Reduced 9% VAT Rate results in 31,584 new jobs. Report by the Restaurant Association of Ireland

The Restaurants Association of Ireland (RAI) has published a report, entitled ‘9% VAT – Food, Tourism & Jobs – Rebuilding Ireland’s Economy’, highlighting the positive impact of the 9% VAT rate introduced in July 2011.

Speaking about the launch of the report and the success of the reduced VAT rate, Adrian Cummins, Chief Executive of the Restaurants Association of Ireland, said that “As this report proves, in terms of creating new jobs in the food and accommodation sector, the introduction of the new VAT rate in July 2011 has been a major success. 31,584 new jobs have been created across the country, with 21,633 of these being direct jobs in the food and accommodation sector.”

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The report uses national employment data from the Central Statistics Office and examines the impact of the introduction of the new VAT rate in July 2011, when it was reduced from 13.5% to 9% for tourism related services and goods. The report covers the direct and indirect number of jobs created, an estimate of social welfare savings as well as the increase in revenue for the Exchequer (e.g. PAYE, USC and PRSI Employer contribution) at a county and national level.

Key findings from the report include:

Direct/Indirect/Total Employment Increase

• Between Q2 2011 and Q1 2014, direct employment in the Accommodation & Food Services sector increased by 21,633 from 114,904 to 136,537:
• An additional 9,951 indirect jobs were created elsewhere in the economy, giving a total employment increase of 31,584;

Significant savings for the Exchequer

The Report demonstrates the considerable social welfare savings made by Exchequer using the model that “for every 10,000 people off the live register, and back in employment, it results in a net gain to the Exchequer of some €200 million”.

• Viewed on a national basis, the Exchequer made a remarkable €433m in social welfare savings as a result of the 21,633 direct jobs created since the VAT rate was reduced.
• The new jobs created as a result of the reduced VAT rate has also meant additional revenue for the Exchequer from the increase in payroll tax receipts.
• Nationally, the contribution from employee taxes (USC and PRSI) and employer taxes (employers PRSI) from the 21,633 direct jobs has delivered€103m in revenues for the Exchequer.

Ireland’s Value for Money Rating Rises

Tourism has also increased every year since the new VAT rate was introduced, with overall visits to Ireland rising by 17.82% since July 2011. There is further good news for Ireland’s tourism sector regarding Ireland’s Value for Money (VFM) rating as the number of visitors rating Ireland ‘good’ or ‘very good’ VFM has increased from 28% to 40% from 2009 to 2012 and the number of visitors rating Ireland ‘very poor’ or ‘poor’ for VFM has fallen sharply from 40% in 2009 to 16% in 2012.

Visitor Numbers Increase

Since the introduction of the new VAT rate of 9%, there has been strong growth in the number of overseas visits to Ireland. According to the CSO figures overseas visits to Ireland grew by 10.3% overall in the period from January to June 2014 when compared to the corresponding period of 2013.