Carol Nolan (Laois-Offaly, Independent)
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4. To ask the Minister for Culture, Heritage and the Gaeltacht if she will address concerns expressed by the Irish Tourism Industry Confederation that the recent increase in the VAT rate has eroded competitiveness; if she agrees that, at a minimum, the 9% VAT rate should be kept under review for the food services sector; and if she will make a statement on the matter. [45981/23]

Carol Nolan (Laois-Offaly, Independent)
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Will the Minister address the concerns expressed by the Irish Tourism Industry Confederation that the recent increase in the VAT rate has eroded competitiveness? Will she agree that, at a minimum, the VAT rate pertaining to the food sector should be kept under review? Will she make a statement on the matter?

Catherine Martin (Dublin Rathdown, Green Party)
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While elements of the hospitality sector are also important parts of the wider tourism ecosystem, as Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media I do not have responsibility for the general hospitality sector or the food services sector. However, the Minister for Enterprise, Trade and Employment and I co-chair the hospitality and tourism forum, which brings together regularly these two important and interrelated sectors.

The Government has strongly supported the tourism and hospitality sectors through a range of fiscal supports, particularly during the Covid pandemic and more recently in dealing with the challenges facing the sector. Those supports have included the retention of the lower VAT rate from November 2021 until 1 September of this year.

In 2021 supports from my Department included €55 million for a dedicated tourism business continuity fund, €17 million in capital investment for an outdoor dining scheme and €5 million for an urban animation scheme. In budget 2022, the Government allocated €67.6 million in additional funding for tourism, of which a further €50 million was for tourism business continuity supports. These were in addition to significant supports provided through the employment wage subsidy scheme, EWSS, and the Covid restrictions support scheme.

The Minister for Finance has responsibility for VAT rates and other taxation measures. In assessing any proposals on such matters, the balance between the costs of measures against their impact and the overall budgetary framework is a critical consideration.

The total estimated cost of the reduction of VAT to the Exchequer over that period is €1.2 billion. Notwithstanding this, the Government recognises both the challenging business environment within which key elements of the tourism and hospitality sectors are operating this year and the role that such businesses play in driving employment and economic activity across Ireland.

As the Deputy will be aware, I am concerned about the possible impact on other tourism businesses impacted by the reduction in tourist footfall due to tourism accommodation stock displacement. In this context, my primary focus is on supporting those businesses that most merit further assistance. In the period before the budget, I raised with the Minster for Finance the question of applying separate rates of VAT to food and accommodation as a transitional measure on the road to the restoration of the full rate. The Minister reiterated his view that the conditions justifying further adjustments to the VAT rate no longer existed. He also outlined that the Revenue Commissioners have advised that there would be significant practical operational concerns in having different VAT rates applying to hotel accommodation and meals, given how the sector operates, with various packages ranging from bed and breakfast accommodation through to all-inclusive board and lodging packages. I am conscious of the points raised in this regard by the Irish Tourism Industry Confederation, ITIC, recently. I intend to meet ITIC next week and I look forward to that engagement.

Carol Nolan (Laois-Offaly, Independent)
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As the Minister will be aware, the Irish Hotels Federation has pointed out that Ireland has the third-highest VAT rate in the EU. I know the Minister said she does not have direct responsibility for VAT but with her responsibility for tourism, it is important that the view of the sector is articulated and that the sector is supported. More than 285,000 jobs are directly related to tourism in 46,000 tourism businesses. This is a profoundly serious issue as it is a huge sector. In my constituency, in County Offaly in particular, I can see that it is having a profound effect already and businesses need more support. My colleague, Independent local election candidate, Jonathan O'Meara, who owns and operates an outdoor adventure company, Mid Ireland Adventure, as well as Slieve Bloom Mountain Bike Centre, based in Banagher, has also said, as the Minister noted, that the lack of budget hotel accommodation in Offaly is having a knock-on effect. This needs to be resolved. We know there are Government contracts and these mean that tourism is not happening the way it should. People are not coming into the county; they are leaving it and crisscrossing between Dublin and Galway but they are not spending time in Offaly and I am sure the case is the same around the country. This needs to be addressed.

Catherine Martin (Dublin Rathdown, Green Party)
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I agree on the knock-on impact on downstream tourism businesses. That is being felt and that is why, as part of the budget settlement, I have secured up to €10 million for tourism in 2024 for a comprehensive programme of supports targeted at downstream tourism businesses experiencing particular trading challenges linked to the reduction in footfall in respect of activities and attractions in regions most impacted by tourism bed stock displacement. This programme of supports includes investment in sustainable tourism development and promotion, industry digitisation, promotion of domestic tourism and festivals and recruitment and retention initiatives. I have also asked Fáilte Ireland to engage with the impacted businesses to consider the scope for a specific tourism support scheme that could help the most affected tourism activities and attractions. I have asked it to report back to me on options and recommendations within four weeks. I wrote that letter last week on the day of the budget. A strong evidence base will be critical in this regard and I have asked the tourism sector, particularly activities and attractions, to please engage with Fáilte Ireland so we can gather that real data in order that we can provide direct and verifiable evidence of how tourism accommodation stock displacement has negatively impacted their businesses and then look to devise a scheme.

Carol Nolan (Laois-Offaly, Independent)
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I thank the Minister for her response and I acknowledge the support package. However, this is a short-term measure. We need long-term vision and supports and a way of dealing with the fact that so many contracts that have been signed by Government have made it impossible for hotels. The support package will help them to keep their doors open and that is about it in the short term but what about the long term? As the Minister mentioned, we need a specific tourism support scheme but that has to be a long-term initiative. I understand that last month ITIC launched its strategic vision for the sector to 2030, which suggests that tourism revenue has the potential to increase by 50% over the coming years. That is only if Government takes a grip of the reins and promotes pro-tourism and pro-enterprise policies and has a vision. The Government needs to have a vision because it is one thing giving these businesses money and support packages to keep their doors open in the short term but it needs to think long term. For every €1 spent by tourists, 23 cent is generated in VAT. Tourism is vital to our national and local economy and we need to see Government come in with more pro-business and pro-tourism vision and with more of those policies.

Catherine Martin (Dublin Rathdown, Green Party)
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This Government has hugely stepped up for tourism since 2020 and the start of the Covid crisis, with funding of €216 million to the sector, which is an increase of 33% on the 2020 level. In the intervening period, massive additional support was pumped into the sector, with my Department's funding for tourism reaching a peak of €286 million in 2022. Today, thankfully much of the tourism sector has recovered to a significant extent. The Covid crisis is over, although a range of challenges remain. Tourism demand, airline capacity and intention to travel to and within Ireland are at strong levels. In the context of this four-year arc of collapse and recovery, it is entirely reasonable that some of the one-off supports we put in place in recent years will taper off. What I have managed to do in this budget is maintain most of the additional funding I had last year. I am aware of the wider costs of doing business for the sector and the Government has taken a range of steps to help address this. As Minister with responsibility for tourism, I have fought hard to help bring this sector through the worst of the Covid crisis and the strength of the sector today is a testament to the collaborative approach we have taken with the tourism agencies, the sector itself and key stakeholders. As I said, I will engage with and meet ITIC early next week.