In Ireland, as elsewhere, there is ongoing economic uncertainty as a result of the continuing COVID-pandemic. With this in mind, the Irish authorities recently announced plans to retain various incentives, support schemes, and rate reductions, most notably the reduced VAT rate for the hospitality sector.
In an announcement in early June, Finance Minister Paschal Donohoe said Ireland would extend the reduced nine percent VAT rate that is temporarily in place for hospitality and tourism goods and services until September 2022. The tax break had been set to expire in December 2021.
The reduced rate was introduced in November 2020 to support the tourism sector. It covers hotel stays and holiday accommodation, restaurant and hotel meals and catering services, admission to various theatrical and entertainment events, tickets for exhibitions, fairgrounds, and amusements, and certain types of printed materials.
It was introduced alongside a cut in the standard VAT rate from 23 percent to its pre-2012 rate of 21 percent, from the start of September 2020 to February 28, 2021.
This is not the first time that Ireland has deployed VAT measures as a policy lever to steer the economy, especially in relation to the hospitality sector. In the economic dip that followed the 2008 economic crisis, the Irish Government cut the VAT rate applicable to tourism and related sectors from 13.5 percent to 9 percent. This was initially intended to expire at the end of 2013, but was extended in the 2014 Budget. The reduced rate of 13.5 percent was returned in January 2019.
According to Donohoe, the earlier VAT cut achieved its aims, by boosting overseas visitor numbers by over 3.4 million and supporting tens of thousands of jobs.
Ireland has already allowed many hospitality venues to reopen. Outdoor amusement parks, drive-in cinemas, sports and fitness facilities are allowed to open, as long as they put in place measures to mitigate risks, and organised outdoor events can now be attended by up to 200 people, and cinemas by up to 50 people. These restrictions will continue be lifted as vaccination rates increase, with more than half of Ireland now double vaccinated.
The Government has newly said that the Irish tax take held up strongly in 2020. The make-up of the Irish tax mix, with its heavy reliance on corporate tax revenues from large businesses that have fared well during the pandemic, insulated the Irish finances, the Government has said. The Government is therefore in a strong position — considerably stronger than many other European countries — to provide continued support for Irish businesses and position the economy for a stronger rebound, as reopening continues.
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