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9pc VAT a temporary reprieve for tourism sector on the ropes

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Small change: Clare hotelier John Burke says that for many in the hospitality industry, the help will unfortunately have come too late. Photo: Arthur Ellis

Small change: Clare hotelier John Burke says that for many in the hospitality industry, the help will unfortunately have come too late. Photo: Arthur Ellis

Small change: Clare hotelier John Burke says that for many in the hospitality industry, the help will unfortunately have come too late. Photo: Arthur Ellis

Thousands of Irish tourism and hospitality businesses have been thrown a lifeline in the shape of a 9pc VAT rate.

The new rate, to be reduced from 13.5pc from November 1, is a temporary measure until December 2021, and a response to the "unprecedented challenges" facing the sector, Finance Minister ­Paschal Donohoe has said.

The cut, flagged in advance of Budget 2021, had been a key lobbying focus since the first March lockdown. Last night, it received a broad, if cautious, welcome alongside other new tourism supports.

These included the Covid Restrictions Support Scheme, a €55m business continuity fund, and an extension of the commercial rates waiver to the end of this year.

"These are all positive steps to help tourism and hospitality businesses survive this existential crisis," said Eoghan O'Mara Walsh, CEO of the Irish Tourist Industry Confederation (ITIC), an umbrella group representing the sector.

"A degree of hope," Padraig Cribben of the Vintners ­Federation called it.

"This is the right tourism VAT rate," said Elaina Fitzgerald Kane, president of the Irish Hotels Federation.

The reduction will help Irish competitiveness and sustain jobs and communities across the country, she added.

However, she said it should be a measure, "for a minimum of five years". Contracts with tour operators, for example, are agreed two years in advance.

"It's a small change in the right direction," said another hotelier, John Burke of the Armada Hotel in Spanish Point, Co Clare. Hospitality venues like his are under "huge strain", Burke pointed out, hoping the cut would help bring in business "and achieve at least median occupancy".

But for many, he cautioned, "this small step will unfortunately come too late".

Austin Hickey, a director with business advisory firm BDO, said the VAT reduction would give "an immediate cashflow benefit" to tourism businesses.

But "it will only be when international tourist activity commences and normal business returns that the tourism sector and wider economy will see the full benefit of the reduction".

Others argued the VAT cut should go deeper, to 5pc or even zero, to reflect the devastation suffered by hotels, restaurants and other tourism businesses at the economic coalface of Covid-19, dealing with rolling lockdowns and facing little prospect of overseas visitors. Nor will a VAT reduction be of immediate benefit to businesses that are closed or taking in little cash.

"Nine per cent of zero is the same as 13.5pc of zero," one observer said on Twitter.

Tourism and hospitality businesses broadly welcomed Budget 2020's extension of commercial rates waivers and employment supports to the end of this year - though again, with qualifications. Extensions of months rather than weeks, and a restoration of EWSS and PUP supports to their previous rates, were ­lobbied for.

In other supports, a Covid Restrictions Support Scheme will allow tourism businesses shuttered by Level 3 restrictions (or above) to claim up to €5,000 per week, while the €55m business continuity fund will be administered by Fáilte Ireland.

Adrian Cummins of the Restaurants Association of Ireland described the suite of measures as "a vital step in supporting a struggling and flattened hospitality sector".

"There is now hope for many struggling restaurant businesses... [but] there are still long, hard months ahead."

"The devil is in the detail, as with all budgets," said ITIC's Eoghan O'Mara Walsh. "But we broadly support the measures and give credit to the Government for acknowledging that tourism and hospitality have been one of the hardest hit sectors."

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Irish Independent