Mayo hoteliers welcome extension of 9% tourism VAT rate and energy supports

Mayo hoteliers have welcomed the government’s decision to extend the 9% tourism VAT rate and reform the energy support scheme for businesses.

Darren Madden, chair of the Mayo branch of the Irish Hotels Federation (IHF), said that the measures announced now give tourism businesses greater certainty as they grapple with the impact of the cost-of-living crisis on Irish consumers and key overseas markets.

“Today’s announcement is a clear recognition by the government of the challenges facing tourism and hospitality, Ireland’s largest indigenous employer which currently supports over 250,000 livelihoods. It will go a long way in helping to sustain the recovery of our industry at a time when businesses and consumers are facing significant economic and financial headwinds.

“A vibrant tourism industry is one of the most effective ways to spread employment opportunities and prosperity throughout the entire country. That is why the decision to extend the 9% VAT rate is so critical for communities and regions that rely on tourism as a major employer and driver of economic activity.”

Mr. Madden noted that most European countries apply a reduced rate VAT rate to tourism accommodation.

He explained: “When you look at the tourism VAT rates among our key European competitors, it is clear that the 9% rate is the right rate for Ireland. At 9%, Ireland is in line with our European neighbours, in particular those countries where tourism plays a key role in their economy.”

Mr. Madden also welcomed changes to the TBESS energy support scheme designed to provide greater assistance to businesses experiencing exceptional increases in energy costs.

CHALLENGES REMAIN

The extension of the hospitality 9% VAT rate for a further six months and changes to Temporary Business Energy Support Scheme (TBESS), making it easier for more publicans to qualify, have also been welcomed by the Vintners Federation of Ireland (VFI).

The VFI said the announcements will help ease the financial burden on its members over the coming months but that once supports are removed, pubs will face an uncertain future.

Paul Clancy, VFI chief executive, stated: “The government’s decision to maintain the hospitality VAT rate at 9% for a further six months is welcome news at a time when the cost of doing business is having a severe impact on our members serving food. The Minister for Finance has quite rightly recognised that any increase in the VAT rate would increase inflation at the worst possible time.

“The coming six months are vital for the pub trade, with the St. Patrick’s weekend seen as the traditional start of the tourist season and on into summer, so maintaining the 9% VAT rate will assist those businesses serving food and bring an element of confidence.

“However, we are in a situation where the problems an increase in VAT will bring, namely pub closures and job losses, will re-emerge later this year once the extension lapses. Our message to government will remain the same – the hospitality sector needs VAT at 9% until 2026 when tourist numbers are expected to return to pre-pandemic levels.”

The VFI chief executive said the expansion of the Temporary Business Energy Support Scheme is a welcome development as well.

“Since TBESS was announced during Budget 2023, the VFI has lobbied on behalf of the significant number of our members who were omitted from the scheme because they are not connected to the natural gas network, so the announcement that pubs using LPG and kerosene can now apply is a big boost for businesses facing massive energy costs.

“We recognise that the government is offering considerable support to our sector at this time but the external pressures on our members is unprecedented and will continue for the foreseeable future.”

The Small Firms Association (SFA) director, David Broderick, also welcomed today's announcement, stating: “The extended supports announced by government today is welcomed, particularly the extension of the 9% VAT rate to the end of August which will benefit small firms in the experience economy, which includes hospitality, cinemas and hairdressing.

“We also warmly welcome the new level for entry into the Temporary Business Energy Support Scheme, which will allow more businesses apply and will help with cashflow at a time where our smallest employers continue to face cost challenges in every area of business be it labour, transport, insurance, banking, and utility costs.

“While it is disappointing to see applications to the TBESS have been lower than expected, hopefully this new entry level and a more simplified application process will safeguard small firms most affected by rising energy costs.”