Maria Byrne (Fine Gael)
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I thank the Minister of State for coming here today to discuss this all-important topic. Coming from a small business background and with my family having been in the hospitality trade for many years, I am well aware of the issues faced by people in that trade. I have received local communication from the chair of the Shannon hotels group, which operates in the mid-west, the Irish Hotels Federation , the Restaurants Association of Ireland and small businesses.There is growing concern among small businesses after Covid. The hospitality industry may have been the worst hit during the pandemic. They were closed for quite a while, opened for a short period and then closed again. Many of them are only beginning to come back now. Having spoken to people involved with small businesses, and especially restaurants and hotels, I am aware that some are not opening on Mondays, Tuesdays or Wednesdays. This is how serious the situation is. In addition, they have been hit with increased energy costs. My understanding concerning hotels is that there has been a reduction of up to 57% in tourists from the UK, one of the biggest contributors of visitors to this country. That is a very high number. Equally, the reduction in the numbers of European visitors is between 30% and 40%. Our own people are also not travelling to hotels as much as they used to. While people are beginning to move out and about, many people, especially those who are older, are still being wary. They may be dining or drinking at home. There is great concern among those in the industry.

Approximately 280,000 people were employed in the hospitality industry prior to the onset of Covid. A number of businesses have not reopened, so this number has certainly fallen but a large number of wage packets are still dependent on the sector. While we can pride ourselves on our level of unemployment, which is under 4%, and this is phenomenal, the important point is what will happen if we do not support the hospitality industry and its call for an extension of the 9% VAT rate for another while. We must look at this matter seriously. Have there been discussions between the Departments of Finance and Tourism, Culture, Arts, Gaeltacht, Sport and Media regarding how we are going to support businesses in future? I know we cannot support them forever and a day, but they have been hit with the double whammy of Covid and energy costs. We must do something to support these small businesses and keep the 280,000 people to whom I refer in employment.

Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael)
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I thank the Senator for raising this important issue. She is correct that the hospitality sector has suffered this double whammy from the impact of Covid and the energy crisis. She is also right to identify that the Government has tried to support businesses through both of these periods.

As the Senator is aware, the 9% rate of VAT applies on a temporary basis to the hospitality and tourism sectors, until 20 February every 2023. This 9% rate of VAT was reintroduced, having been in place for a time in the last decade, on 1 November 2020 in recognition that the tourism and hospitality sectors were among those most impacted, as the Senator said, by the public health restrictions put in place throughout the pandemic. Through no fault of their own, bars, hotels and restaurants had to close and reopen on multiple occasions in response to the public health crisis.

It is important to remember that even temporary VAT reductions involve a cost to the Exchequer in the context of tax revenues foregone. The estimated cost of the VAT rate reduction to 9% when it was first introduced from 1 November 2020 to 31 December 2021, a 13-month period, was €401 million. This rate was then extended to 31 August 2022 at a cost of an additional €251 million. A further extension to the rate was announced in budget 2023, bringing the total anticipated cost of this VAT rate reduction to more than €900 million by the end of February. This represents the provision of substantial support by the Government to the hospitality and tourism-related sector of close to €1 billion euro in a relatively short time. The estimated cost for extending the current measure to the end of this year is €460 million. This can be broken down into estimated figures of €358 million for the hospitality sector and €102 million for the accommodation sector.

I note that it is possible to change the VAT rate for either the hospitality or accommodation sectors without reference to the other. It is important to be aware, however, that if only the accommodation sector, for example, reverted to the 13.5% VAT rate this higher rate would have to apply to all accommodation, including bed and breakfast establishments and small hotels. This is because of the EU principle of fiscal neutrality. Member states are required to apply the same VAT rate to the same service and this principle is also the reason it is not possible to provide separate VAT rates based on geography. There are also practical, operational concerns in having different VAT rates applying to hotel accommodation and meals, given how the sector operates, with various packages possible, ranging from bed and breakfast accommodation on its own through to dining and accommodation plus dining.The complexity of it is quite real. As Senator Byrne and all Senators will be aware, this temporary 9% VAT reduction also applies to other sectors of tourist activity, as well as hairdressing. If the VAT reduction was extended in full to the end of the year, it would cost just over €500 million, with €460 million for tourism and hospitality, and €40 million for other sectors. However, in the coming weeks the Government will examine the full suite of taxation and other measures due to expire at the end of February, as the Senator identified. It is important to note that no decision has been made on whether the measures currently in place will be allowed to expire or whether new measures will be introduced. It is therefore premature for me today, at the end of January, to comment on that further except to say that the range of supports available to businesses is under consideration in a deep way. The decisions that must be made relate to the nature of supports, prospects of inflation, development in public finances, effectiveness of current measures and how that can be fully evaluated.

Senator Maria Byrne highlighted the significant cost of energy, which is important to reference. It is a huge pressure for businesses, especially those in the hospitality sector. Of course, Senator Maria Byrne is aware of the temporary business energy support scheme, TBESS, which is aimed at businesses with an average unit gas or electricity price that has gone up by over 50%. I may come back to that in closing remarks; I have more data for the Senator.

Maria Byrne (Fine Gael)
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I am glad to see Senator Conway as the Acting Chairperson. I thank the Minister of State for her comprehensive response. I acknowledge all of the supports that have been given to small businesses and businesses in general. There is a case to be made, and I am glad to hear, that the Government is monitoring it and will be looking at it. That is a positive step. I encourage the parties involved when sitting around the table in the Department to think of the 280,000 people and their families, who are reliant on their salaries. We need to be cognisant of the double whammy of energy and the VAT rate. Any support that can be given, especially to small businesses, would be appreciated

Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael)
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I thank the Senator. I know and appreciate the importance of the tourism and hospitality sectors as significant employers. Both the Senator and I come from that background. It is right across the country. I emphasise the TBESS. In the Senator's area in County Limerick, there have been 736 applications to date, with 719 approved so far and €815,000 distributed. I see Senator Dolan from County Roscommon in the Chamber; some 238 businesses there have applied, with 230 approved. I can provide data to any other Senators on their areas of interest.

This scheme will also be considered to make sure it is meeting needs. Take-up could be higher and I am aware people are making applications now. The Government is extending the period for applications. If I were going back to any part of Ireland including my constituency, I would emphasise the simplicity of the process to make applications for that scheme through the Revenue system. There is substantial support available through that scheme. It is also under consideration. What Government needs to reflect is the balance of support, where it is most needed and where it can be most effectively delivered at this time, recognising that Covid-19 is different now than it has been previously. It is about recognising the most appropriate targeted support of the best benefit while being mindful of the pressure on public finances posed by the considerable sums involved.

Martin Conway (Fine Gael)
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As the Ministers of State must attend a vote in the Dáil, we will suspend the House.