Violet-Anne Wynne (Clare, Independent)
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97. To ask the Minister for Finance if he will comment on the decision to remove the 9% VAT rate for tourism and hospitality; and if he will make a statement on the matter. [53599/23]

Alan Dillon (Mayo, Fine Gael)
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106. To ask the Minister for Finance if he will consider reducing the 13.5% VAT rate for restaurants and hospitality; and if he will make a statement on the matter. [4493/24]

Michael McGrath (Cork South Central, Fianna Fail)
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I propose to take Questions Nos. 97 and 106 together.

At the outset, the Deputy should note that the VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate (23% in Ireland), unless they fall within categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT. Tourism and hospitality fall within Annex III thus explaining why they have been subject to these lower rates for a considerable period of time. The lower VAT rates that apply in this country are 13.5% and 9%.

As the Deputy will be aware the 9% VAT rate applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5% rate. The 9% rate was introduced on 1 November 2020 in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic.

The economic rationale for a VAT rate reduction at that time as it was in 2011 when it was also reduced to 9% was to lower consumer prices, encouraging higher demand, more output and an increase in employment.

However, it is important to remember that VAT reductions, even temporary VAT reductions, do have a cost to the Exchequer. The estimated cost of the 9% VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a very substantial support by the Government to the hospitality and tourism related sectors.

It is possible to have separate VAT treatment for tourism and hospitality under the EU VAT Directive. However, Revenue have indicated that there are 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 accommodation through to all-inclusive board and lodging packages.

The Government obviously wants to maintain a healthy and profitable environment for the sector going forward. However, in making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.

I have no plans to reduce the VAT rate for the tourism and hospitality sector to 9%.

Michael McGrath (Cork South Central, Fianna Fail)
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As has been stated on numerous occasions, this Government is committed to the reform of the TV licence. A long-term funding is model is needed, to deliver effective reform and ensure that a secure, sustainable funding model is put in place for our public service media.

The Future of Media Commission was established to, amongst other things, consider sustainable public funding model and noted three main funding models, a TV Licence, a universal charge, or direct Exchequer funding. While the Commission recommended a direct Exchequer funding model, Government established a Technical Working Group in order to examine other potential options for the reform and enhancement of the existing system.

I understand that the Working Group submitted their report to my colleague, the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media last year, and while initial discussions on the matter had commenced, the events over the summer regarding RTÉ meant that a final decision had to be paused. As Minister Martin has stated, while discussions on the matter are continuing, a final decision on this matter will not be taken until the independent reviews into RTÉ, carried out by the Expert Advisory Committees that Government appointed, are complete and have received consideration. I am advised that these reports are expected at the end of February.

It would not be appropriate for me to pre-empt consideration of the matter by Government.

Regarding a tax on digital and social media companies, the Deputy will be aware that the European Commission previously made a legislative proposal for a digital services tax based on a €750 million global revenue threshold and an EU-wide €50 million revenue from in-scope services threshold. This proposal, together with other digital taxes proposed or implemented around the globe, were received negatively. Subsequently, negotiations by the OECD and the G20 on reforms to the international system of taxation led to the OECD Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy in October 2021.

It must be noted that Pillar One of the OECD Agreement provides for the standstill and removal of unilateral measures such as digital services taxes. I firmly believe that Pillar One of the agreement will be successfully implemented, as was the case with Pillar Two, in a manner faithful to the agreement.

It is important that any proposal for additional taxation avoids raising trade tensions and does not undermine the ongoing development and implementation of the OECD agreement. Implementation of the agreement will bring much needed stability to the international tax framework after the turbulence and uncertainty of the last couple of years. Throughout this process, I have remained convinced that a global approach under Pillar One of the OECD agreement is preferable to unilateral measures like a Digital Services Tax.