Ireland's lower VAT rate for tourism has become a "significant dead weight" on the economy and increasing it now will not harm tourism, according to the Department of Finance.
It published a review of the 9% VAT rate yesterday, as part of its preparations for the Budget.
The rate was cut from 13.5% in 2011 to help boost the industry and to keep people in work.
General Secretary of the Irish Congress of Trade Unions Patricia King said there is no case to continue upholding the 9% VAT rate for the tourism industry.
Speaking on RTÉ's Morning Ireland, Ms King said Ireland had moved on considerably from the conditions under which the rate had initially been cut.
Ms King said there was now economic growth and that the employment rate had fallen.
She said hotel prices had risen by over twice the rate of all other services and added that they were 20% higher than their EU equivalent, adding that profits were up considerably.
In relation to Ireland having to compete with international markets for overseas tourists, she said the UK had a VAT rate of 20%, while the average across the EU is 15%.
Chief Executive of the Irish Hotels Federation Tim Fenn said the department's report lacks balance.
Also speaking on Morning Ireland, Mr Fenn said the report looked at household spending patterns in Ireland but does not take into account the fact that 80% of the revenue comes from overseas.
He said international visitors decide to visit countries for various reasons, including value for money and said the tourist industry was an extremely competitive international industry and said Revenue had not taken this sufficiently into account.
He said the lower VAT rate works but that it had not done its job, adding that, given the right circumstances the industry could continue to grow.
Mr Fenn said the industry provides jobs in every county and town. The uncertainty around Brexit was also a concern, he added.
Minister for Finance Paschal Donohoe said he would not be giving his view in relation to the matter as it would be an indication in relation to any announcement he intended to make on Budget day.
He said any decision in relation to the matter would be made by him on Budget day in October.
