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Finance and Public Expenditure Minister Paschal Donohoe. Oireachtas TV

The tourist industry could lose its 9% VAT rate as it's 'under consideration' for Budget 2018

Restaurants and hotels express concerns as 1% hike is on the cards.

PRESSURE IS MOUNTING on the government to increase the 9% VAT rate for the tourism sector.

With money for tax cuts and fresh spending amounting to just €300 million, the Minister for Finance and Public Expenditure has limited funds to play with.

Just two weeks out from the Budget, Paschal Donohoe was before the Oireachtas Budgetary Oversight Committee yesterday.

While he said he would not be revealing any specific details relating to the budget, he did rule out any big surprises on 10 October.

While some trade unions have urged the government to abolish the special 9% VAT rate for the hospitality and tourism sectors, those in the industry are understood to have expressed deep concern about any potential increase.

However, the minister admitted to the committee yesterday that the VAT rate is under consideration, adding that the rate had served its purpose during the recession.

Not issue in confidence and supply agreement 

It’s understood that Fianna Fáil has not put up any roadblocks to an increase, with one source explaining it is not a measure contained in the confidence and supply agreement and if Fine Gael wants to push on with tax cuts, it will need to find additional expenditure from somewhere.

One Fine Gael TD said an increase is on the cards in this year’s Budget as hotels are “back booming”.

“They don’t have a case to make. Hotels are almost at 100% capacity, they are making money, and I do not for one minute believe an increase will result in job losses,” said another TD.

The VAT rate was reduced during the economic downturn from 13.5% to 9% in a bid to boost the tourist sector and retain jobs in the industry.

Jobs at risk

There’s speculation that the government won’t return to the 13.5% but will perhaps increase the rate nominally to 10%. However, the Restaurant Association of Ireland said a 1% increase could put 6,000 jobs at risk.

Donohoe said he believed the rate reduction has worked well over the years.

“I believe it played a valuable role, at a point in time, in relation to the creation and retention of jobs,” he told Fianna Fáil’s John Lahart.

“At a point in time?” asked Lahart pointedly.

“At a point in time,” replied the minister.

“It is a matter under consideration by me and others and I have made no decision in relation to it and I will announce what we are going to do on Budget day,” said Donohoe, who added that it was a measure of “where we were in the economic cycle and played a positive role in the creation and retention of jobs”.

“And what I will be doing now is looking at the economic evidence in relation to that tax rate, as I will with every other rate,” he said.

Price gouging 

Lahart also asked the minister if his department had evidence of price gouging by the hotel industry, particularly at times of big events.

The minister said any changes in hotel price rates send out a signal about Ireland’s competitiveness and send out a signal regarding the “ability of people to come and visit us”.

“When I was Minister for Tourism I made the point that if trends that we had then continued, it would cause a difficulty for us in the future,” he said, adding:

I also said that I understood that the setting of price levels in that sector was needed to, in turn, make the construction of more hotels and more hotel rooms available and what I can see, and am aware, and share some of the concerns of people, regarding the pricing of hotels in Dublin, I can also see the delivery of more hotels and more hotels rooms.

The minister said that the hotel sector in Dublin is not necessarily reflective of the industry nationwide. He explained that he would not make any decision on the tax rate based on one city, “even if it is our capital”.

“I know from going to other parts of the country that they continue to experience difficulties in relation to the development of tourism and getting people to stay. I will be looking at the national performance of that tax and not just in our capital city,” he concluded.

Other Budget measures

In addition to discussions on VAT, the minister hinted the government may seek to divert funding for various rental support schemes, such as the Housing Assistance Payment (Hap), to local authorities for the building of social housing.

He also confirmed that there would be another Christmas bonus this year, though he would only make the details known on Budget day.

Donohoe also confirmed that there will be a “Brexit package” in this year’s Budget.

