Hospitality and tourism in Donegal could suffer if the Government follows through with a proposed tax increase in the upcoming budget, says Donegal MD Cathaoirleach Michael Naughton.
The Donegal Area Councillor said the Government’s move to single out large hotels for an increase in the special lower VAT rate would be detrimental to the hospitality industry and would undermine the sector in rural counties like Donegal and the Northwest.
The possible move in the October budget will see the scrapping of the special lower 9% VAT rate for large hotels. The full 13.5% VAT rate would be restored only for businesses who sell accommodation, and will not affect other tourism services.
In opposition to the proposals, Cllr Naughton said, “The 9% VAT rate, which was lowered from 13.5% during the height of the recession to boost hospitality and tourism, was vital in underpinning and sustaining the continued growth of the tourism sector. The 9% VAT has been shown to be the right rate for the sector — bringing Ireland more closely in line with tourism VAT rates in other competing European countries and enabling Irish tourism to become more competitive.”
Cllr. Michael Naughton
Cllr Naughton pointed out that the tourism product in Dublin is a completely different product to rural Ireland.
“Dublin has seen a significant increase in room rates due to demand and lack of supply, however here in Donegal and in the Northwest we have not seen the same increase in activity. This VAT rate was introduced in 2011 in the depths of the financial crisis to help a number of sectors including hotels and this has most certainly helped the Dublin area while the rural areas are still recovering.”
“Our accommodation providers in Donegal and the Northwest are fearful that it will have an impact on the number employed by the tourism industry here and along with the impact on sterling of Brexit, and therefore the number of British visitors potentially coming to Northwest Ireland, will have an impact on jobs.”
Cllr Naughton added that Brexit and the spiralling cost of insurance are all expected to have a huge impact on the hotel sector on the Northwest.
“Also a lot of accommodation providers will have seen increased costs with works required for the fire authority. For some accommodation providers in the Northwest an increase could potentially affect employment in the sector.”
Cllr Naughton said he will be calling on Minister Paschal Donohoe to retain the 9 per cent VAT rate for Donegal.
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