Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

The reduced 9% VAT rate is reviewed annually in the context of the budget, including the economic costs and benefits and the additional revenue that could be raised by bringing the rate back to 13.5%. Revenue's most recent estimate is that reverting to the 13.5% rate would bring in an additional €491 million. A 1% increase would yield €109 million. The estimated cost to the Exchequer of the reduced 9% VAT rate since its introduction in 2011 to the end of 2016 is of the order of €2.2 billion.

As to the economic benefit, employment in the accommodation and food service sector has grown significantly since the introduction of the 9% VAT rate.Employment in these sectors has increased gradually each year since 2011, with an increase of over 35%, or 40,500 jobs, in the period from quarter 2, 2011 to quarter 1, 2017. The rate of increase in employment in the sector was significantly greater than the overall level of employment increase. The number of overseas trips to Ireland by non-residents increased from 6.5 million in 2011 to 9.6 million in 2016, an increase of almost 50%. However, those benefits could be attributed to other factors such as the general and very strong recovery in the economy and better economic performance in the target markets.

The Minister, Deputy Donohoe, decided not to make any change to the 9% VAT rate in budget 2018 as it continues to benefit the tourism sector throughout the country and any change in the rate could impact greatly on the tourism sector outside the capital. The Minister was also conscious of the impact the decline in the value of sterling is having on UK visitor numbers and how any increase in the VAT rate might exacerbate this.

While it is noted that hotel prices in Dublin continue to rise, that is partly a function of supply, which is being addressed. Furthermore, due to EU fiscal neutrality constraints, different VAT rates cannot apply to different geographical areas in the country. VAT policy must be decided in the context of the national interest.

However, we accept the position of the Senators that the 9% VAT rate must be subject to ongoing analysis and it is. In that context, the Minister asked the Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of next year’s budget. The review should be completed by mid-2018 and will better inform any future decision on the reduced rate.

However, it is not certain that the analysis will be finalised within the timeframe suggested in the recommendation and, therefore, the Senators’ recommendation cannot be accepted. However, I assure them that their concerns will be included in the study to be undertaken by the Department.

Senator Conway-Walsh is confused today. On some issues she has called for votes and has opposed votes on other sections she brings forward. She is in favour of rural Ireland being supported. The 9% VAT rate is the biggest and most costly example of how the Government favours rural Ireland but the Senator is against it. Her continued confusion is consistent.