During an unusual line of questioning, where the minister was asked if he would be a “Coca-Cola” “Coke Light” or “Coke Zero” drinker, Donohoe said he enjoyed many forms of fizzy drinks.

He said the introduction of a sugar tax in 2018 had been well-flagged and said the tax would be applied to sweetened drinks which have sugar in them.

Read: Clash in Dáil sees Mary Lou leave chamber after jibes from Taoiseach>

Read: ‘The assembly has the advantage of not having to address constituents’: Politicians discuss abortion>

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    Mute Nick Allen
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    Oct 5th 2017, 7:47 AM

    Good news. More jobs, more money in the economy and more tax collected. Well done to Microsoft and the people working there who helped to make this happen. And people really think we should be increasing corporation tax.

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    Mute Hardly Normal
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    Oct 6th 2017, 12:52 AM

    @Nick Allen: when the likes of apple pay €50 on each million they earn and Starbucks pay €45 per million they earn then yes of course the corporate tax rate should be hired.. I earn €220 and pay €50 tax how’s that fair?

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    Mute Shakka1244
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    Oct 5th 2017, 7:44 AM

    Good news. A little known fact is IBM employ more in Ireland.

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    Mute Brian Cunningham
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    Oct 5th 2017, 7:50 AM

    @Shakka1244: Indeed, their campus out in Damastown is massive. It’s like a small town.

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    Mute Ciaran Whyte
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    Oct 5th 2017, 7:58 AM

    @Brian Cunningham: as do a tonne of other companies, like CRH, Paddy Power, Ryan Air, Musgrave, Apple, Primark etc. Etc.

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    Mute Sean
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    Oct 5th 2017, 8:27 AM

    @Brian Cunningham: a very small town in Leitrim perhaps.

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    Mute Steve
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    Oct 5th 2017, 8:59 AM

    If only they could have somewhre to live.

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    Mute cortisola
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    Oct 5th 2017, 10:58 AM

    @Steve: This will be sales people with wages in 100k region so they easily afford living in Dublin.

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    Mute Ciaran Ó Fallúin
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    Oct 5th 2017, 12:44 PM

    @cortisola: If 200 people earning 100k appear in the market, needing 200 places to live, the fact that they can “easily afford living in Dublin” means they take 200 properties from people who can’t afford to pay as much and would have a demand driven impact, pushing up prices.

    So @Steve is correct, news like this just highlights the need for emergency level response to the housing supply shortage Dublin is seeing at the moment.

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    Mute cortisola
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    Oct 5th 2017, 12:51 PM

    @Ciaran Ó Fallúin: @Steve never said what you tell he said. You’re a liar and demagogue Ciaran.

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    Mute Nick Allen
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    Oct 5th 2017, 1:54 PM

    @Ciaran Ó Fallúin:

    Why do you think that the 200 people are not already living in Dublin?

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    Mute Ciaran Ó Fallúin
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    Oct 5th 2017, 4:10 PM

    @Nick Allen: Ok… so the 200 people live in work in Dublin and decide to go for these high paying jobs. Leaving, presumably, already reasonably high paying jobs, which need to be filled and so on. There is an increased size of the workforce whatever way you cut it.

    @cortisola If you don’t understand my point, I can’t help you with that.

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    Mute Eddie Byrne
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    Oct 5th 2017, 9:58 AM

    On the news this morning that most of the jobs are for foreign language speakers.

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    Mute Michael Reilly
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    Oct 5th 2017, 10:10 AM

    @Eddie Byrne: Brush up on your languages before you submit your CV.

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    Mute iMoan Brutal
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    Oct 5th 2017, 10:28 AM

    @Eddie Byrne: Well of course they are! Its the European centre. So most will have to be recruited from outside the country due to our backward education system. But most who come will be 20 somethings from around Europe who will spend the vast majority of what they earn here and pay a good chunk of income tax. So a win-win for everyone.

