Michael McGrath (Cork South Central, Fianna Fail)
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I am advised by Revenue that net tax receipts by sector to year 2022 are available on the Revenue website www.revenue.ie/en/corporate/documents/statistics/receipts/net-receipts-by-sector.pdf. These tax receipts are presented according to the taxpayers’ primary economic activity classification (NACE). It should be noted that the sectoral breakdown cannot be taken as the exact tax amount associated with this economic activity as a number of traders (including VAT Group remitters) will operate across multiple economic sectors.

Data for year 2023 are expected to be available at the same link by the end of May 2024, following the completion of the annual audit of Revenue accounts by the Comptroller and Auditor General and the presentation of the accounts to the Oireachtas.

Provisional figures for 2023 are provided in the table below.

Restaurants and Food Services (NACE code 56)	VAT Internal	PAYE, Income Tax and USC	Self Employed Income Tax	Corporation Tax	Capital Gains Tax	Overall
2023	€318m	€158m	€25m	€38m	€2m	€541m

Source: Revenue Net Receipts

VAT traders are not required to identify the VAT yield generated from the supply of specific goods and services on their VAT returns. As noted above, VAT traders may operate across multiple economic sectors and the NACE code may not fully identify VAT associated with the restaurant sector. A tentative estimate, based on third party data, of the VAT generated in 2023 and the expected yield in 2024 from expenditure on meals out (for example restaurants, takeaways and canteens) are approximately €1,162m and €1,633m respectively. The 2024 figure includes an additional €544m from the reintroduction of the 13.5% VAT rate and incorporates inflationary growth within this sector.

For the Accommodation and Food Services sector as a whole, the estimated VAT yield is estimated at €1,510m and €2,112m for 2023 and 2024 respectively, with the 2024 estimate including an additional €728m from the reintroduction of the 13.5% VAT rate.

As the Deputy will be aware, the 9 per cent VAT rate applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5 per cent rate. The 9 per cent 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 per cent was to lower consumer prices, encouraging higher demand, more output and an increase in employment.

Despite facing numerous successive headwinds over recent years, the domestic economy has proven to be remarkably resilient. Looking ahead, as inflation eases, the real disposable income of households should recover and support consumer spending. As a result, households are on a stronger financial footing and this will support demand for contact-intensive services including the tourism and hospitality sectors.

In relation to employment, between the end of 2020 when the 9 per cent rate was re-introduced, and the third quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record high of 2.66 million, an increase of 17 per cent. The Q3 2023 Labour Force Survey indicated that employment in the accommodation and food service sector stood at 181,000.

It is noteworthy that 14 EU countries have a VAT rate of 12 per cent or higher on food services. Our nearest neighbour, Great Britain and Northern Ireland has a VAT rate of 20 per cent on food services.

It is important to remember that VAT reductions, even temporary VAT reductions, have a cost to the Exchequer. The estimated cost of the 9 per cent 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.

The cost of a further temporary VAT reduction to 9 per cent for a full year is estimated to be €728 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €544 million.

The Government wants to maintain a healthy and profitable environment for these sectors 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.

The Deputy will also be aware that, on 5 February, I announced changes to the tax debt warehousing scheme including a reduction in the interest rate on warehoused debt to 0 per cent which, amongst other sectors, will assist businesses in the tourism and hospitality sectors.

The Government has provided significant support to business throughout the period of increasing costs and Budget 2024 contained a number of measures which will support businesses facing increased costs, including the Increased Cost of Business (ICOB) grant, which aims to provide financial support to small and medium sized businesses who operate from a rateable premises, at a cost of €257 million. The grant will be at a rate of half an enterprise’s commercial rates bill, for 2023, for firms paying up to €10,000 in rates. A flat €5,000 grant will be available to firms who pay between €10,000 and €30,000 in rates. The online application system for the grant is now open with applications accepted until 1 May 2024.

Broader supports for SMEs which were announced in Budget 2024 include the extension of the 9% VAT rate on gas and electricity from end-October 2023 to end-October 2024.

In light of these points I have no plans to reduce the VAT rate for the tourism and hospitality sector.