Press Release

SIPTU criticises failure to end VAT break for non-compliant hospitality sector

Date Released: 14 October 2015

SIPTU has criticised the failure of the Minister for Finance, Michael Noonan, in Budget 2016 to end the preferential 9% VAT rate enjoyed by the profitable hotel and restaurant sector that includes many businesses that are exploiting low paid workers.

SIPTU Services Division Organiser, Ethel Buckley, said: “The reduction of the VAT rate in the tourism and hospitality sector from 12.5% to 9% was originally introduced in 2011. The annual cost in lost revenue to the State of the reduced VAT rate is €350 million. A staggering €1.4 billion has been lost to the State’s coffers since the introduction of the subsidy back in 2011.

“This cost has been met directly by workers.  The private sector pension levy was introduced in the same budget as the reduced VAT rate and the finances generated by the levy imposed on private sector workers were used to offset the cost of the tourism and hospitality subsidy. It should also be remembered that the reduced VAT rate is just one of many state subsidies for the tourism and hospitality sector.”

She added: “Retention of the VAT break to the tourism and hospitality sector comes at a time when it is experiencing steady growth and increased revenues. A recently published hotel industry survey for 2015 showed that profit before tax per bedroom is running at €9,201 across the country. Hoteliers are optimistic for continued increases in occupancy and room rates.

“Despite steady growth and increased revenues, employers in the hospitality sector are continuing to veto the Joint Labour Committee (JLC) process established by the State in January 2014 for agreeing statutory minimum wages and conditions for workers in the sector.  

“As a result of the veto by employers, we now have the intolerable situation whereby the JLC for the hotel sector has been effectively decommissioned before it even got off the ground. The continuing hostility and lack of engagement from employers in this sector with a mechanism that could provide a living wage and acceptable conditions of employment to their employees is totally incompatible with the maintenance of State subsidies.”

“As far as SIPTU is concerned a state subsidy implies a social contract.  In other words, an industry which receives benefits from the State on the one hand, cannot ignore State policy on the other hand.  The hospitality industry must now live up to its responsibilities and come to the JLC bargaining table. The industry can no longer be allowed to take all the benefit of the reduced VAT rate while treating the Exchequer and its workforce with contempt.”


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