The recent initiative of reducing the sales tax for hotels, restaurants and other tourist facilities in Ireland has been a success. The tax cut produced more than 16 000 jobs and contributed significantly for the revenues of the Irish hospitality businesses. Many experts are however concerned that another round of austerity measures that will be introduced in Ireland the curs may not be extended any further. Although tourism sector in Ireland is not as important for the economy as it is in France and Spain for example, it is still significant contributor for growth and employment. It is estimated that each year hotel hire as much workers as large foreign companies such as Google, Apple or Pfizer. Despite the fact that the last bailout ended successfully, the consumer spending continues to fall for a sixth year in a row which brings the country on the edge of stagnation. The government is banking on a resumption of strong export growth next year to return economic growth to the 2 percent seen in 2011. Analysts say it will be the performance of trade partners – not the country’s restaurants and hotels – that will determine how smooth a bailout exit Ireland makes.
The problem is however that if the recovery in the Eurozone does not come as fast as expected the domestic demand will have to pick up for the lost opportunities in the export sector. This is the reason why many of the leading hospitality businesses in Ireland are hoping that the tax cuts will be extended so that the sector keeps its momentum. It is expected that more than ten thousands new jobs will be created if the VAT is not returned to 13,5% after it was reduced to 13% from the previous rate of 15%
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