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    VAT Reduction Measure Helps Create 30,000 Jobs

    VAT Reduction Measure Helps Create 30,000 Jobs

    Fáilte Ireland today published an analysis which illustrated that the reduced rate of VAT for the hospitality sector, introduced by the Government in 2011, has contributed to an increase of 30,000 jobs amongst other benefits.

    The research, An Analysis of the Impact of the VAT Reduction on Irish Tourism & Tourism Development, was designed and commissioned by Fáilte Ireland and then conducted by Deloitte.  

    The report found a number of very positive developments from the VAT reduction for the tourism sector including:

    • Since the VAT cut, employment in the targeted sectors increased by approximately 30,000 with direct tourism employment up by more than 20,000;
    • Price pass through of the rate reduction to consumers is evident across nearly every category;
    • Renewed and sustained growth in overseas tourism numbers and earnings;
    • Increased activity levels apparent across the industry; and
    • Improved value for money perception across all visitors.
    The jobs created by the measure equates to a benefit to the Exchequer of circa €165 million between additional income tax and social welfare savings and these employment gains follow very significant decreases prior to the commencement of the reduction.  Fáilte Ireland estimates that the Exchequer’s tax take on the growth in spending by overseas visitors in 2013 was worth more than €100 million.

    Additionally, the tax foregone through the implementation of the rate reduction is below initial estimates. For the first 12 months of the measure, there was a net reduction in VAT receipts for the 9% categories of €100 million. The report also shows that there has been a stabilisation of VAT receipts since September 2012.

    Speaking today, Fáilte Ireland’s CEO, Shaun Quinn, emphasised:

    “This research underscores the point that this tourism initiative not only worked but brought quite clear results. From increased employment to an improved perception of our value in overseas markets, tourism today is reaping the benefits of the VAT stimulus. Given the ability of tourism to generate revenue and jobs for regions away from the major technological and industrial hubs, the significance of this initiative is doubly important.”

    The VAT reduction was part of a suite of measures to support tourism which were introduced in the Government’s Jobs Initiative (2011). Then, a new, temporarily reduced rate of VAT (9%) was introduced for tourism related goods and services. The Minister for Finance introduced the VAT rate reduction in July 2011 explicitly in order to boost tourism and stimulate employment in the sector.

    A full copy of the report, can be viewed here

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