Finance Minister Michael Noonan has told the Dáil that he is retaining the 9% VAT rate for tourism related activities, describing it as a great success since it was introduced.
But he said it was incumbent on the industry to ensure that this relief continues to be passed through fully to the consumer and he said that if prices begin to rise, the case for retaining the measure diminishes.
The decision to retain the rate was welcomed by representatives of the retail and hotel industry.
The cut in the VAT rate for tourism services was funded by the 0.6% Pension Levy, which was introduced in 2011 and continued in the Budget last year.
"Without the Pension Levy, there would have been no VAT reduction," the Minister stated.
He said that as result of the overall improvement in the country's finances, he was in a position to continue the VAT reduction but was also ending the 0.6% Pension Levy at the end of 2014, as he had previously indicated.
The additional 0.15% Pension Levy introduced for 2014 and 2015 will expire at the end of 2015, the Minister added.
Mr Noonan also said that the new Irish film tax credit scheme is due to start next year.
He said that as the new scheme beds down, he will monitor how it works and how it can be improved.
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There has been a broad welcome from the tourism industry to the measures announced in Budget 2015, although the decision not to reduce the excise on alcohol was described as a missed opportunity.
The Restaurants Association of Ireland said the decision not to reverse excise on alcohol "is a missed opportunity to create further jobs and increase overseas tourism visits".
The association welcomed the retention of the VAT rate, but said the high cost of alcohol in hotels and restaurants is one of the "main reasons tourists will not return to Ireland".
However, the National Off-Licence Association (NOffLA) said the Budget measure will offer some relief to independent off-licences.
The Vintners’ Federation of Ireland (VFI) and the Licensed Vintners Association (LVA) both welcomed the decision not to increase excise rates further.
LVA chief executive Donall O’Keeffe said the move will bring a degree of stability to alcohol taxation, but said Ireland still has one of the highest excise rates on alcohol in Europe, which is damaging competitiveness in the tourism industry.
The VFI also said the minister missed an opportunity to bring some relief to the industry, describing the excise duty as a tax on employment, consumers and tourism, but said the Budget measures are "small step in the right direction".
Failte Ireland welcomed the retention of the 9% VAT rate, saying it has made a significant contribution to job creation since it was introduced in 2011.
CEO Shaun Quinn said the decision will ensure that conditions will remain job friendly and help sustain current employment levels in the sector.
The Irish Hotels Federation was also in favour of the VAT rate retention and described the Budget as very positive for the industry.
IHF president Stephen McNally said the sector is on course to create a further 40,000 jobs by 2020 and the VAT rate helps level the playing field for businesses.
