A special tax break brought in to boost the tourism industry is being utilised by the corporate caterers to multinationals such as Apple, Google and Facebook, while at the same time it is being denied to many genuine tourism businesses.
The 9 per cent reduced VAT rate for tourism services was estimated to cost taxpayers €350 million annually when introduced as a temporary measure in 2011. The tourism industry is lobbying hard for its retention in the upcoming budget.
As well as benefitting the tourism industry, however, multinational catering firms including Aramark, Google's caterer Compass and Sodexo, which have hundreds of contracts to run staff canteens for big companies, also benefit.
While the booming hotel sector and restaurants are among the tourism businesses to benefit from the reduced rate, other tourism operations, including boat hire companies, caravan rentals and tour guides, are denied the tax break.
Clew Bay Bike Hire in Westport, for example, last year won the Mayo Tourism Business of the Year award, yet it is not allowed charge the tourism VAT rate.
The Irish Boat Rental Association has also lobbied the Government recently to get the rate applied to its members, without success.
Other beneficiaries
Other businesses that would appear unrelated to tourism, such as the sale of newspapers and hairdressing, are also beneficiaries. Dublin hotels, meanwhile, continue to benefit from it, even as occupancy levels breach record levels and room rates rise by more than 20 per cent annually.
In response to queries about whether the costly subsidy is properly targeted towards the tourism small businesses that need it most, the Department of Finance said was "not possible" to prevent it being used by corporate caterers who have no tourism interests.
It said it is restricted in how the rate can be applied by "competition law" and European Union VAT directives: " A different rate cannot be applied to such services depending on location or customer base... it is not possible to charge different VAT rates to catering services who supply to businesses and tourists."
‘Kinks in the system’
Eoghan O'Mara Walsh, chief executive of the Irish Tourist Industry Confederation umbrella group, said there were "kinks in the system" but the industry wants the rate retained as it helps create jobs.
“[The Kinks] are down to how Revenue apply the special rate. We think it is a good policy and there is no cost to retaining it,” he said.
Gavin Prendergast, whose Urban Picnic catering company provides services to the staff of tech giants such as Facebook and Airbnb, said the tourism rate is a "huge help" to its business when pricing contracts.
Aramark, which caters for Apple and Intel, declined to comment, while Compass would not answer specific queries about whether it utilises the special tourism rate with its corporate clients, which include Google.
Sodexo said it charges for services at a 9 per cent rate where it is allow to under VAT legislation.
