Written answers

Wednesday, 5 July 2023

Photo of Michael LowryMichael Lowry (Tipperary, Independent)
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77. To ask the Minister for Finance regarding the proposed increase in VAT to 13.5 % for the hospitality sector (details supplied) if he will give a commitment to maintain the current 9% VAT rate; and if he will make a statement on the matter. [32903/23]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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As the Deputy will recall, I extended the 9% VAT rate for the tourism and hospitality sectors to 31 August 2023 from the previous end date of 28 February 2023. It will revert to the 13.5% VAT rate on 1 September 2023. The estimated cost of this measure is €300m. This extension strikes a balance between the cost to public finances and the provision of support for these sectors.

It is not intended to extend this 9% reduced rate for a further period. As you may know, officials from my Department compiled a ministerial briefing on a number of measures, including the temporary 9% VAT rate. This briefing included an economic assessment of the measure. This considered the macroeconomic backdrop to any extension of the 9% rate, noting that the economy has rebounded strongly from the pandemic and that economic activity is now above pre-pandemic levels. The briefing also noted that the reduced rate is both regressive and very costly, and that this cost represents a transfer from taxpayers to the sectors which it covers.

The Government accepted the Department’s economic assessment, which found that there was no longer an economic case for the temporary 9% rate, and, therefore, decided upon a reversion to the 13.5% VAT rate. Specifically, the Government decided that the 9% VAT rate for the tourism and hospitality sectors will only apply until 31 August 2023. This decision was made in recognition of the employment provided in the sectors to which the 9% rate applies, as well as to give businesses a transition period to adapt to the changing economic and policy environment. Finally, the Government was cognisant of avoiding adding to upward pressure on prices while inflation remains so elevated.

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry, Independent)
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78. To ask the Minister for Finance if he will provide clarification on a tax matter (details supplied); and if he will make a statement on the matter. [32935/23]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Future tax changes are generally taken in the context of the Budget. The Deputy will be aware that my officials prepare a series of papers containing tax options for the Tax Strategy Group to be considered in the context of the budgetary process, alongside a wide range of submissions from various stakeholders and lobby groups.

As the Deputy will also be aware, it is a longstanding practice that the Minister for Finance does not comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.

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