Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank Senators for their contributions on this important issue. I acknowledge the importance of the tourism and hospitality sectors as significant employers throughout the country. There is a great range of opportunities in the sector with part-time and full-time roles. The tourism and hospitality sectors provide many people with their first jobs. For other people the sectors provide flexible working patterns allowing for other commitments, be they childcare or third level study. For a large number of people these sectors provide well-paid full-time employment. This is a fair representation of the employees in the sector. It is varied, with some working weekends, some working part-time, some working evenings, some working full-time and some working a number of days at various times of the year.

The issue of recruitment to the sector has been mentioned as has the fact the country is at full employment, with more than 2.5 million people in employment. Hiring and retaining staff is a key important issue. It is one that is very much live in the sector. Everyone I meet raises it as a particular issue. The businesses in these sectors are part of the fabric of Irish society where we welcome guests to the country and where we take our families. There are many milestones celebrated in function areas, from first communions to birthdays to graduations to receptions after many family bereavements and funerals. The personal nature of the business and the way it impacts on all of our lives means the Government is very aware of the challenges facing the tourism and hospitality sectors at present. Unfortunately, these challenges are being faced by all in our society and economy. This means there are limits to what the Government can do to assist the tourism and hospitality sector as a specific sector.

The Minister, Deputy Donohoe, outlined the costs associated with the measures when he opened the debate earlier this afternoon. It is important to repeat one or two key points. The cost to the Exchequer, which is the taxpayers and people of Ireland, of the reduced to 9% VAT rate for tourism and hospitality from 1 November 2020 to the scheduled end point on 28 February 2023 is just over €900 million. If we were to seek to extend the measures to the end of 2023 it would be at a further cost of €427 million. This is a significant amount of tax for the Government to choose not to collect. When the Minister, Deputy Donohoe, introduced a reduction in the VAT rate in November 2020 it was at a time when public health measures routinely closed hotels and restaurants or significantly limited their capacity. Many businesses made a choice not to pass on the savings. They decided to retain them for the benefit of the businesses at a time they needed substantial additional support.

In 2018 the Department of Finance evaluated the impact of the 9% VAT rate. It found expenditure on tourism and hospitality was more sensitive to income growth and the economic cycle than price changes. This is a very important factor. If the economy is good and there is good employment and people have reasonable incomes they will spend money in the hospitality sector and on accommodation when going to events or going away for a night or a weekend. The level of activity is more determined by how much money people feel they have in their pockets rather than the price for a particular menu on a particular night. This is what research has shown. From this perspective I would not be surprised if the changes introduced on income tax end up having a more direct and positive impact on the hospitality and tourism sectors in Ireland than the extension of the VAT rate changes.

The Minister, Deputy Donohoe, spoke about the wide range of supports available in the pandemic, including more than €10 billion through the temporary wage subsidy scheme, the employment wage subsidy scheme and other supports the tourism and hospitality sectors availed of, including the Covid restriction support scheme. This was a targeted support for businesses significantly impacted by the restrictions. The support was available to companies where business premises were located in a region subject to Covid restrictions. More than 25,000 unique premises claimed payments under the scheme, amounting to €724 million.

Practical supports were also put in place through measures such as the tax debt warehousing scheme. This allows tax liability to be warehoused for all taxpayers eligible for Covid-19 supports. More than €3 billion of taxes was warehoused in the pandemic in respect of more than 100,000 businesses. In this regard people may be aware that on Monday this week the Revenue Commissioners announced an important and significant extension of the debt warehousing scheme in light of the current challenges and economic situation facing businesses. Under the scheme businesses with warehoused debt were due to enter an arrangement with Revenue to deal with the debt by the end of the year, or by 1 May for those subject to the extended deadline. Given the current economic uncertainty, Revenue has extended the timeline to 1 May 2024. This means businesses will not face the challenge of clearing the debt in the warehousing or entering a phased payment arrangement to clear the debt until 1 May 2024. Importantly, businesses will still be able to avail of the reduced 3% interest rate from 1 January 2023 as opposed to the general interest rate of 10% when they come to pay the debt. These are potential cash flow benefits for many of the businesses warehousing their debt. The fact this must not be dealt with now or that an arrangement must not be entered in the immediate future is a serious cash flow benefit for businesses throughout the country.

As Senators are aware, what is driving costs for sectors in the economy is the energy crisis. The wholesale price of natural gas is now approximately eight times its average level in the year preceding the war in Ukraine. Prices in global energy markets are driving costs for people and businesses. The Ministers, Deputies Donohoe and McGrath, announced an €11 billion budget day package in the Dáil a few weeks ago. The budget was all about the cost of living and putting money back into people's pockets, supporting families and older people and helping businesses facing the challenges of rising costs. Senators should note the Government will continue to monitor and respond to the energy crisis. It is important for all of us to remember this is something affecting businesses in every sector and there are limits to what the Government can do in respect of any of these issues.

A number of points have been raised during the debate. One is whether it is possible to decouple tourism and accommodation from the hospitality sector for VAT purposes. The answer is that it is possible and it can be done. This is not a commitment that it is being done. It can be done legally but it is important to note the following point.The hospitality sector, which has high levels of employment in the sector, accounts for 70% of the total cost of such a measure, as opposed to the tourism accommodation side. It would have-----