Restaurants Association calls on Minister Ross to 'step aside' over 'failure to protect 9pc VAT rate'
BUSINESSES in the tourism sector have hit out at the decision by Finance Minister Paschal Donohoe to increase the VAT rate, saying they fear the industry will now be knocked out of recovery mode.
Restaurants and rural hotels have raised significant concerns after the Government announced its plan to increase VAT from the reduced 9pc.
VAT on Ireland's booming tourism sector will increase to 13.5pc, producing an extra €466m.
While it will bring in hundreds of millions to help fund tax cuts and spending elsewhere, businesses fear it will have a detrimental knock-on effect for them.
Adrian Cummins, CEO of The Restaurants Association of Ireland, is asking the Minister for Transport, Tourism and Sport, Shane Ross to consider his role following the VAT hike.
He told Independent.ie: "This VAT increase has just cost 5,000 jobs in our businesses - restaurants, cafes and bars serving food.
"Minister Ross failed to defend us in the negotiations in the Budget. If VAT increased from 9.5pc to 11pc then we might have given the minister a pass mark. But we give him zero percent for complete failure and he should now resign...
"This is a black day for us. In one fell swoop, we have these increases and the arrival of Brexit in March.
"This is deeply annoying. It will cost the industry €440m next year. It's a 50pc hike in our VAT bills," he said.
Pat McDonagh, founder of fastfood chain Supermac's and owner of a number of hotels across Ireland, says he wasn't expecting the VAT hike to be so high.
"I think it will affect hotels outside Dublin because there is two different economies running, there's one inside the M50 and one outside the M50. We were looking at hotel prices in Dublin tonight and the cheapest we could see was €240 and over 70pc of them were booked out," he told Independent.ie.
"We've already seen the price of food going up dramatically from the drought earlier in the year and now we have this VAT coming into effect next year.
"There's a lot of uncertainty with Brexit at the moment... I've been speaking to tour operators in the west and they're fearing a decline as Ireland has gone so pricey. This is going to be a challenge, we were lucky this year with the good weather but I think the improvement we've seen is now going to be harder to maintain."
Hannah Wrixon, founder of Get The Shifts, a tech-centric staffing solution that acts as a matchmaking service for experienced hospitality staff and bars, restaurants and other hospitality and events businesses, says it's wrong of the Government to target a trade that's recovering.
"This will put a huge strain on many hotels and B&Bs across the country, making it harder for them to achieve median occupancy and as a knock-on effect cover the costs associated with running their businesses," Hannah told Independent.ie.
"It's been a very fast recovery from the recession, so something like this can have a profound effect. People are just getting comfortable with having disposable income again and are reemerging out of the woodwork, but this will cause people to second guess again.
"I think unfortunately history is repeating itself slightly and it is a question of have we learned anything from the recession. There is a concern, especially around the implication of passing on the price hike to the customer. It will have an effect, cost comes into every decision-making process and people will think longer and harder about coming to Ireland or holidaying here.
"This industry needs to be less flourish until it reaches a more stable high and then possibly the Government could look at changing it, but the industry hasn't even been given a chance."
Get The Shifts recently announced the creation of 700 casual roles over the next 12 months, bringing the total number of jobs it has created to 1,200.
The Shannon-based company says it has recently added housekeeping roles to its portfolio in response to the demand from hotels which "cannot afford to hire a full-time team of accommodation as it is".
"Many businesses already battle with negative price perception from international tourists and today’s likely increase is particularly alarming when this reality is added to the looming unknown of Brexit," Hannah added.
Responding to the outcome of today’s Budget announcement, Fáilte Ireland’s CEO Paul Kelly said:
“The Government’s 9pc VAT rate made a positive impact and was very much needed at a time of 15pc unemployment and falling demand. This VAT rate - along with zero Airport Passenger Duty, the creation of Fáilte Ireland’s regional experience brands like the Wild Atlantic Way and Ireland’s Ancient East, strong international marketing of the island of Ireland by Tourism Ireland, as well as the work of a resilient and ambitious industry - have driven significant recovery in volume, revenue and employment across the sector.
"While we acknowledge the increased VAT rate will be a significant challenge to many industry players, we are still confident about the long-term future growth prospects for the sector."
Michael Lennon, Irish Hotels Federation President and owner of Westport Woods Hotel in Co Mayo, said the VAT increase was "a joke to the industry".
"It is not unexpected but we fought hard to try to retain the reduction. It’s a reckless failure to recognise how important we are to the economy, the whole tourism industry. The growth to the economy has been helped by tourism. The reduction of VAT to 9pc has been a great motivating factor.
"From a competitive stance, there are 26 countries with a lower VAT rate than us. I’d be asking the tourism minister Shane Ross to go to cabinet and ask them to support our call for deferring the increase for nine months, till the end of the summer season at least.
He said the government needs to be considerate of contracts already in place, particularly tour operators in the UK, Germany and America, which are important markets to the tourism economy.
"The government had great foresight introducing the VAT reduction. The minister mentioned in his budget speech that there are 240,000 people employed in tourism. Since 2011, 65,000 new jobs have been created by tourism and the minister acknowledges it.
"We would be asking him to do his job and hold off on the new VAT rise. Another reason we would like to hold off on this increase for another nine months would be so we can see a bit more clarity around Brexit."
Philip Gavin, Managing Director of The Talbot Collection, which employs almost 700 people in the hospitality industry, called the change in the VAT rate "unfortunate and disappointing."
He said: "The Coalition Government of 2011 afforded the hospitality sector a “lifeline” in a time of great uncertainty.
"Finance Ministers since that time must be applauded and commended for retaining the Vat rate at 9pc as this certainly helped us to retain and create employment, it also afforded us in recent years to refurbish our properties to the standards we are renowned for as a 4* Collection.
"It is unfortunate and disappointing that Minister O’ Donoghue has not retained the rate at 9pc as the uncertainty of Brexit looms and with it the certain decline in visitors from our strongest and nearest market.
"This will have an negative impact on our sectors ability to sustain jobs in a labour intensive market and in some instances capital refurbishment programmes will be cancelled leading to a reduction in indirect employment."