Kenny tells tourism firms they must pass on VAT cut
Published 01/07/2011 | 05:00
HOSPITALITY and tourism firms have been warned to drop their prices as lower VAT rates come into force today.
Taoiseach Enda Kenny said the Government would get tough with companies that benefitted from the reduction but failed to pass this on to the consumer.
The tax on having your hair cut, going out for a meal, playing bingo and hiring a bouncy castle will all drop today. These are among the goods and services where the rate will fall from 13.5pc to 9pc.
VAT is coming down in the tourism sector in a bid to boost employment as part of the Government's jobs initiative.
It is being funded by a raid on private pension funds, which is expected to raise €470m annually for the next four years.
Mr Kenny said the tourism industry must pass these VAT cuts on to the customer.
Meanwhile, Enterprise Minister Richard Bruton said he hoped jobs would flow from the lower VAT rates.
"We decided very clearly to focus a cut on a small number of sectors where we could get employment quickly," he said.
"We will examine its impact closely to see if more employment is being created and that better value is available to consumers. This is an opportunity for more tourists and to gain jobs quickly."
However, the new rates do create some contrasts within the same industry. For example, the tax on meals in restaurants will come down to 9pc, but the VAT on soft drinks and wine will remain at 21pc.
Hairdressing will benefit from the lower VAT rate, as many larger hotels have a salon in the lobby. But hair products and services, like manicures and facials, will stay at 13.5pc.
The tax on entertainment services, such as the hire of a bouncy castle, golf-green fees, bingo and swimming-pool admission, all come down.
However, car hire, short-term boat hire and laundry services in hotels will remain at 13.5pc.
The Irish Hotels Federation and the Restaurants Association both backed the move and called on their members to pass on the savings to customers.
Adrian Cummins, chief executive of the Restaurants Association, said the cut would mean that one euro should come off every €25 spent on a meal.
Meanwhile, McDonald's Ireland, which has 78 restaurants here, said it was committed to passing on the VAT fall.
Managing director John Atherton said most prices should fall by around 3pc. Some items in the restaurants will still have higher rates of VAT on them after today.
He backed the plan to cut VAT, saying a French cut in the rate levied on restaurants in June 2009 led to a 10pc increase in the trade and created 27,000 extra jobs.
Mr Atherton said each restaurant owner would now have to make his or her own decision in regard to passing on the savings to customers.
McDonald's, which has almost 4,000 staff here, is due to open three more restaurants by the end of the year.