Tourism Impacts | July Stimulus Package
23 July 2020
The tourism industry has been one of the sectors of the economy that has felt the full impact of COVID-19. The pandemic has had a devastating effect on tourism, which in turn has led to widespread job layoffs and an unprecedented fall in earnings across the sector. Tourism was worth approximately €9.3bn to the Irish economy in 2019, with projected earnings for 2020 now estimated to be €2.4bn.
The long awaited July Jobs Stimulus Package released by the Department of the Taoiseach today will provide a much needed boost to tourism and hopefully help to accelerate recovery in the sector. It is positive to see that the plan specifically acknowledges how badly impacted the hospitality and tourism sectors have been as a result of COVID-19.
BDO are delighted to see the inclusion of a ‘Stay and Spend Incentive’ which will allow consumers to claim a tax credit of €125 for any spending over €625 on accommodation, food and non-alcoholic drinks between October 2020 and April 2021. The value of the credit is lower than the €250 BDO had recommended in our 12 Point Plan for Recovery in the Tourism Sector, but should still be viewed as a positive initiative to help stimulate domestic tourism activity, particularly when the short to medium term prognosis for overseas tourist activity is poor.
Proposals to increase the level of public investment, particularly in cycling and walking infrastructure and town centre investment schemes should also be welcomed. While not immediately viewed as tourism infrastructure, these types of infrastructure classes make up an important element of the wider tourism eco-system, enhance Ireland’s overall tourism offering and can have a positive impact on the experience of tourists when they are holidaying in Ireland. The additional €40m for investment in a range of heritage, arts, tourism and Gaeltacht-related projects will also have a positive impact on tourism, although the benefits of this are unlikely to be realised in the short to medium term.
Within our 12 Point Plan, we recommended that continued support through the Temporary Wage Subsidy Scheme should be provided after (tourism) businesses reopen in order to allow a gradual return to work as business levels dictate. We recommended that this should be followed by a more permanent support to help businesses as they attempt to trade out of a recovery mode to more financially sustainable levels. The decision to extend the scheme and include seasonal workers will be welcomed by operators across the sector.
The extension of the waiver on commercial rates until September and allowing businesses to warehouse part of their PAYE and VAT bills without attracting interest or penalties is also positive and will help alleviate immediate cashflow pressures for many tourism businesses. However, it must be remembered that the tax liabilities are only being deferred and these liabilities will eventually fall due and will have to be paid at some stage in the future.
A specific €10 million Restart Fund for the Tourism sector, combined with increases in the restart grant to €25,000 will also help many tourism businesses and can make a contribution to some of the expenditure that has been incurred by many in the sector who have had to undertake essential capital and other works to allow them operate in adherence with COVID-19 guidelines. The decision to include some businesses, such as B&Bs which were not previously included in the scheme is positive for the sector.
While there have been changes to the standard 23% VAT rate (reduced to 21% from September), many in the sector will be extremely disappointed that no steps have been taken to cut the Reduced VAT rate from its current 13.5% level, as the previous reduction in 2012 was widely recognised as having a very positive impact on driving growth in the sector. What will be particularly painful for many in the sector is the decision by our neighbours in the UK, in response to COVID-19, to temporarily reduce the VAT rate applied to businesses in the tourism and hospitality sector from 20% to 5%. Perhaps this is something the Government may revisit when it sits down to prepare Budget 2021.
If you have any queries related to the above or to find out more information, please contact [email protected].