Alice-Mary Higgins (Independent) | Oireachtas source

I move recommendation No. 1:

In page 7, between lines 19 and 20, to insert the following:

“Report on evidence for special rates of VAT 6. The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on the evidence base for the extension of the 9 per cent rate of VAT on the supply of certain goods and services in the hospitality and tourism sectors, which shall include analysis of the financial health of the sectors and profits in the sectors over the last three financial quarters, as well as the cost to the Exchequer of extending the 9 per cent rate.”.

Recommendation Nos. 1 and 2 relate to the extension of the special 9% rate of VAT for the hospitality and tourism sector. Recommendation No. 1 seeks a report which gives more information on the evidence base for the extension of the special 9% rate, including analysis of the financial health of the sectors and profits in the sectors over the last three financial quarters, as well as the cost to the Exchequer of extending the 9% rate.

It was absolutely right and proportionate that significant State support was extended to many sectors of the economy during the Covid-19 pandemic in order to mitigate its effects. However, it is important that we apply scrutiny when we are looking at certain very profitable business sectors. I realise that hospitality is a very broad spectrum. There are potentially profitable sectors within hospitality. In particular I am thinking of the hotel industry, which is being subsidised by the State despite significant profits. We need to remember that tax reliefs and tax breaks are public expenditure. In that context, I request that when we are making those decisions, we have the best possible evidence base.

I know these are only recommendations and will not likely impact this Finance Bill, but we need to ensure we apply nuance within a measure. Having a more detailed analysis of the sector might allow us to look at, for example, what aspects of the hospitality industry are extremely profitable and what aspects need support.

I will give the example a particular hotel group which was in the news last week, the Dalata Hotel Group. I simply picked this example because it is in the news. It reported the revenue per available room had increased by 28% on the 2019 levels. That is not simply recovery; that is an increase of 28% compared with 2019 levels for a particular hotel chain. That is the kind of nuance we might need to apply on these measures to ensure we are not subsidising very profitable large international hotel chains. The hotel group has seen its revenues boom and, in that context, where is the evidence to support it being subsidised by a tax relief?

Recommendation No. 2 calls for another report.This is about ensuring we have the best evidence base so that we can make better and more detailed and nuanced financial decisions. Recommendation No. 2 proposes a slightly different report. It relates not to the short term but, rather, to the longer term in the context of the impact of the 9% tax rate on the hospitality and tourism sectors since its introduction, "with particular analysis of the impact on wages of workers in the sector, prices for consumers, and profit margins for providers". I, like others, supported the introduction of the 9% rate, but, at the time, we were talking about engagement with what were then joint labour committees, for example, as well as employment standards, and whether we would see a knock-on effect whereby giving this public subsidy to a sector would not simply benefit the shareholders or owners of companies but would also have a significant benefit for those working in the sector. It was about genuinely supporting part of the fabric of society rather than simply supporting people to be in employment. There was a concern that when the State showed generosity to the hospitality sector, even going back to the period post 2008, opportunism was evident in some cases, such as when the roll-out of no-fixed-hours contracts accelerated in certain parts of the hospitality industry and there were poor practices. We are now seeing the beginning of a positive move in that regard. I acknowledge the positive steps taken recently by the Oireachtas towards ensuring fair play and conditions for workers through the passage of the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022, for example. I commend Senator Gavan on bringing forward the original legislation that prompted the Government to bring forward its own legislation, which is very welcome, in respect of the payment of tips and gratuities to hospitality workers.

There has been progress in that area but it would be useful to have an analysis of how the reduced VAT rate of 9% was passed on. We have heard reports regarding the boom compared with pre-pandemic levels. If we had that analysis, it would be useful. We could consider how to continue to provide supports, such as through a reduced rate of VAT, possibly with conditions attached thereto. It is important that workers, customers and communities benefit, as well as company owners or shareholders. If the sector is to continue to receive targeted support, let us make sure the prosperity is reflected across the board.

I have other facts and figures relating to this area. Through the recommendation, I am looking for the Government to do its own research rather than us having to piece this together. Research carried out by Fáilte Ireland in 2022 found that 42% of hospitality and tourism workers did not return to their pre-pandemic employers, while almost one third of workers chose to leave the sector, largely due to pay and conditions. The health of the sector is impacted by the failure to have good and secure working conditions. The Irish Examiner reported in 2022 that the average rate for a hotel room in Ireland increased by 30% from 2019. The recommendations call for a distributional analysis to provide clear evidence in respect of this measure. It should not be a tool that is bluntly applied. Rather, we must ensure it is being used to best effect and in the best possible way to the widest benefit. In that regard, I hope the Minister of State will consider agreeing to either of the recommendations.