The OECD has recommended that Ireland increase to 23pc the VAT rate for hospitality, currently at 13.5pc, rather than restore the previous 9pc rate prior to September 2023.
According to the OECD report, increasing the reduced VAT rates by one percentage point could generate an additional €64m from the hospitality sector and €519m overall each year. It says the Vat base should be broadened by merging the special reduced rates for hospitality and other sectors like food, books, and children’s clothes (0pc), and heating oil, solid fuels, construction, as well as hospitality and tourism-related services (13.5pc and 9pc) and increasing them incrementally over time.
The report also urges for broadening the personal tax system since about one-third of income earners do not pay personal income taxes or the Universal Social Charge, while the top 20pc contribute 80pc of the yield.
The OECD shared: “as a starting point, those that disproportionately benefit the higher income deciles – such as those applicable to hospitality and tourism – could be gradually aligned to the standard rate.”
