Fail)
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The key question is whether the Minister is determined that the income from the pension levy and the cost of the various initiatives under the jobs initiative will total zero and even out. It is very clear, based on the figures provided by the Department, that it is not the case so far, unless a policy decision is taken in another direction. The gap has increased because of the additional revenue from the pension levy which is linked, as the Minister indicated, with some recovery in equity values. It is important that those affected by the pension levy be reassured that every cent of the money has been spent on the jobs initiative. There is a discrepancy, as the Minister has acknowledged, but he will have the opportunity in the budget on 15 October to ensure it is properly accounted for and that decisions taken will ensure all of the money is spent in the appropriate way, on job creation.

Michael Noonan (Limerick City, Fine Gael)
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There is only a discrepancy if one puts a ring around the jobs initiative back in May 2011 and assumes that the Government never took any other initiative on job creation subsequently. The jobs initiative was rolled into the wider jobs programme under the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton. Enormous amounts of money have been spent on job creation measures all across the economy. There is no spare money left in a drawer or a press on Merrion Street. The money is used but -----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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There might be some spare money under Tom McFeely's bath.

Michael Noonan (Limerick City, Fine Gael)
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Is that in the Deputy's constituency?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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No, I believe it is in the Minister, Deputy Ruairí Quinn's constituency.