Varadkar casts doubt on retention of low VAT rate for tourism sectors – Dooley

Fianna Fáil Spokesperson on Tourism Timmy Dooley has accused the Minister for Tourism Leo Varadkar of damaging confidence in the tourism sector having signalled that the reduced lower VAT rate is unlikely to be kept through next year despite the Government’s commitment that it would run until the end of 2013.

When the Jobs Initiative was announced last summer the Government said: “A new temporary second reduced rate of VAT at 9% will be introduced with effect from 1 July 2011 until end-December 2013.”

Deputy Dooley said: “The Jobs Initiative last July raided private pension funds to the tune €470m a year for four years.  This is was suppose to pay for the job creation measures being introduced by the Government.  Not only is the Government now divided over the effect of the cut in the lower VAT rate on jobs but Minister Varadkar, just two months into the year, has dealt a crushing blow to confidence for those in the tourism sector. Minister Varadkar has cast doubt over the job creation capacity of the rate cut despite his colleague Richard Bruton stating ‘the low rate of VAT has secured an increase of 6,000 in the number of people in the tourism sector.’

Minister Bruton also told the Dáil on January 25 ^th that “these [Jobs Initiative] measures are of considerable benefit to tourism and hospitality businesses .’

“Having increased the top rate of VAT from the start of the year and now looking at increasing the lower rate again in the next budget the Government is damaging confidence and damaging the economy.  There is no time being given to allow a recovery to take hold in the economy and for new jobs to be sustained.

“The levy on private pension funds was introduced to fund the jobs initiative.  The cut in the lower rate of VAT will cost €350 next year but the levy will yield €470m for the Government. In that case why does Minister Varadkar seem intent of letting the job stimulus measure lapse at the end of the year? And if the lower rate of VAT goes back up to 13.5% will the Government scrap the levy on pension funds?  It has become increasingly obvious that the Jobs Initiative was not primarily about jobs but about bolstering the Government coffers.

“The tourism sector welcomed the VAT cut for key areas last July and it was a positive measure but to effectively put them on notice two months into the year that the rug may be pulled from under them before the year is out is extremely short-sighted.  The Minister should be driving confidence and recovery in the sector not damaging it.”