The VAT derogation for Ireland’s hospitality industry, reducing the VAT rate from 15pc to 9pc in hotels and restaurants, was retained in Paschal Donoghue’s first budget as minister for Finance.
Both Paschal Donohoe and Taoiseach Leo Varadakar, as well as the junior minister at the Department of Finance Patrick O’Donovan are former ministers of touurism.
The lower rate of VAT is claimed to have created 37,800 new jobs since its introduction by Michael Noonan in 2011 and in the savings of €756m to the exchequer.
The Restaurants Association of Ireland called on the Government to reduce the current rate of excise duty in their Pre-Budget Submission 2018. While there was no reduction, the RAI are relieved that there was no increase in excise duty in Budget 2018. Ireland pays the highest excise duty on wine in Europe. Excise has increased by 62pc since 2012, with the tax take on a standard bottle of wine now over 50pc.
Adrian Cummins CEO of the Restaurants Association said, The rising cost of doing business meant retention of VAT at 9pc was more important than ever. Ireland is still operating in a three-tier economy, Dublin is galloping ahead and tourism hotspots have reported a good year, there is still however many parts of Ireland, including rural and boarder counties where business is deeply challenging. The VAT remaining at 9pc was crucial to theses parts of Ireland.
Despite calling for a reduction of 15pc in excise duty in our Pre-Budget Submission, we are happy to see no increase in excise duty for a third year in a row. It should be noted that excise increases not only impact restaurants, hotels and pubs. These increases introduced during the financial crisis as an emergency measure have created significant cash-flow issues for distributors and importers, as many have to pay excise as an up-front cost.” Adrian Cummins continued, “the budget that was delivered today will bring a positive response from the restaurant and tourism industry.”
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