Retaining 9% VAT ‘costly to the exchequer'

Retaining the 9% rate VAT rate for tourism related services would be costly to the exchequer, according to the finance minister, and would require an increase in taxation or reduction in expenditure elsewhere.

His comments were in response to a Dáil question from Longford Westmeath TD, Nicky McFadden, who received a written answer last week.

The FG TD’s question was:
To ask the Minister for Finance if the VAT rate of 9% for restaurant and catering services, hotel and holiday accommodation, admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions, fairgrounds or amusement park services, the use of sporting facilities, hairdressing services, and printed matter will be maintained; if he will acknowledge the significant role this VAT rate plays in developing the food, tourism and hospitality sector; and if he will make a statement on the matter.

The reply from Minister Michael Noonan was:

The 9% reduced VAT rate for tourism related services was introduced in July 2011 as part of the Government Jobs Initiative. The measure was designed to boost tourism and create additional jobs in that sector. In line with best international practice it was introduced as a temporary measure and is due to expire at end December 2013, at which point it will revert to 13.5%. Retaining the 9% rate would be very costly to the Exchequer and would require an increase in taxation or reduction in expenditure elsewhere.

Any proposal to maintain the 9% VAT rate will be considered in the context of the Budget.