Tourism sector greets lower tax rate

TOURISM STRATEGY:THE INTRODUCTION of a reduced, temporary VAT rate of 9 per cent for businesses involved in tourism forms the central strand of the Government's tourism strategy announced yesterday as part of its jobs initiative.

Minister for Finance Michael Noonan also announced a proposal to abolish the travel tax – possibly by July 1st – though this is subject to an agreement being reached with the airlines to bring in additional passenger numbers.

While the new rate of VAT has been welcomed by the tourism industry, it means that the Government has reversed its pledge outlined in the programme for government to cut the overall 13.5 per cent rate by 1.5 per cent by the end of 2013. Tourism emerged as one of the key focuses of yesterday’s much-awaited jobs initiative.

As well as the moves on VAT and the travel tax, Mr Noonan also announced new visa arrangements with the UK which will allow overseas visitors to the UK to enter Ireland without a separate visa.

This is part of the Government’s plan to capitalise on the hundreds of thousands of tourists expected to visit London for next year’s Olympics.

The reduction of the VAT rate from 13.5 per cent to 9 per cent will apply to hotels and restaurants, as well as service industries such as cinemas, theatres and sporting facilities. Hairdressers are also included, while various printed materials such as brochures and programmes also fall under the new lower rate. The new rate will be effective from July 1st to the end of December 2013, and will cost the exchequer €120 million this year, and €350 million for each further full year.

While the travel tax will be reduced to zero, it will be reassessed at the end of 2012. As a result the relevant legislation will remain in place to allow the tax to be reinstated if necessary.

The measure is expected to cost €15 million in 2011, €90 million in 2012 and €105 million thereafter.

In addition to the suspension of the travel tax, a new scheme of discounts on airport charges is to be introduced.

The Dublin Airport Authority, which operates Dublin, Cork and Shannon airports, said yesterday it was to introduce a scheme to rebate passenger service charges to airlines once the threshold of the previous year’s traffic total has been surpassed at the airport in question.

Details of a new Tourism Marketing Fund were also announced yesterday.

Tourism marketing resources will be made available to Tourism Ireland, the State agency responsible for promoting Ireland as a tourist destination, though it will be required to work in collaboration with the State’s airports and airlines.

Yesterday’s announcement received a strong endorsement from some of the major players in the tourism industry.

The Irish Hotels Federation hailed the announcement as “one of most comprehensive policy initiatives supporting the tourism industry in the last decade”.

Ryanair said the decision to abolish the travel tax a was “ a welcome move by the new Government towards change and reform of Irish tourism”.

The airline said it was working with Minister for Transport Leo Varadkar and his department to see if a competitive cost package could be finalised at Irish airports.

The Restaurant Association of Ireland also welcomed the initiative, in particular the reduction in the VAT rate.

“It is a sensible approach to have a meaningful VAT reduction of a targeted nature, rather than a very small cut spread more thinly,” said Brian Fallon, president of the association.