Dublin City Council (DCC), as Ireland’s largest city and local authority, is the latest local authority to explore the potential for an accommodation tax.
Local authorities in Ireland typically lack the legal power to introduce new taxes independently. Therefore, for such a tax to be enacted, primary legislation would need to be passed by the Dáil.
In January 2023, the council Head of Finance presented a report to the Finance Strategic Policy Committee concerning this issue which estimated that a 1pc tax on accommodation could generate approximately €12m based on the number of hotel bedrooms recorded in 2022. For context, the Local Property Tax (LPT) for DCC in 2022 was just over €23m, with the income lost due to a 15pc cut in the LPT amounting to €12m.
The estimate pertains solely to hotel rooms and does not encompass other types of accommodation. Consequently, along with the rise in hotel prices since that time, the estimated €12m is likely to fall short of the actual potential yield.
Galway City Council has engaged in similar discussions, with reports indicating that the anticipated revenue from the tax there is about €2m annually, which is just under a third of its projected total LPT for 2024.
The 2022 report from the Commission on Taxation and Welfare outlines accommodation tax rates within EU member states, which range from €0.40 to €2.50 per night, with these rates varying according to the type of accommodation. As part of measures aimed at broadening the tax base, the Commission has advocated for the implementation of an accommodation tax, similar to practices in mainland EU countries where many municipalities impose such a tax. In certain large or capital cities of some EU countries, the overnight flat rates currently exceed €2.50 significantly.
In 2024, the Scottish Parliament enacted the Visitor Levy (Scotland) Act, granting local councils the authority to implement a visitor tax if they choose to do so. Following a public consultation process involving residents and businesses, and an obligatory 18-month implementation period, Edinburgh City Council aims to establish a visitor levy by the summer of 2026 based on its current draft scheme.
