Revenue to get extra €563m from higher hospitality Vat rate
The Exchequer will reap an additional €563m a year after it returns the 9pc Vat rate for the hospitality sector to 13.5pc at the end of the summer.
The Revenue Commissioners have estimated that the sector will pay €1.7bn a year in Vat when the rate reverts to 13.5pc.
The 13.5pc Vat rate for the sector was cut to 9pc in November 2020 as the Government introduced measures to address the economic impact of the pandemic.
However, a range of businesses had enjoyed a 9pc Vat rate for most of the last decade. The 13.5pc rate was cut to 9pc in July 2011 to help the hospitality sector during the economic crash. That reduced rate applied to a range of businesses and services, from hotels and restaurants, to newspaper sales and hairdressers. It didn’t return to 13.5pc until January 2019.
The hospitality sector has lobbied intensively to retain the most recent cut to the rate, with the Restaurants Association of Ireland insisting the 9pc rate should be made permanent.
Dermot Crowley, the chief executive of hotel group Dalata, is among those who have questioned why Ireland does not retain a permanent 9pc rate. Dalata operates hotels under the Maldron and Clayton brands.
Independent TD Carol Nolan asked Finance Minister Michael McGrath in a written Dáil question what the tax yield will be from the hospitality sector when the 13.5pc Vat rate applies.
“A tentative estimate of the full-year Vat yield arising from a 13.5pc Vat rate applying in the hospitality sector would be in the region of €1.7bn, or an additional €563m compared to the full-year yield from the application of the 9pc Vat rate,” he said.
“This estimate assumes no change in consumer behaviour as a response to the increase in Vat.”
Hotels and guesthouses paid an estimated €203m in Vat last year on accommodation services while the 9pc Vat rate was in force. The figure compared with €276m paid in 2019, before the pandemic and when the rate was 13.5pc.
The highest amount paid over the past 16 years by hotels and guesthouses was in 2008, when the figure was €456m.
That same year saw the beginning of the global financial crash. The lowest figure was in 2021, at €97m, while the cumulative figure in the 16-year period was €3.1bn.