Hotels and guesthouses paid an estimated €203m in Vat last year on accommodation services even as they enjoyed a special 9pc rate that was introduced as a result of the Covid pandemic, according to figures released by Finance Minister Michael McGrath.
he figure compared with €276m paid in 2019, before the pandemic and when the rate was 13.5pc.
The highest amount paid over the past 16 years by hotels and guesthouses was in 2008, when the figure was €456m. That year saw Bear Stearns collapse and the global financial crisis intensify.
The lowest figure was in 2021, at €97m, while the cumulative figure in the 16-year period was €3.1bn.
The hospitality sector has seen the usual 13.5pc Vat rate that applies to it temporarily slashed to 9pc twice over the past decade.
The first time it was cut was in July 2011, in response to the financial crash. That rate applied across a range of businesses, from restaurants and hotels, to cinemas, funfairs, newspaper publishers and hairdressers. The reduced rate remained in place until January 2019, when it reverted to 13.5pc.
But the Vat rate was cut again to 9pc in November 2020 as the Government tried to soften the impact of the pandemic.
Following the financial crisis, the hospitality sector credited the 9pc Vat rate with helping to create as more than 100,000 jobs.
But by summer 2018, the 9pc Vat rate was in the Government’s sights.
A report in July that year from the Department of Finance said that the 9pc Vat rate that was introduced in 2011 was by then a “significant deadweight” on the economy and that reverting to a 13.5pc rate would not damage the tourism industry.
It said the reduced rate had cost the Exchequer €3.2bn between 2011 and 2018.
The 9pc rate introduced during the Covid crisis was due to revert to 13.5pc at the end of February this year. The Government has extended it to August.
Mr McGrath provided the figures in response this week to a written Oireachtas question from independent TD Carol Nolan.
He pointed out that the figures provided include some elements of hospitality, such as some meals that were not charged separately like breakfast, as well as some other meals that may have been consumed within a restaurant. Business lobby group Ibec said last month that the 9pc Vat rate for the hospitality sector should be made permanent.
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