Govt urged to reduce alcohol, hospitality VAT rate to 5%

The Irish drink and hospitality sector is urging the Government to deliver a VAT reduction in the July stimulus economic plan.

The call comes after the UK announced it was cutting VAT (Value Added Tax) on hospitality services from 20% to 5%.

At present, there is a 13.5% VAT rate in Ireland for hotel, tourism, food and drink services.

The Restaurants Association of Ireland (RAI) has called for the immediate reduction of the tourism and hospitality VAT rate to 5%.

It also wants to see alcohol on sales included in the 5% rate. On-trade sales applies to alcohol sold in pubs, restaurants and hotel bars.

RAI Chief Executive Adrian Cummins said: “The UK has cut Value Added Tax on hospitality services from the current 20% standard rate to the reduced rate of 5%. The measure will be in place until 12 January 2021.

“This is the kind of action we need to see happen here. EU member states are also taking action, so why haven’t we seen any reduction in Ireland?”

“It is also worth noting that pre Covid-19, Ireland had one of the highest VAT rates [13.5%] for tourism and hospitality in the EU. The supports currently being offered to businesses simply do not go far enough.”

Donall O’Keeffe, CEO of the Licensed Vintners’ Association (representing Dublin pubs), said: “We are seeking a temporary reduction in the on-trade VAT rate on alcohol as a support measure to help businesses meet the 50% shortfall in trading due to Covid.

“This is for businesses and is not intended as a demand stimulus, which VAT rate changes tend to be.

“This is a new ask which has never been considered in Ireland and is achievable and easy to implement quickly. Ireland’s VAT rate on alcohol is already significantly higher than EU averages.”

Padraig Cribben, chief executive of the Vintners Federation of Ireland (representing rural publicans), warned that “new trading conditions and guidelines on social distancing and reduced capacity make meeting business costs an impossible challenge” for rural pubs.

“These businesses need a short-term stimulus to get through the next few months. Our ask for a reduced VAT rate for on-trade alcohol is one that can be done with relative ease and will provide an immediate impact,” he said.

Patricia Callan, director of Drinks Ireland, said: “The Government should grasp the opportunity to support the on-licenced sector efficiently and effectively by lowering the VAT rate for on-licenced alcohol sales.”

The drinks sector said a temporary cut in VAT on on-trade alcohol in the July stimulus programme would support and safeguard up to 50,000 jobs and a network of 7,000 businesses as the drinks and hospitality sector builds up its trade over the coming months.

Meanwhile, the Chief Executive of the Irish Tourism Industry Confederation has called for people to be given a “staycation voucher” as part of the July stimulus package. 

Eoghan O’Mara Walsh said every effort must be made to “incentivise and stimulate the domestic market”.

He said ITIC has called for a “staycation voucher to ensure that Irish people go out there and see what’s on their doorstep, and support the industry”.

Mr O’Mara Walsh described the British government’s stimulus package as “very bold and ambitious” and he called for the Irish government to “follow suit”.

And he added his voice to the calls for the VAT rate in the tourism and hospitality sector to be cut to 5%.

Eoghan O’Mara Walsh said not doing so could result in “wide scale job losses and wide scale business closures”. 

Earlier, the Chief Executive Officer of Ibec, Danny McCoy, has said the Irish economy can afford to match the 5% VAT rate for the of the tourism and hospitality sector. 

In Northern Ireland, measures to boost the hospitality and tourism industries after the coronavirus pandemic have been welcomed by a range of groups involved in the sectors.

The Northern Ireland Hotels Federation chief Janice Gault described them as a “game changer” that will “increase our chances of survival”.

“The news of a cut in VAT on food, accommodation and attractions from 20% to 5% until 12 January is a tremendous result for the sector, under the Chancellor’s plans to kick-start the economy,” she said.

“It will allow us as an industry to compete on an all-island basis and it also helps hoteliers address a number of challenges as they return to trading.”

Howard Hastings, managing director of the Hastings Hotels group, said the move will allow his hotels to update their rates to offer cheaper accommodation.

“These measures will go a long way in helping the local economy recover in the coming weeks and months ahead and will hopefully encourage more people to visit restaurants and book a staycation this summer,” he said.

“We hope this will also give an extra incentive to visitors from the Republic of Ireland and the UK to book a visit to Northern Ireland this summer as it certainly adds extra value to what we already offer.”

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