Irish hotel and restaurant operators have welcomed a new VAT rate of just 9%, which came into force in the country on Friday last week.
The new rate, which was slashed from 13.5%, applies to all goods and services relating to tourism but does not apply to alcohol sales, which remain on the country's higher rate of 21%.
The Irish Government introduced the cut, which lasts until the end of 2013, on 1 July as part of a package of measures (see panel), to help boost the hospitality and tourism sector in a country which has been hit badly during the global recession.
Aidan McGrath, chef-owner of pub with rooms the Wild Honey Inn in Lisdoonvarna, County Clare, said he was pleased with the move which he viewed as "positive overall", making prices more competitive when compared with the UK.
"I definitely hope it will bring in more tourists," he said. His business has already passed on the rate cut to customers.
But Donnachadh Lynch of O'Neills Seafood bar in Cahersiveen, County Kerry, said he did not expect pubs and bars to benefit. "I don't think it will make much difference. In the hotel business it will have an effect, but it doesn't affect me so much because drink is still at 21%," he said.
Meanwhile the Restaurants Association of Ireland urged its members to pass on the new lower rate to customers immediately. Chief executive Adrian Cummins said: "We are very pleased the Government has taken those steps to reduce VAT rate with the aim of making Ireland more competitive to do business and attract more tourists to the country. This is the first step in the road to recovery in the restaurant sector in Ireland."
And Tim Fenn, chief executive of the Irish Hotels Federation (IHF), echoed Cummins' call: "It is very important that all businesses within the tourism sector pass on the reduction in VAT to customers and make it very transparent that they are doing so. We believe the initiative will provide a much-needed boost in trade," he said.
How Ireland is boosting hospitality and tourism
● VAT reduction to 9% until 2013
● Visa waiver scheme for travellers with a UK visa who wish to visit Ireland
● Reduction in employers' PRSI (Pay Related Social Insurance) by 50% for lower-paid workers - as an incentive towards employment retention and growth
● Scrapping of €10 travel tax
How Irish hospitality sees the VAT cut
"Our average room rate across the year, including VAT and breakfast, is €115. The new rate will mean a reduction of about €5 which might not sound much, but over seven nights it means a significant saving for the customer of €35. The new rate is helping to give Ireland a competitive advantage."
Paul Gallagher, general manager of Buswells hotel in Dublin, and president of the Irish Hotels Federation
"It's really a net reduction of 4.5% so in a €25 menu it's not a huge amount. In terms of the room rate we'll be seeing a bigger reduction though. We've been trying to get it on the agenda for a long time so from that point of view at least the Government acknowledges we're one of the industries that can bring the country out of recession."
Adriaan Bartels, general manager, the Cliff House hotel, Ardmore, County Waterford
"We're passing on the VAT reduction and it is a good thing for the industry which will hopefully get people to go out more. But only time will tell whether this will be sustainable and whether operators will pass on the reduction across their menus."
Nick Munier, owner of Pichet Restaurant in Dublin
Slash VAT, boost business
This week sees the launch of a major new campaign by Caterer and Hotelkeeper for a cut in the UK rate of VAT called "Slash VAT, Boost Business".
The rate currently stands at 20% - the second-highest in Europe - and Caterer and Hotelkeeper believes hospitality businesses could help kick-start the economy if they were subject to a lower rate of VAT.
To get behind the campaign and show your support, you can:
1 Follow us on Twitter at www.twitter.com/slashVAT
2 Visit our dedicated Slash VAT homepage and contribute to the debate on our Table Talk forum on www.caterersearch.com/slashVAT
3 Write to us if you have any suggestions for how we can make the campaign more successful or if you want to see your views on VAT printed in the pages of Caterer and Hotelkeeper to our dedicated e‑mail address firstname.lastname@example.org