Neale Richmond (Dublin Rathdown, Fine Gael)

I will not leave out Waterford either. We all know that this has a significant impact on many communities, both rural and indeed urban, in Dublin and outside Dublin. We know the many challenges that so many SMEs have experienced in recent years with economic shocks from the Covid-19 pandemic. Many business representatives I have met in recent months cite the supports. People talk about shutting down hospitality. No one ever wanted to do it but unfortunately it is what we had to do. They will talk about the real supports from Government.

Most politicians stood at the plate to offer support but the impact of Covid-19, the Russian war in Ukraine, the subsequent energy crisis, and rising inflation rates, which are thankfully going down rapidly this year, have all had a major impact. It would be remiss of me not to acknowledge the impact that Government measures have had. The Department of Enterprise, Trade and Employment did a report on this just before Christmas, which was published. It examined the impact of rising costs on all sectors and the economy as a whole and referred to pension auto-enrolment, the move towards a living wage, statutory sick pay, parent's leave and benefit, the additional public holiday in February and indeed the right to request remote working. It showed that, in the round, the economy can meet these challenges. I am fairly sure every Deputy in this Chamber supported and still supports those continuing moves, but they acknowledge that they have an acute impact, particularly on lower margin, lower salary sectors such as retail and hospitality. We acknowledge those challenges.

When the then Minister for Finance, Deputy Donohoe, introduced the 9% VAT rate for tourism and hospitality measure in November 2020, it was a time when public health measures routinely closed hotels and restaurants or significantly limited their capacity. The temporary change to the VAT rate was only one part of the Government's response, with other business supports as I have laid out. Analysis conducted by the Department of Finance at the time the VAT rate previously reverted to 13.5% concluded there was no economic case for a continuation of the preferential 9% VAT rate at that time, and further analysis last year reached the same conclusion. As I mentioned, it will always be looked at in the context of the budget. The recent analysis has of course looked at recent impacts.

On employment, between the end of 2020 when the 9% VAT rate was reintroduced, and the final quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record of 2.71 million. As Deputies know, the estimated cost of the 9% VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a substantial but justified support from the Government to the hospitality and tourism-related sectors. The cost of a further VAT reduction to 9% for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 million and would therefore constitute a significant fiscal transfer of taxpayers' money. For context, the VAT rate for the hospitality sector in Ireland compares favourably to that of Britain and Northern Ireland, which has a 20% VAT rate. Across the whole of the EU, Ireland is one of 14 countries with a rate at 12% or higher for hospitality.

One of the issues that regularly comes up in this debate is whether it is possible to change the VAT rate for hospitality or accommodation without reference to the other. It is possible. However, it is not possible to apply two different VAT rates within the same sector, so the VAT rate that applies to food and catering services provided by a restaurant must be the same rate that is applied to that service as provided by cafés or pubs. Revenue has advised that there would be significant practical operational concerns in having different VAT rates applying.

I am rapidly running out of time. There are one or two areas that I want to address that Deputies raised. More will be addressed as the debate goes on. Deputy Collins talked about a Government-imposed passenger cap in Dublin Airport. That is nothing to do with the Government. The passenger cap is, of course, looked after by Fingal County Council in consultation with the Dublin Airport Authority. We as a Government monitor that closely but we are not responsible for that cap. That is important for the context of the debate and how much we continue to promote or invest in encouraging tourism in the State.

Regarding announced supports, the increased cost of business scheme must be referenced. That is a €257 million fund, which is a large fund, that was provided for in the latest budget. It was part of wider measures for SMEs that were announced within the budget, including changing the VAT thresholds. One thing that many people discuss is the tax debt warehousing scheme, which has offered a valuable, practical liquidity support to businesses since the pandemic and supported cash flow. We are keen to make sure that flexibility is shown to businesses to ensure they can pay in a manner that will allow them to stay viable.

This year alone, the Government has provided funding of €216 million to the hospitality and tourism sector, which represents an increase of 33% on the 2020 level. Today, more than €27 million has been announced in tourism funding from the just transition fund. In counties Offaly and Laois, Deputy Nolan, more than €12 million was announced today for tourism projects, with in excess of €7 million for Clonmacnoise alone. These are real, serious investments.

When considering the increased cost of business scheme, we have to also consider that 80,577 properties have registered for it, which represents 66% of estimated eligible businesses and includes the 5,245 registrations that happened in the reopening period. As I said, these were part of a suite of measures that were carried out.

I will talk about one final matter. The motion calls on the Government to consider varying VAT rates throughout the country and suggests the creation of a 5% VAT rate outside of Dublin. I note for Deputies that the VAT directive does not permit the varying of VAT rates across individual member states. The VAT rates in Kimmage and Dún Laoghaire must be the same as the VAT rates in counties Kerry and Donegal. I understand that Article 104 of the VAT directive allows certain member states to maintain a historical derogation that allows for very limited variation in their VAT rates. This means that Austria can maintain a lower standard rate in two specific communes, Greece may maintain a lower VAT rate on specified islands, and Portugal can maintain a lower rate of VAT for the Azores and Madeira. These provisions cannot be extended by these member states nor adapted by other member states for their own use.

I look forward to the rest of the debate. I could say a lot more. I am more than happy to meet with Deputies in a separate deputation meeting. As I said, the Government will not oppose the motion. However, we will consider it in its full context as part of budgetary discussions and examinations. I thank the Deputies for submitting the motion and look forward to the debate.

See this speech in context