THE VAT REDUCTION for the tourism and hospitality sector drops today from 13.5% to 9%

The rate reduction was announced by the Minister for Finance Paschal Donohoe in the Budget earlier this month as a measure to assist businesses in this sector who are struggling due to the impact of Covid-19 restrictions.

The reduction will apply to catering and restaurant services, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter, and hairdressing. This change will apply from today until 31 December 2021.

Speaking in advance of the change the Minister Donohoe said it was introduced in recognition of the unprecedented challenges facing particular sectors of the economy.

“The reason I chose a start date of 1 November was to introduce this measure at the earliest possible moment to allow those businesses that are currently open to benefit,” he said.

I understand that many businesses remain closed for now and those that are open are operating at significantly reduced capacity. I am putting this reduced rate in place until December 2021 in order to provide significant additional support to businesses throughout 2021 when hopefully our economy and society can start to return to some form of normality.

He said based on 2017 figures of the number of VAT traders in 9% sectors, the measures has the potential to benefit 14,600 businesses. 

“When we look specific sectors most seriously impacted by the pandemic and the health restrictions, employment in the accommodation and food services sector fell from 181,000 in Q2 2019 to 128,000 in Q2 2020,” the minister said.

“However, there were approximately 122,000 workers in this sector claiming the PUP in June. While PUP claims decreased from 122,000 to 90,000 by mid-October, the impact of the pandemic remains considerable.”

He said this measure along with others such as the wage subsidy scheme and Covid restrictions support scheme form an important part of the government’s economic response to the pandemic.