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 Header Item Financial Resolution No. 2: Capital Gains Tax (Continued)
 Header Item Financial Resolution No. 3: Value-Added Tax

Tuesday, 9 October 2018

Dáil Éireann Debate
Vol. 973 No. 2

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  Sitting suspended at 11.20 p.m. and resumed at 11.22 p.m.

An Leas-Cheann Comhairle: Information on Pat the Cope Gallagher Zoom on Pat the Cope Gallagher I advise the House that we have 40 minutes remaining. There are no time restrictions on Members but I suggest that they think of colleagues when they contribute.

Financial Resolution No. 3: Value-Added Tax

Minister for Justice and Equality (Deputy Charles Flanagan): Information on Charles Flanagan Zoom on Charles Flanagan I move:

(1) THAT the 9 per cent rate of value-added tax which is provided for in subsection (1)(ca) of section 46 of the Value-Added Tax Consolidation Act 2010 (No. 31 of 2010) and which applies to the supply of goods and services referred to in paragraphs 3(1) to (3), 7(b) to (e), 8, 11, 13(3) and 13B(1) to (3) of Schedule 3 to that Act, be increased to 13.5% and that the Value-Added Tax Consolidation Act 2010 (No. 31 of 2010) be amended accordingly.

(2) THAT this Resolution shall have effect on and from 1 January 2019.

(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

This resolution provides for an increase of the VAT rate to 13.5%, with effect from 1 January 2019, on all services and goods to which the 9% rate currently applies, with the exception of newspapers, periodicals and sporting facilities. The proposed change will apply to catering and restaurant supplies, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter, hairdressing, the sale of live horses and greyhounds and the hire of horses. The increase is estimated to raise €466 million in 2019 and €560 million over a full year.

  The 9% VAT rate was introduced as a new temporary reduced rate as part of a jobs initiative from July 2011 to December 2013. It was aimed at boosting tourism and at the creation of additional jobs across that sector. From budget 2014 it was decided to retain the 9% rate to support increased numbers of jobs and, latterly, due to the weakness of sterling following the UK vote to leave the European Union.

  During last year's Finance Bill, the Minister for Finance committed to undertake a comprehensive study of all aspects of the 9% VAT rate to better inform any decision on the reduced rate. The review of the 9% VAT rate, analysis of economic and sectoral developments published in July, assesses the 9% VAT rate's relevance, its cost, value for money, impact to date, and the estimated impact were it to be removed. This matter was debated at an appropriate Oireachtas committee. The review found that tourism expenditure was more sensitive to income growth and the economic cycle than price changes, which reduced the relevance of the VAT rate applying to the sector. The review found that there was a lack of competitiveness in the sector and that if the 9% rate were increased, it would likely not materially impact demand or employment in the sector.

  With economic analysis indicating that there is a decline in competitiveness across the sector, that the majority of activity at the 9% rate is driven by income growth more than price, and that the retention of the rate provides little additional benefit relative to its cost, the Minister has decided to return these items to the 13.5% rate. In the case of newspapers and sporting facilities, however, VAT will be retained at the 9% rate to assist national and regional newspapers to remain competitive and to meet the challenges of the modern media landscape. The 9% VAT rate is being retained for sports facilities to encourage healthy activity through facilities remaining affordable across the sector.

Deputy Michael Fitzmaurice: Information on Michael Fitzmaurice Zoom on Michael Fitzmaurice While it is widely acknowledged that things have been booming in the Dublin area, we must be mindful of small hotels in rural parts of Ireland which will not have beds full tonight and which struggle during the week especially. We must also be mindful of restaurants. We ought also to take into account that we are trying to keep people visiting here from England as tourists. It is not a good idea to put added costs on top of them. I am fearful for the small operators who are struggling. I acknowledge that tonight, in Dublin, one probably would not get a hotel bed and those hotels are charging pretty strong prices. However, it is like a weighing scale where one might put a few pounds on one side but the other drops. It may be detrimental to rural parts of Ireland.

An Leas-Cheann Comhairle: Information on Pat the Cope Gallagher Zoom on Pat the Cope Gallagher Deputy Peter Fitzpatrick was the next to indicate. I remind the House that we will try to accommodate everyone.

Deputy Peter Fitzpatrick: Information on Peter Fitzpatrick Zoom on Peter Fitzpatrick It was widely reported that the VAT measures introduced some years ago to help tourism and hospitality would be reversed and, unfortunately, that has proven to be the case. Today, the Minister stated that tens of thousands of extra jobs were created in the tourism sector since the measure was introduced in 2011 and that the sector has never supported more employment than it does today. It supports 240,000 jobs and provides balanced regional growth, as the Minister confirmed. Why would the Government threaten this by reversing a measure that was designed to protect and support our tourism sector? It makes no economic sense.

The Minister stated that this increase will allow him to reduce his reliance on other taxes, such as corporation tax, and prevent increases there. The Government wants to increase the costs of local indigenous businesses so that we do not have to increase taxes on companies which pay the lowest rate of corporation tax in the EU.

I was very disappointed when the Minister did not acknowledge the threat of Brexit to the tourism sector, especially along the Border area. There is no doubt that Brexit will be a great challenge to tourism. Now, more than ever, it needs all the support and help to maintain its growth.

Coming from the constituency covering Louth and east Meath, I know better than most the value of a thriving tourism sector. My constituency has some of the best tourist attractions in the country. The Carlingford Peninsula in the north of the county has attractions such as Carlingford village, the Cooley mountains, many walking routes and a new greenway from Carlingford to Omeath.

Deputy Sean Sherlock: Information on Seán Sherlock Zoom on Seán Sherlock We are getting a tour of Louth.

Deputy Peter Fitzpatrick: Information on Peter Fitzpatrick Zoom on Peter Fitzpatrick Further south there are the historic towns of Dundalk and Drogheda, the many attractions of the Boyne valley and the seaside villages of Laytown and Bettystown. These areas suffered greatly when the economy collapsed and we faced years of austerity. Now we have the threat of Brexit which will be particularly felt in Border areas.

The 9% VAT rate has been critical to Louth and east Meath's tourism success, having brought Ireland more closely in line with the tourism VAT rates in the European countries with which we compete. Tourism is one of our largest indigenous industries and is essential for prosperity and economic well-being. I have always advocated for keeping the VAT rate at 9% and will continue to do so.

As the UK plans to leave the EU, there is a level of uncertainty about what Brexit means for many things and we must consider what it will mean for the future of our tourism and hospitality sectors. We are still in the process of achieving sustainability, and much of our tourism and hospitality is seasonal. We rely on tourism from the UK market, with tourists from the UK being our largest overseas market. As the euro has grown more expensive relative to sterling, visitors are spending less.


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