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    Mute Peadar Rooney
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    Oct 5th 2017, 10:40 AM
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    Mute Darren Bates
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    Oct 5th 2017, 11:14 AM

    @Peadar Rooney: that’s the fault of those 73%.

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    Mute Peadar Rooney
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    Oct 5th 2017, 11:52 AM

    @Darren Bates: Not really, its the education system. By the way, these jobs are for technically fluent foreign speakers, a rather advanced level of fluency which suits native language speakers.

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    Mute joe
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    Oct 5th 2017, 12:26 PM

    @Peadar Rooney: This is exactly why US companies need a European base. For all the naysayers going on about US tax moves and how it will affect Ireland, this is a perfect example of why these companies need a European base. It is much more likely that French, Spanish, German workers will move to Ireland than to the US. On top of the the US is trying to limit immigration as are the UK. Win win for Ireland. Even if these people are not Irish, they need to live here, buy food here, entertain themselves here, raise their children here etc etc etc. Irish people will likely benefit from this.

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    Mute Marc Power
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    Oct 5th 2017, 5:38 PM

    @iMoan Brutal: try being overt 50 here and looking for a job. It’s bloody disgusting and drives older workers to desperation. Most of these jobs also go to foreigners so what’s in it for Irish people who want to work?

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    Mute iMoan Brutal
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    Oct 11th 2017, 2:11 PM

    @Marc Power: Their taxes are paying your dole. Their spent cash is putting money into shops,pubs,etc. Try to understand you NEED to be able to speak fluent German to speak with German customers in Germany. Are there many over 50 Irish “non foreigners” who have fluent Finnish out there looking for a job????? Try to understand the alternative is for these companies to employ people in those countries instead. now stop whinging and cop on

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    Mute Fred Jetson
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    Oct 5th 2017, 9:23 AM

    Good news. It’s always good to see jobs being created outside the canals of Dublin. At least they won’t add to the morning commute.

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    Mute Kal Ipers
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    Oct 5th 2017, 12:16 PM

    @Fred Jetson: Yeah nobody on the Northside works in Microsoft.

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    Mute Fred Jetson
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    Oct 5th 2017, 2:13 PM

    @Kal Ipers:

    Pretty much, yeah.

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    Mute eastsmer
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    Oct 5th 2017, 9:49 AM

    Great news – just wondering however why they all need to be based in Sandyford – I am sure that there are lots of commercial parks available countrywide with sufficient network access.

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    Mute cortisola
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    Oct 5th 2017, 11:00 AM

    @eastsmer: Sandyford is still better than D2 area already filled with great number of international corporations tending to open their offices in City Centre..

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    Mute Nick Allen
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    Oct 5th 2017, 1:56 PM

    @eastsmer:

    Perhaps because MS has its office in Sandyford

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    Mute Stevie Doran
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    Oct 5th 2017, 8:15 AM

    Who uses MS Office these days?

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    Mute Nick Allen
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    Oct 5th 2017, 8:20 AM
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    Mute iohanx
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    Oct 5th 2017, 9:26 AM

    @Stevie Doran: (doh) ignorance is bliss eh

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    Mute cortisola
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    Oct 5th 2017, 11:01 AM

    @Stevie Doran: “Who uses MS Office these days?” – all poor people who cant afford Apple, something like 95% of the world.

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    Mute Nick Allen
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    Oct 5th 2017, 12:08 PM

    @cortisola:

    I use Office 365 on my Mac

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    Mute Stevie Doran
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    Oct 5th 2017, 10:46 PM

    @cortisola: google docs is free was my initial point

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    Mute Rob
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    Oct 5th 2017, 12:27 PM

    @Eddie Byrne
    We’re laughing so as English is a foreign language ;)

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    Mute Rear Admiral
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    Oct 5th 2017, 12:35 PM

    good news. thank feck Steve ‘Ballbag’ Ballmer is gone, MS are doing much better things with Satya ‘Nutella’ Nadella

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