Minister for Finance Michael Noonan has hinted that the reduced 9 per cent rate of VAT applied to the hospitality sector could be increased unless an alternative source for the tax revenue can be found.
Speaking at the launch of a new academic publication on macroeconomics at the University of Limerick, the Minister said that he has been well lobbied on the matter.
“There is a big lobby on but when I reduced the VAT on the whole hospitality industry from 13.5 to 9 per cent, there wasn’t a single representation on my desk to do so, but people were very surprised and it worked and it created a lot of jobs.
“It has reinforced and got a lot of the tourist industry back again and the tourist industry is now growing.”
Since its introduction in 2011, the Restaurant Association of Ireland (RAI) told a meeting for the Oireachtas Committee on Jobs, some 9,000 jobs were created in the sector.
The RAI is campaigning to get Government to retain the current VAT rate of 9 per cent to support the restaurant industry and to keep Ireland competitive as a tourist destination and sustain jobs in local communities.
Chief executive of the association Adrian Cummins said the 9 per cent VAT rate is crucial to the survival of restaurants the length and breadth of the country.
“We are one of the only industries creating employment in every corner of the country, and if the 9 per cent VAT rate is increased, unfortunately jobs will be lost everywhere as well.”
However Mr Noonan said when the special rate was introduced, it was done as a temporary measure.
"The difficulty I have is when we removed it, it was a pump priming exercise intended to be temporary and the people in the Department of Finance and in Revenue built in its restoration to the Budget figures.
“So in very simple language, if I don’t bring it back I have to find something like €360 million elsewhere.
Mr Noonan said when local Government and lobbyists were sending in their pre budget submission, “they might suggest who I tax instead to get €360 million”.