Written answers

Wednesday, 18 January 2023

Photo of Michael LowryMichael Lowry (Tipperary, Independent)
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307. To ask the Minister for Finance if he has considered extending the 9% tourism VAT rate beyond 28 February 2023 as raised in correspondence by a person (details supplied); and if he will make a statement on the matter. [63277/22]

Photo of Catherine ConnollyCatherine Connolly (Galway West, Independent)
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333. To ask the Minister for Finance his plans to retain the 9% tourism VAT rate beyond February 2023; the analysis that his Department has carried out in this regard; and if he will make a statement on the matter. [1221/23]

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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341. To ask the Minister for Finance if it is permissible to apply separate rates of VAT to hotel accommodation and meals in hotels that is, food and drink for consumption; and if he will make a statement on the matter. [1396/23]

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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376. To ask the Minister for Finance the estimated cost of extending the reduced rate of VAT applicable to the hospitality and tourism sector until end-March 2023 and end-June 2023, respectively. [2172/23]

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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377. To ask the Minister for Finance the estimated cost of extending the reduced rate of VAT applicable to the hospitality and tourism sector for all categories to which it applies except hotel accommodation; and if he will list the categories of goods and services in the hospitality and tourism sector to which the reduced rate currently applies. [2173/23]

Photo of Holly CairnsHolly Cairns (Cork South West, Social Democrats)
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381. To ask the Minister for Finance his views on retaining the 9% tourism VAT rate for all of 2023 to support the hospitality sector. [2290/23]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 307, 333, 341, 376, 377 and 381 together.

I am advised by Revenue that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply.  In general, the Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply either one or two reduced rates of VAT. Ireland currently operates two reduced rates of VAT, 13.5% and 9%, as permitted by the Directive.

Currently, the 9% rate applies on a temporary basis to the hospitality and tourism sectors which includes the supply of hotel accommodation and the supply of meals in hotels (excluding alcohol and soft drinks) until 28 February 2023. From 1 March 2023, these sectors are due to return to the 13.5% rate. The supply of alcohol and soft drinks remains unchanged at the standard rate of VAT (23%). As I have said on a number of occasions, the government will in the coming weeks examine the full suite of taxation and other measures that are due to expire at the end of February.

It would be possible within the terms of the Directive to apply different rates of VAT to the supply of hotel accommodation and the supply of meals in hotels. However, a decision could not be confined to hotels only; in accordance with the principle of fiscal neutrality, the VAT rate applicable to hotel accommodation would apply to all holiday accommodation providers such as guest houses, bed and breakfasts, serviced apartments, web-based guest and holiday accommodation, camp sites, and other holiday accommodation. The VAT rate on hotel meals would also apply to all restaurants, catering businesses and establishments providing hot takeaway food. Furthermore, any policy decision in relation to the rates would need to be considered carefully having regard to a range of factors including the impact on Exchequer revenues.

I am advised by Revenue, 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 through to all-inclusive board and lodging packages. This could lead to the underpayment of VAT because the charge for accommodation and meals would have to be apportioned.  It would undoubtedly provide opportunities for tax planning which would be difficult to police. This would give rise to administrative and operational complexity and increased risk of avoidance and the scope for manipulation of the VAT system.  This could lead to further leakage, and this does need to be factored into any deliberations over the splitting of VAT rates in this sector.

I am further advised by Revenue that traders are not required to identify the VAT yield generated from the supply of specific goods and services on their VAT returns. Therefore, it is not possible to provide a costing for extending the reduced rate of VAT applicable to the hospitality and tourism sector using information provided on tax returns. However, a tentative estimate is provided below based on third-party data sources.

1 – 31 March 2023 1 March – 30 June 2023
Accommodation only €8m €36m
Food and Catering Services only €35m €141m
Other Entertainment €1.3m €5.4m
Total Temporary Rate Reduction in the

Tourism and Hospitality Sector
€44.3m €182.4

The 9% rate currently applies to the following activities within the hospitality and tourism sectors:

- The provision of guest or holiday accommodation in hotels, guesthouses, serviced apartments, B&Bs, aparthotels, web-based guest and holiday accommodation and the letting of a place in a caravan park, camp site, or glamping site.

- The provision of restaurant and catering services by restaurants, canteens, caterers, establishments providing hot takeaway food, etc.

- Admission to cinemas, theatres (with certain exceptions), museums, art galleries, musical performances (with certain exceptions), historic houses, natural heritage facilities, open farms, fairgrounds, and amusement parks.

As the Deputies will be aware, the 9% rate for the tourism and hospitality sectors was reintroduced in Budget 2021 from 1 November 2020 to 31 December 2021 at an estimated cost of €401m. This measure was initially extended in Budget 2022 to 31 August 2022 at a further estimated cost of €251m. It was then extended again for another six months until 28 February 2023 at an additional estimated cost of €250m. This was done to provide further support to the tourism and hospitality sectors over the busy November/December period and into the early New Year.

The Government recognises the impacts of the current energy crisis and understands how it has contributed to a rise in the cost of doing business across the country.

That is why on Budget Day, the new TBESS (Temporary Business Energy Support Scheme) was announced. This scheme is aimed at businesses whose average unit gas or electricity price has risen by over 50% compared with their average unit gas or electricity price in 2021. It will run from September 2022 to the end of February 2023. Qualifying businesses can apply to Revenue for a cash payment, representing an advance credit for energy expenses (ACEC) that are deductible for income and/or corporation tax purposes.

The ACEC will be calculated as 40% of the excess of the 2022 bill over the 2021 bill, capped at €10,000 per business per month, or up to €30,000 if the business operates from multiple locations.  Overall caps at business level will also apply as set out in the EU Temporary Crisis Framework.

The Scheme opened for registration on November 26 and for claims on December 5th. Further information on the scheme can be found at the following link from the Revenue website: www.revenue.ie/en/starting-a-business/tbess/index.aspx.

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