Noonan says no decision yet over VAT rate for hospitality sector

Minister for Finance Michael Noonan has insisted that no decision has been taken to end a VAT relief for the hospitality sector which he said had generated some 15,000 jobs.

“It’s a matter for decision in the budget and there is no Government decision yet and very little Government discussion yet,” Mr Noonan said yesterday. “We’re examining what the options are.”

The Minister said there had been “strong” lobbying over the retention of the rate, which has been reduced to 9 per cent from 13.5 per cent since 2011, and that it had been a very successful initiative which had generated some 15,000 jobs.

Mr Noonan last week hinted that the relief would cease unless an alternative source for the tax revenue lost as a result, said to be some €350 million, could be found.

9,000 jobs
The Restaurant Association of Ireland says some 9,000 jobs have been created in the sector since the 9 per cent VAT rate started in July 2011. Retail Excellence Ireland has argued that when the VAT receipts reduction is deducted from the employment gains the net impact is an exchequer benefit of €173 million annually. It has warned that restoring the 13.5 per cent rate could have implications for thousands of jobs.

On corporation tax, Mr Noonan said he did not expect the State would have to raise its 12.5 per cent rate “during my life expectancy, however long or short that might be”.

"We are not under any pressure to change it either because under the European treaties, the setting of a tax rate is a matter for the sovereign governments, it's not a matter for Europe and we have set the corporation tax rate and it is going to stay there," he told reporters at a Dell jobs announcement in Dublin yesterday.

Mr Noonan said his focus for the budget would be to create “an economic background that is jobs friendly”.