The VAT reduction across the restaurant and hospitality sector should be taken off the Government’s menu for the forthcoming Budget and transferred to the construction sector instead to help create more jobs and activity. That’s according to the CIF who are calling for the Government to reduce construction VAT by 13.5% to 9% on a temporary basis in the coming Budget.
The CIF believes that reducing the construction VAT will help encourage private sector investment in construction activity and this will have a dramatic impact on the number of construction jobs available throughout the country. There is a belief throughout the construction sector that the industry is on the verge of a return to growth and that a push in the right direction from Government, such as in the form of a VAT reduction, would have a major impact on job creation and activity levels.
With 1 in 4 of the current people on the Live Register being former construction workers, the Government has realized the importance of encouraging construction employment and have witnessed the impact growth in construction activity can have. Between Q1 and Q2 2013 the CSO recorded a jump of 9,600 in the number of people employed across all sectors. The construction sector was responsible for 6,400 of that rise in employment which highlighted the capacity of the industry to create a lot of jobs in a short period.
According to the CIF’s calculations a 12% increase in private sector construction investment would more than cover the cost of the VAT reduction in purely fiscal terms. In addition there would be political and social benefits throughout the country derived from the increase in job opportunities, knock on spending and improved infrastructure, housing and commercial property.
Speaking about their proposal, CIF Director General Tom Parlon said, “Reducing the VAT rate for the construction sector makes sense on many different levels. The Government has realized the quickest way to boost the employment situation is to get the construction sector working. To achieve that we will need to see the private sector investing in construction activity again and the best way of encouraging that activity is to reduce the construction VAT rate.
“The restaurant and hospitality sector should be applauded for how they have managed their VAT rate reduction. It has an obvious beneficial impact on the turnover of the sector and on creating jobs. However that rate was introduced for a two year period to help tide the sector over a difficult period and it has achieved that goal. Given how much it is costing the Exchequer, with it estimated at approximately €350m per year this reduction should now be taken off the menu by the Government.
“The restaurant and hospitality sector are thriving, they don’t need the assistance anymore. If this country wants to create a lot more jobs then the construction sector offers a lot more scope for growth. We have seen what the VAT reduction has done for the restaurant and hospitality sector and we think it could have a similar impact on the construction sector if it was introduced on a temporary basis.
“Ultimately this is about generating increased economic activity and jobs. The Government must ask itself, which would have a stronger impact – a reduction in construction VAT or the continuation of the restaurant VAT rate?” Mr. Parlon concluded.