David Stanton (Cork East, Fine Gael)
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108. To ask the Minister for Finance the tax measures he is considering to support the hospitality sector; and if he will make a statement on the matter. [28591/24]

Robert Troy (Longford-Westmeath, Fianna Fail)
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111. To ask the Minister for Finance if he will consider introducing a 9% VAT rate for hospitality businesses; and if he will make a statement on the matter. [28637/24]

David Stanton (Cork East, Fine Gael)
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This question has to do with the tax measures that might be considered to support the hospitality sector. Yesterday, representatives of the hospitality sector were in Leinster House and were lobbying Members of the Houses with respect to supports, were telling us that the sector was under pressure and that many of its members are on the verge of running out of liquidity. Is the Minister is aware of this and has any work been done in his Department in this area? In particular, has the Minister any information as to the pressures this sector is under?

Jack Chambers (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 108 and 111 together.

As the Deputy will be aware, the 9% VAT rate was applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5% rate. The 9% rate was introduced on 1 November 2020 in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic.

The economic rationale for a VAT rate reduction at that time, as it was in 2011 when it was also reduced to 9%, was to lower consumer prices, encouraging higher demand, more output and an increase in employment.

Despite facing numerous successive headwinds over recent years, the domestic economy has proven to be remarkably resilient. Looking ahead, as inflation eases, the real disposable income of households should recover and support consumer spending. As a result, households are on a stronger financial footing and this will support demand for contact-intensive services, including the tourism and hospitality sectors.

On employment, between the end of 2020 when the 9% rate was reintroduced, and the final quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record high of 2.71 million, an increase of over 17%. The labour force survey for quarter 4 of 2023 indicated that employment in the accommodation and food service sector stood at 183,000.

It is important to remember that VAT reductions, even temporary VAT reductions, have a cost to the Exchequer. 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 very substantial support by the Government to the hospitality and tourism-related sectors. The cost of a further temporary 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.

In making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.

Finally, the Deputies should note that any decisions about VAT rates for this area is a matter for consideration as part of the budget 2025 process.

David Stanton (Cork East, Fine Gael)
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I thank the Minister for his response and I understand it is part of his budget consideration and that he cannot speak directly about this issue now. Has the Minister's Department carried out any analysis of that sector and of the hospitality and the food sector in particular? Has he or his Department engaged with the representative bodies from that sector and, if so, can he tell the us what transpired and what findings has his Department come to with respect to the pressures that the sector is under, or at least that it says it is under, in particular on the food side?

Jack Chambers (Dublin West, Fianna Fail)
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Both my colleagues, the Ministers, Deputies Peter Burke and Catherine Martin, have extensively engaged with the tourism and hospitality sector. I know that my colleague, Deputy McGrath, when he was Minister recently met the sector also. That is why the Government responded in budget 2024 with the increased cost of business grant, which aims to provide financial support to small and medium-sized businesses who operate a rateable premises at a cost of €257 million.

Broader supports were also announced, including the extension of the 9% VAT rate on gas and electricity, for example, which was another support. There has also been a range of other measures brought by the Minister for Enterprise, Trade and Employment, including raising the employer PRSI threshold from €441 to €496 with effect from 1 October. That will ensure that employees earning the weekly equivalent of the national minimum wage will pay the lower rate of employer PRSI of 8.8%.

We are conscious of the particular cost increases which have been impacting businesses but I would say, more generally, that the purchasing power of households should strengthen as we enter the latter months of the year, with wage inflation now exceeding the flat rate of inflation. That should see improved consumer spending, which retailers in the hospitality sector should see in their businesses over the coming period. My colleagues, the Ministers, Deputies Burke and Martin, are having ongoing engagement on the wider cost implications and no decision has been taken in the context of budget 2025.

David Stanton (Cork East, Fine Gael)
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I understand that an economic analysis was carried out with respect to the impact of the quite correct changes which the Government has brought about on the sector. This refers to the various changes we have done. I understand that impact is quite strong. Can the Minister comment on that? With respect to the increased cost of business grant, that is a one-off payment but the sector is looking for an ongoing support and not just a once-off grant.

Again, the issue of loans is an issue where many businesses are reluctant to get into further debt.

Could the Minister comment on those two issues, namely, the economic impact of the changes which the Government has brought about with respect to various leaves, sick leave, pensions, and so forth? Also, on the issue of ongoing supports, would the Minister agree with me that the sector needs ongoing supports and not just once-off payments?

Jack Chambers (Dublin West, Fianna Fail)
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I know that extensive work was done towards the latter end of last year, in which the Minister of State, Deputy Richmond, was involved in his previous role. That is why we responded with the increased cost of business scheme and also providing for the other ranges of support which the Minister, Deputy Burke, has advanced around the national minimum wage and having the lower rate of employment PRSI also. We are trying to advance supports for businesses, particularly around the cost implications. I know that the specific VAT 9 group speaks to that as the solution but it is a broader issue with regard to what the cost implications of that might be. That is why, as part of the ongoing process, the Minister, Deputy Burke, has engaged with businesses.

I am also clear to say that the current economic position should see a strengthening of consumer demand, which will help the retail and hospitality sector and that has to be and is an important context around budget 2025 also.