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Saturday, May 28, 2022

9 pc VAT rate reduction for tourism and hospitality to be extended early next year

9 pc VAT rate reduction for tourism and hospitality to be extended early next year

The lower rate of 9pc VAT for the hospitality and tourism sector is set to be extended until early next year, the Irish Independent understands.

The measure will be signed by cabinet ministers this morning in a memorandum from Finance Minister Paschal Donohoe.

The decision to cut the rate is understood to cost the taxpayer more than €200m.

The lower rate of 9pc was due to expire at the end of August.

However, a senior source said that the government is keen to help the troubled sector after the end of the Emergency Wage Subsidy Scheme (EWSS).

The 13.5pc VAT rate that normally applies to the sector was cut to 9pc after the 2020 Budget, as part of financial packages designed to help businesses survive the pandemic.

The rate was due to return to 13.5 per cent in September, raising fears in the sector that the hike would jeopardize the viability of the business.

While it is not clear how long the lower rate will be in effect, it is understood that it will return to the higher rate of 13.5 pc at some stage in the new year.

Minister Donoho is set to make an announcement after today’s cabinet meeting, which is set to be welcomed by the industry, which has been hardest hit by the pandemic.

Culture Minister Katherine Martin has previously said she is in favor of raising the rate to 9 percent for the sector.

She said she would “pressure” cabinet colleagues to stay at the 9pc rate.

However, he also acknowledged that it would ultimately be a decision for Minister Donohue.

Irish independent Reported yesterday that Minister Donohoe has previously said that raising the lower VAT rate to December next year would cost taxpayers €500m.

“I have been informed by Revenue that the estimated cost of extending the 9pc VAT rate for hospitality and tourism-related services from 1 September 2022 to 31 December 2023 will be in the region of €500m,” Mr Donohoe said in a response. Said a parliamentary question.

“This estimate is based on the most recent third-party consumption data available and assumes no behavioral change by consumers.”

A senior government source said extending the lower VAT rate at the start of the new year would cost the taxpayer “more than €200 million”.

Adrian Cummins, chief executive of the Restaurant Association of Ireland (RAI), had previously called for the 9pc rate to be maintained, warning that the survival of its members would be at risk otherwise.

Accountancy and consultancy firms including PwC have predicted a recent wave of bankruptcy as pandemic support has been withdrawn or stopped.

Last night, Mr Cummins welcomed the government’s move, saying it would help restaurants and pubs ahead of “the tough tourist season ahead”.

“Our association will advocate for the continuation of the 9pc VAT rate until at least the end of 2023,” he said.

During the financial crisis in 2011 the 13.5pc VAT rate for restaurants, tourism and some other sectors was reduced to 9pc to help businesses survive and also create jobs.

World Nation News Deskhttps://www.worldnationnews.com
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