• Hotels’ taxing issue

There isn't a great deal about the Irish hotel market to make the rest of the industry green-eyed these days, but the introduction last week of a lower rate of VAT for the hospitality has done so.

Representatives of the UK sector in particular have campaigned for a cut since the beginning of this year and observers will now be watching to assess how effective it is in Ireland, where VAT was cut from 13% to 9% on 1 July.

The cut will remain until December 2013, when it will be reviewed. Tim Fenn, CEO, Irish Hotels Federation, said: "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."

In the UK, the British Hospitality Association has argued the 20% VAT rate makes tourism uncompetitive compared to other European countries. France pays 5.5% on hotel accommodation; in Italy, 10%; in Spain, 8% and in Germany 7%.

The chances of seeing a reduction in the UK were cut earlier this year, when the government's tourism strategy revealed plans for moves including cutting red tape on visa applications, but tourism minister John Penrose ruled out a VAT cut, at least in the short term.

The BHA has pushed on with its campaign, having talks with Treasury ministers and officials. In a note to BHA members last month, CEO Ufi Ibrahim said: "The outcome was positive. Further sessions have been agreed for Treasury and BHA experts".

In some regions of the UK there have been efforts to raise tax, with local authorities in Cornwall and Brighton & Hove calling for the chance to charge a £1 ‘bed tax' for every night spent in a hotel or B&B.

Hoteliers in the areas under consideration have objected to the plans, although similar measures have been employed in France, where visitors are charged a ‘taxe de sejour' on their hotel bills. Italy is following suit with Rome and now Venice implementing a levy. Croatia has its own tourist tax, charged on a city-by-city basis, while Lisbon may charge visitors a fee to enter the Portugese capital – and then an extra hotel levy.

The Irish hotel market has found itself in its current state of crisis in large part due to the country's tax structure, which fed the boom in hotel building. The sector is now in such dire straits that a tax cut – an unwilling move from any government not coming up to election – is one of the only ways to possibly jump-start the market.

In the UK rather than tax cuts the wider travel and hospitality industry is facing tax increases via the increase in Air Passenger Duty. Perhaps rather than campaigning to give a narrower segment of the sector a tax break there ought to be a focus on ensuring that the industry is not unfairly clobbered by tax hikes.

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