The hotel industry has called for a temporary cut in VAT rates to stimulate the economy and to address the “competitive imbalance” it says now exists between Ireland and Britain.
In a submission to the Government in advance of the April 7th budget, the Irish Hotels Federation called for a six-month reduction in the standard rate of VAT from 21.5 per cent to 16.5 per cent and a cut in the lower rate from 13.5 per cent to 10 per cent.
It said the measure would also assist offset the effect of imminent reductions in the VAT rates for restaurants across many European countries following the recent EU decision to allow substantial reductions in VAT charged by restaurants.
The hotels body called on the Government to make some 70 per cent of its proposed adjustments through substantial reductions in public expenditure, including through cuts in the public sector pay bill and in social welfare payments.
It said the Government should “formally abandon” the current national wage agreement and “advise the Labour Court to take into account the national economic crisis in its deliberations”.
Cuts should also be made to the national minimum wage, it said.
It called for a 5 per cent cut in national and local public sector charges and commercial rates and said the overall tax burden should be kept “as low as possible”.
“The IHF acknowledges that this will be difficult to achieve and will require very strong public financial management over the five years on a scale not hitherto appreciated,” the organisation’s submission said.
IHF president Matthew Ryan said: “It is absolutely essential that next month’s budget succeeds in presenting a realistic multi annual budgetary profile with detailed outlines of the tax and expenditure measures for the full period.
“The success of Ireland’s hospitality industry depends to a large extent on the stability of the Irish economy.
“While restoring the public finances will not directly increase economic activity, it is a necessary first step in restoring business and consumer confidence and assisting the process of economic development and renewal. Setting the public finances on a sound path will allow businesses throughout the economy focus their energies on economic renewal.”
In total, the IHF called for a 28 per cent reduction in gross expenditure by the end of 2013, including through reductions in public sector salaries and social welfare payments.
It said all public sector salary increases, including the medical consultant contract and increases for TDs and senior civil servants, should also be abandoned.
Non-essential projects under the National Development Plan should also be put on hold, it said.
Some 1,000 hotels and guesthouses employing more than 60,000 people are represented by the IHF.