Ireland's reduced rate of value-added tax (VAT) for the hospitality sector has "done its job," according to a brief prepared for the new Finance Minister.
The brief was prepared in June for Paschal Donohoe, and has now been published on the Finance Department's website. It covers a range of issues, from economic forecasts, to the impact of Brexit, to tax policy.
As regards the reduced VAT rate, the brief stated: "While all the indications are that the measure has done its job with robust growth in visitors and employment in the tourism area, the general recovery of the economy and increasing prices in the sector raises questions about its future."
The rate was lowered from 13.5 percent to nine percent in July 2011. It applies to the supplies of restaurants, hotels, and tourist attractions, and extends to some printed media. It was originally intended to expire at the end of 2013, but was retained as part of the 2014 Budget.
The 2017 Budget, delivered in October 2016, again kept the measure in place. The Finance Minister at the time, Michael Noonan, stated that although the economic rationale for the reduced rate is no longer as strong, its retention is intended to "act as a buffer for the sector" against the fall in the value of sterling.
According to the brief, it is estimated that a return to the 13.5 percent rate for this sector would increase revenue by around EUR500m (USD571m).