Michael McGrath (Cork South Central, Fianna Fail)
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As the Deputy will be aware, the 9 per cent VAT rate was 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 €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 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.

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

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.

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 addition, the Deputy may have noted the wide range of measures brought forward by my colleague, the Minister for Enterprise, Trade and Employment, announced on 15 May. Details of these measures can be found at the following link:

enterprise.gov.ie/en/news-and-events/department-news/2024/may/202405151.html

Michael McGrath (Cork South Central, Fianna Fail)
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The Government is acutely aware of the difficulties in the housing market and the challenges this presents for many people and families at the moment. The need to address vacancy and to ensure all viable housing stock is being used is a priority for the Government. In Housing for All, the Government has set out a suite of incentives to address vacancy and efficient use of existing stock.

Following on from a commitment made in Housing for All, a Vacant Homes Tax was announced in Budget 2023 and legislated for in Finance Act 2022. The first chargeable period was 1 November 2022 to 31 October 2023 and the tax was payable on 1 January 2024. The rate of the tax was increased, in Budget 2024, from three times to five times the property’s existing base local property tax rate from the next chargeable period ending 31 October 2024.

The Vacant Homes Action Plan, which was launched by my colleague, the Minister for Housing, Local Government and Heritage in January 2023, outlines the significant progress that has been made in addressing vacancy, along with the actions that are being pursued to return as many vacant properties back into use as possible. In April this year, Minister O’Brien published a Progress Report on the Plan, which sets out what has been achieved in 2023 and the further steps that will be taken in 2024.

A range of schemes and supports have been implemented by the Government to address vacancy and bring properties back into use. Initiatives such as the Vacant Property Refurbishment Grant under the Croí Cónaithe Towns Fund, provide financial incentives for people to buy and refurbish vacant properties and sites; while the Repair and Leasing and Buy and Renew Schemes involve the Local Authority leasing or buying the vacant property from the owner to assist in the provision of social housing. The Urban Regeneration Development Fund provides funding for, amongst other things, local authorities to acquire vacant or derelict properties and sites for re-use or sale, and the Compulsory Purchase Orders (CPO) Activation Programme, launched in April 2023, provides for a planned, proactive and systematic approach by local authorities to bring vacant and derelict properties back into use. All local authorities now have a dedicated Vacant Homes Officer, funded by the Department of Housing, Local and Heritage, ensuring a dedicated focus on tackling vacancy.

With regards to dereliction, I understand the Department of Housing, Local Government and Heritage continues to liaise with Local Authorities on the implementation of the Derelict Sites Act 1990 with a view to improving its effectiveness.

The Deputy will be aware that it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions. Any proposals for potential tax measures must be assessed carefully and need to be targeted and clear in their policy intent. My Department continues to monitor the operation of the Vacant Homes Tax, and monitors all aspects of the property market, including vacant and derelict properties, and I will continue to work with my colleagues in Government to ensure that any further interventions in the housing market are appropriately calibrated, represent the best use of scarce public resources and boost the supply of much-needed housing in the State.