The tax rebate initiative could become a game changer for the hospitality sector if tweaked appropriately
The “Stay and Spend” tax rebate that gives families up to €250 cash back on a €1,250 spend is a good concept but in its current guise it will not deliver the stimulus the sector needs to counter the impact that COVID-19 is having on revenues for restaurant and hotel businesses.
Hospitality specialist Aiden Murphy believes the proposed 20% discount, which in some instances might be paid out over a 12-month period, will not excite people enough to encourage people back into the habit of going out and going away on breaks and increase their spending for the sector. Below he outlines a number of adjustments the government could make to simplify and increase the impact of the scheme:
For instance, a couple or family could then take a weekend break and spend €300 on a hotel and €200 on meals at restaurants totalling €500, which would cost them just €250.
If 500k taxpayers took up this measure over the next few months, then the spending power would be €125m with a direct income tax credit cost of €62.5m to the Exchequer. The activity itself however should bring in €29m in VAT and payroll taxes on a €125m spend at hospitality businesses.
Overall, we welcome the scheme. However, every effort should be made to make the initiative as attractive for taxpayers as possible to encourage uptake over the next eight months. We believe that the government will need to make a number of adjustments in the coming months to ensure the scheme delivers the support required.
It is likely that the increased revenue for hospitality businesses resulting from the tax credit will be used to pay tax bills on payroll to the Exchequer. If we can save more of these businesses and avoid liquidations the overall cost in tax terms will be reduced. In the midst of poor demand, weak balance sheets and continued cash flow pressures for hospitality businesses, creating a stimulus on the footfall side aligned to the wage supports will save more businesses and jobs.
Our dedicated Hotel, Tourism and Leisure (HTL) team has vast experience providing a wide range of planning, operational and taxation advice and support to hospitality businesses. If you need support in devising the appropriate strategy for your business, please contact Aiden Murphy or a member of our HTL team.