Brexit and VAT hike could prove to be a tipping point

THE drop in sterling is a particular worry for local tourism as there’s already a noticeable decrease in the numbers of UK visitors here. 

That, combined with a threatened increase in the hospitality industry’s VAT, could be a tipping point that risks a significant loss of market share to other destinations. 

That’s the fear of Neil Grant, manager of the Celtic Ross in Rosscarbery, and chair of the Cork branch of the Irish Hotels Federation. A reduced VAT rate of 9% for the hospitality industry was introduced by the government in 2011. However, the Department of Finance is now considering a return to a level of 13.5% in next month’s Budget. 

 ‘The measure has been of enormous benefit to the local economy in Cork by supporting growth and making our tourism offering more competitive internationally,’ said Neil. ‘Bringing the rate in line with the VAT rates of other competing European countries was the correct decision. It is allowing tourism businesses in Cork to restore investment in product development and service levels whilst also aiding increased capacity – all critical for the long-term success of the industry. 

‘And, as the biggest investor in Irish tourism, the hotels sector is playing a critical role. Hotels and guesthouses not only provide local employment opportunities, we buy local services, source locally produced food and provide a vital infrastructure in support of local business and communities.’

Neil said our focus should therefore be on creating the right environment to sustain further tourism growth. ‘Appropriate taxation policy that supports competitiveness is a key element of this,’ he added. 

‘Tourism should be treated as an indigenous export industry given that 78% of tourism revenue is generated by visitors coming into the country and spending money in our economy. The 9% VAT is a key part of the overall competitiveness of our tourism product. 

‘It has been a tremendous catalyst for growing tourism in Cork. In light of the serious challenges facing the industry, any increase in VAT would be short-sighted in the extreme.’