Belfast Telegraph

Blow for Irish hospitality sector as VAT held in Budget

Minister for Finance Paschal Donohoe (Niall Carson/PA)
Minister for Finance Paschal Donohoe (Niall Carson/PA)
Margaret Canning

By Margaret Canning

Hospitality businesses in the Republic have hit out after Irish finance minister Paschal Donohoe failed to lower the VAT rate in the "Budget without precedent" ahead of a likely no-deal Brexit.

Businesses such as hotels in the Republic enjoyed a special low rate of VAT of 9% during the downturn before it was raised to 13.5%, and the industry had lobbied for the rate to be lowered again.

But the rate remains at 13.5% though the Budget did include a total package of €1.2bn to help absorb the impact of a no-deal on the Irish economy.

However, hospitality firms in Northern Ireland have said the 13.5% rate still presents a uneven playing field as they continue to face VAT at the main UK rate of 20%.

Colin Neill, chief executive of Hospitality Ulster, said: "Once again, we remain at a significant competitive disadvantage, with the rate of Irish hospitality VAT staying at 13.5% in comparison to the 20% rate we have to endure in Northern Ireland.

"The UK's 20% tourism VAT rate is one of the highest in Europe, and Northern Ireland hospitality and tourism businesses are particularly vulnerable as the Republic of Ireland is its second largest market and nearest competitor.

"The disadvantage will continue to be acutely felt right across Northern Ireland, with the local VAT rate acting as a brake on the growth of the hospitality and tourism sector".

Meanwhile, the Irish Exporters Association welcomed the Budget, calling it "prudent", but said that a €110m fund for vulnerable yet viable firms in a no-deal Brexit would not be enough.

The €110m is part of an overall €1.5bn pot, including a €650m package for agri-food and tourism. There will also be €200m made available to government departments to increase staffing levels and upgrade airports and ports.

Simon McKeever, chief executive of the Irish Exporters Association, said: "While we note the government's budgetary constraints, we are concerned that the announcement of €110m for vulnerable but viable companies affected by a no-deal Brexit will not be enough.

"We are calling on the minister for finance and the government to clarify how the committed spending will be distributed between affected companies."

The finance minister also announced an increase in the R&D tax credit for micro and small businesses from 25% to 30%.

The price of a packet of 20 cigarettes in the Republic also went up by 50c from midnight, which Mr Donohoe said brought the cost of the most popular price category to €13.50.

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